UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
Securities registered pursuant to Section 12(b) of the Act:
Names of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP UNITS
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. Not applicable.
<PAGE>
PART 1
Item 1. Business
The registrant, First Dearborn Income Properties L.P. II (the
"Partnership"), is a limited partnership formed in May 1988 under the
Revised Uniform Limited Partnership Act of the State of Delaware to
invest in income producing commercial and residential real estate
consisting principally of existing shopping centers and office buildings,
as well as apartment complexes, parking garages and lots and warehouse
and industrial buildings. On February 1, 1989, the Partnership commenced
an offering of $10,000,000 (subject to increase by an additional
$5,000,000) of its limited partnership interests (the "Units") at $500
per Unit, pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933 (File No. 33-23048). A total of 10,000 Units was
sold. The holders of 3,345 Units were admitted to the Partnership in
1989, holders of 4,444 Units were admitted to the Partnership in 1990,
and holders of 2,211 Units were admitted in 1991. Of the 2,211 Units
purchased in 1991, 1,669 Units were purchased by an affiliate of the
General Partners pursuant to its Agreement to Purchase Units. The
offering terminated on January 31, 1991 (extended from its originally
scheduled termination date of January 31, 1990). Since admission to the
Partnership, no holder of Units (hereinafter, a "Limited Partner") has
made any additional capital contributions. The Limited Partners of the
Partnership share in the benefits of ownership of the Partnership's real
property investments in proportion to the number of Units held.
Net of offering costs, Limited Partners have contributed a total of
$4,058,963 to the Partnership. The Partnership is engaged solely in the
business of real estate investment. It is the Partnership's objective to
realize cash flow from operations and appreciation in the value of the
real estate. 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 December 31, 1997. The
Partnership has acquired, through these ventures, interests in two
shopping centers and a mixed use apartment/retail building. No
investments have been made since 1991. The Country Isles property was
sold in December 1997. As of December 31, 1997, the Partnership had made
the real property investments set forth in the following table:
<TABLE>
<CAPTION>
Name, Type of Property Date of Type of
and Location Size Purchase Ownership
<S> <C> <C> <C>
Evanston Galleria 36,068 S.F. 11/1/89 23.87% interest in a
Retail/Apartments and partnership that has
Evanston, Illinois 55 apartments fee ownership of land
and improvements
Country Isles 106,000 S.F. 7/21/91 21.00% interest in a
Shopping Center partnership that has
Ft. Lauderdale, Florida fee ownership of land
and improvements
Sold December 1997
Sycamore Mall 240,206 S.F. 10/26/90 53.40% interest in a
Shopping Center partnership that has
Iowa City, Iowa fee ownership of land
and improvements (a)
<FN>
(a) Reference is made to Note 3 of Notes to Consolidated Financial
Statements filed with this annual report for the current outstanding
principal balance and a description of the long-term mortgage
indebtedness secured by the Partnership's real property investments.
Note: "S.F." represents the amount of rentable square feet of retail
area in each of the properties.
</TABLE>
<PAGE>
Sycamore Mall represents the most significant investment made by the
Partnership. A total of $2,275,000 has been invested by the Partnership
which represents 62% of the Partnership's real estate investments. Since
acquiring the Sycamore Mall investment in 1990, the Partnership has
received cash distributions of $1,423,351 from Sycamore Mall Associates.
Country Isles represents an investment of $775,000 or 21% of the
Partnership's real estate investments. Since acquiring the Country Isles
investment in 1991, the Partnership has received distributions of
$1,536,718. Evanston Galleria accounts for $602,066 or 17% of the
Partnership's real estate investments. Since acquiring the Evanston
Galleria investment in 1989, the Partnership has received distributions
of $50,133.
During the past five years, operations at the Partnership's three
properties have provided sufficient cash flow to meet the obligations of
the Partnership and continue to make distributions to its partners. Each
of the properties has been able to sustain adequate cash flow even though
they have each had some releasing issues over the last few years. The
real estate market in general has suffered from overbuilding which
occurred during the 1980's. This increased the competition for the
Partnership's properties, which resulted in a decrease in rental rates
from 1990 to 1994. Since 1994, the market rental rates have continued to
increase moderately.
During 1996, Randall's, a tenant at Sycamore Mall, vacated its
leased premises of 19,800 square feet. As a result of the Randall's
vacancy, occupancy at Sycamore Mall fell to approximately 86% during the
second quarter of 1996. However, Randall's continued to pay rent through
December, 1996. Sears, Roebuck and Co. is a tenant under a lease which
had an original termination date of March 31, 1992. Prior to that
termination, a ten-year extension was agreed to which provided Sears an
option to terminate the lease at any time after March 31, 1997 by giving
landlord a one year written notice. Sears gave such notice on September
17, 1997 and will terminate its lease on September 1, 1998. Management
is currently negotiating with a potential replacement tenant, however
there can be no assurance that a new lease will be entered into. If this
space is not released, the ability of Sycamore Mall to meet its financial
obligations could be effected, as a result of the decreased revenues.
During 1995, the Evanston Galleria experienced a problem with retail
tenants. There was 13,635 square feet of retail space of which the
tenants were in default of their leases for non payment of rent.
Occupancy in the apartments at Evanston Galleria has remained in the 94%
- - 100% range during the last five years. The retail space has had a
problem with tenant defaults, which has reduced overall occupancy to as
low as 80% in 1991. As of December 31, 1996, occupancy was 84%. During
the fourth quarter of 1997, Evanston Galleria collected $50,000 as a
settlement for past due rents. Management has settled its legal actions
against the previously defaulted tenants. Also during the fourth quarter
of 1997, management was successful in signing two new leases. As of
December 31, 1997 occupancy was 83%. However, a lease has been entered
into to lease the lower level space of 11,300 square feet which has
increased occupancy to over 93%, subsequent to December 31, 1997.
As of October 1, 1997, the Evanston Galleria property was considered
to be held for sale. In accordance with SFAS 121, no depreciation
expense relative to the property was recorded by the Partnership from
October 1, 1997 through December 31, 1997. The net book value of the
Evanston Galleria property at December 31, 1997 and 1996 was $8,415,096
and $8,675,592, respectively, and net loss from operations for the years
ended December 31, 1997, 1996 and 1995, net of the Venture Partners share
were $90,086, $78,686 and $96,309 respectively.
The Partnership's real property investments are subject to
competition from similar types of properties in the vicinities in which
they are located. Approximate occupancy levels for the Partnership's
properties are set forth on a quarterly basis in the table set forth in
Item 2 below to which reference is hereby made. The Partnership has no
real property investments located outside the United States.
<PAGE>
Only one of the three Partnership's investments is consolidated for
financial reporting purposes. Industry segment information is presented
below in order to illustrate applicable information about each of the
three properties individually and does not relate to financial
information presented about the Partnership in Item 6 and Item 8.
<TABLE>
<CAPTION>
Sycamore Mall,
Iowa City, Iowa 1997 1996 1995
<S> <C> <C> <C>
Total revenue 1,828,997 1,947,827 1,957,849
Operating profit 222,766 380,405 267,781
Total assets 8,113,686 8,425,247 8,589,852
Mortgage indebtedness 4,574,933 4,728,868 4,870,823
<CAPTION>
Country Isles Shopping Center
Ft. Lauderdale, Florida 1997 1996 1995
<S> <C> <C> <C>
Total revenue 1,708,274 1,734,027 1,579,850
Operating profit (loss) 385,746 159,718 (15,887)
Gain on sale
of investment property 9,116,946 - -
Total assets 165,311 4,007,615 4,006,457
Mortgage indebtedness - 8,028,160 6,784,728
<CAPTION>
Evanston Galleria
Evanston, Illinois 1997 1996 1995
<S> <C> <C> <C>
Total revenue 1,346,682 1,464,427 1,479,827
Operating loss (377,401) (329,645) (403,475)
Total assets 8,810,445 9,027,234 9,449,391
Mortgage indebtedness 8,486,740 8,486,740 8,512,228
</TABLE>
The Partnership has no employees and is largely dependent on the
General Partners and their affiliates for services. A description of the
terms of transactions between the Partnership and affiliates of the
General Partners is set forth in Item 11 below to which reference is
hereby made.
Evanston Galleria Limited Partnership
On October 31, 1989, the Partnership acquired an interest in
Evanston Galleria Limited Partnership (the "Galleria Partnership") which
owns a 100% beneficial interest in the Evanston Galleria, a mixed-use
residential and retail property located in Evanston, Illinois. The
property, located on a 0.79 acre site, contains 36,068 square feet of
rentable retail space and 55 loft apartments. The Partnership's
acquisition of its interest was effected through its acquisition of an
18.30% general partnership interest in the Galleria Partnership from
First Dearborn Evanston Associates Limited Partnership ("Evanston
Associates"), an affiliate of the General Partners. Evanston Associates
originally agreed to purchase a 76.67% interest in the Galleria
Partnership by agreeing to contribute an aggregate $2,313,125 to the
Galleria Partnership. The Partnership acquired a portion of the 76.67%
general partnership interest on the same terms by contributing $552,066
for its 18.30% general partnership interest. The seller retained a
23.33% limited partnership interest.
The Partnership and Evanston Associates, as general partners of the
Galleria Partnership, have certain preferences from operating cash flow
and distributions from sales or refinancing. Profits are generally
allocated in accordance with cash distributions (including preferences)
and then in accordance with the respective partner's interest. Losses
are allocated first to partners with positive capital account balances
and then in accordance with the respective partner's interest.
<PAGE>
The limited partners ("Guarantors") of the Galleria Partnership had
provided the Partnership and Evanston Associates with a guaranty of
minimum rentals on certain retail space, maximum debt service levels and
maximum real estate tax expenses in the Galleria Partnership. The
property has failed to perform as expected and the Galleria Partnership
has called upon the Guarantors to satisfy their obligations under the
guaranties. The Guarantors have failed to fulfill their obligations to
the Partnership, and the General Partners have taken actions to protect
the rights of the Partnership, including receipt of an assignment in
favor of the Partnership of the Guarantors' limited partnership interests
in the Galleria Partnership of 5.57% and the receipt of security
interests in certain other limited partnership interests owned by the
Guarantors. Amounts owed pursuant to such guaranties which are secured
by the limited partners' partnership interests will be recorded upon
receipt.
The property is managed by an affiliate of the General Partners.
During 1997 and 1996, management fees totaling $41,550 and $25,091,
respectively, were paid to an affiliate of the General Partners. No
management fee was paid in 1995.
In connection with the loan modification to the first mortgage on
the Evanston Galleria, which closed in February of 1993 and was effective
August 1, 1992, the Galleria Partnership received an infusion of
additional capital and obtained modifications of the terms of its loans.
$202,000 of additional capital was contributed to the Galleria
Partnership by Evanston Associates, of which the Partnership's share was
$50,000, in exchange for a preferred equity position. The preferred
equity holders shall receive an annual preferred return from cash
distributions in an amount equal to the lesser of: a) prime rate plus 2%,
or b) 10% per annum. For financial reporting purposes, the Partnership
has a 23.87% interest in the Galleria Partnership.
Evanston Galleria is located in downtown Evanston, Illinois, a short
distance from Northwestern University. Demand for the apartments has
been strong over the past five years with occupancy averaging 98%.
Apartment rents have been rising approximately 3% per year. The ground
floor retail space had been 100% occupied during the past five years,
except for several instances where tenants defaulted. This resulted in
vacancies and a reduction in rental income. Demand for the ground floor
retail space has generally been strong. The lower level retail space,
however, has been vacant since 1995. One retail tenant, with a lease for
11,500 square feet, filed a petition for bankruptcy on January 11, 1994.
The tenant stopped paying rent and vacated the premises during the third
quarter of 1995. During the fourth quarter of 1995, a second tenant
representing 2,135 square feet defaulted under the terms of its lease and
vacated the space. Management has taken legal action against the
defaulted tenants, but currently has no estimate of the amount, if any,
or timing of collection of amounts due from these tenants. During the
fourth quarter of 1997, Evanston Galleria collected $50,000 as a
settlement for past due rents. Management has settled its legal actions
against the previously defaulted tenants. As of December 31, 1997
occupancy was 83%. However, a lease has been entered into to lease the
lower level space of 11,300 square feet which has increased occupancy to
over 93%, subsequent to December 31, 1997.
The property is subject to a first mortgage which matured May 1,
1996. Effective May 1, 1996, a modification of the first mortgage was
entered into which, among other modifications, extended the maturity of
the loan until May 1, 1998. Commencing on May 1, 1996, monthly payments
were adjusted to $57,143, which represents interest only payments at an
annual rate of 8.25%, based on the outstanding principal balance of the
loan as of May 1, 1996. Notwithstanding the pay rate of 8.25%, interest
on the loan continues to accrue and compound monthly on the unpaid
principal balance at the annual rate of 9.00%. The interest
differential, as defined, will be paid only from proceeds resulting from
a sale or refinancing of the property or from any remaining funds in the
cash flow escrow. The unpaid interest together with the unpaid principal
balance of the loan will be due and payable May, 1 1998. All net cash
flow from the property, in excess of the payments due for interest, shall
be deposited into a cash flow escrow account. If cash flow in any month
is insufficient to pay amounts due under the loan, then the amounts may
be withdrawn from the cash flow escrow account. The first mortgage loan
matures May 1, 1998. Although management is attempting to refinance the
loan, there can be no assurance that a refinancing can be consummated.
If the loan is not refinanced, it is likely that the loan will be in
default and that the Partnership's interest in Evanston Galleria could be
jeopardized.
<PAGE>
Sycamore Mall Associates
On October 26, 1990, the Partnership contributed $2,275,000 to
acquire a 53.40% general partnership interest in Sycamore Mall
Associates, a general partnership formed to acquire the Sycamore Mall
Shopping Center in Iowa City, Iowa. The property, situated on an
approximate 21.2 acre site, includes a main building containing 213,206
square feet and an out parcel building containing 27,000 square feet. A
14,000 square foot parcel which contains a 4,590 square foot building is
under a ground lease to McDonald's. Sycamore Mall Associates acquired
the property on October 26, 1990 for a purchase price of $9,400,000,
subject to a purchase money note of $5,140,000 bearing interest at 10%
payable interest only until maturity on October 26, 1995. On August 8,
1991, Sycamore Mall Associates obtained a first mortgage in the amount of
$5,140,000 which bore interest at a rate of 9.625% payable in monthly
installments of principal and interest of $45,355 commencing October 1,
1991 for 60 months until September 30, 1996. The proceeds of this first
mortgage were used to repay the original purchase money note. In October
1995, the first mortgage loan was modified. The terms of the
modification reduced the interest rate to 8.125%, reduced the monthly
payments of principal and interest to $44,375 and extended the maturity
to March 1, 2002.
First Dearborn Income Properties L.P., a public limited partnership
affiliated with the General Partners of the Partnership, and First
Dearborn Sycamore Associates Limited Partnership ("FDSALP"), a privately
offered limited partnership also affiliated with the General Partners,
are the joint venture partners in Sycamore Mall Associates and
contributed a total of $1,075,000 and $910,000 for 25.24% and 21.36% of
the general partner interests, respectively. The terms of the Sycamore
Mall Associates partnership agreement provide that cash flow, sale or
refinancing proceeds and profit and loss will be distributed or
allocated in proportion to the partner's ownership interests.
The property is managed by an affiliate of the General Partners and
an affiliate of the seller under a five year management agreement that
provides for a fee equal to 5% of the effective gross income, of which 1%
is paid to an affiliate of the General Partners. During 1997, 1996 and
1995 the property incurred management fees of $93,053, $96,048 and
$97,270, respectively.
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 so that there was no adverse financial impact in
1996. Management is currently negotiating with a potential replacement
tenant, however there can be no assurance that a new lease will be
entered into. If this space is not released, the ability of Sycamore
Mall to meet its financial obligations could be effected, as a result of
decreased revenues. Sears, Roebuck and Co. is a tenant under a lease
which had an original termination date of March 31, 1992. Prior to that
termination, a ten-year extension was agreed to which provided Sears an
option to terminate the lease at any time after March 31, 1997 by giving
landlord a one year written notice. Sears gave such notice on September
17, 1997, and will terminate it's lease on September 1, 1998. 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.
Sycamore Mall is located in Iowa City, Iowa. A new 1,000,000 square
foot regional mall is under construction in the area. This development
will create additional competition for Sycamore Mall. As a precautionary
measure, Sycamore Mall Associates had reduced distributions to its
partners in order to maintain its working capital reserves. It is
believed that the additional working capital might be necessary to help
maintain existing tenants and attract new tenants, due to the increased
competition from the new shopping center. During the fourth quarter of
1996, Sycamore Mall Associates distributed the extra reserve to its
partners. The partners of Sycamore Mall Associates have agreed to
maintain these additional reserves and will contribute these amounts back
to Sycamore Mall Associates if it is considered appropriate by the
partners. The Partnership has no definite plans for improvements to the
property at this time. Distributions to the partners in 1997 were
$295,000 as compared to $407,998 in 1996 and $356,406 in 1995.
<PAGE>
Country Isles
On July 12, 1991 the Partnership acquired from an unaffiliated
seller, a 21% interest in Country Isles Associates, an Illinois general
partnership owning Country Isles Shopping Center. The Partnership paid
$775,000 for its 21% interest in the joint venture. The remaining
interest in the joint venture is held by the Seller. The partners of
Country Isles Associates are the Partnership and Arvida/JMB Partners.
Arvida/JMB Partners, which owns a 79% interest in Country Isles
Associates, is the managing general partner. All profits, losses and
cash distributions of Country Isles Associates are allocated between its
partners in accordance with their percentage interests, described above,
except that, in the case of the Partnership, a special preferential
distribution of cash is to be made to the Partnership to compensate it
for certain rental discounts granted by the Seller in connection with the
lease of the property.
The Country Isles Shopping Center, located in Fort Lauderdale,
Florida, is an approximately 106,000 square foot retail shopping center
containing approximately 71,000 square feet which opened in 1986 and an
additional expansion of approximately 35,000 square feet which opened in
1989. The shopping center was 99% occupied as of December 31, 1996. The
Country Isles Shopping Center was managed by an affiliate of the Seller.
On April 25, 1996, Country Isles Associates completed the
refinancing of Country Isles Plaza in Ft. Lauderdale, Florida. The new
mortgage provided funding of $8,100,000, the proceeds of which were used
to repay the outstanding balance of $6,807,669 on the previous mortgage,
pay the costs of completing the new loan (approximately $174,000), and
provide for property tax escrow and working capital. Out of the
remaining proceeds, the Partnership received a distribution of $210,650
from Country Isles Associates. The Partnership made a special
distribution to the Limited Partners. As a result of the refinancing,
the interest rate was reduced from 9.75% to 7.00%, the monthly payments
have decreased from $60,141 to $57,250. The mortgage was due to mature
on May 1, 2001.
On December 17, 1997, Country Isles Associates, sold the Country
Isles Shopping Center in Fort Lauderdale, Florida, to Principal Mutual
Life Insurance Company ("Buyer"). The total purchase price received by
Country Isles was $13.2 million, which price was determined through arm's
length negotiations with Buyer. Of this total purchase price,
approximately $7.9 million was used to repay amounts owed to the lender
holding the mortgage on the shopping center and approximately $595,000
was used for customary additional selling expenses and prorations. The
net proceeds to Country Isles after these deductions were approximately
$4.7 million. Of these proceeds, the Partnership received approximately
$991,000 for its 21% interest.
Through March of 1992, Country Isles Shopping Center was managed by
Arvida Management, Limited Partnership, a Delaware limited partnership
which is affiliated with Arvida/JMB Partners. In March of 1992, JMB
Property Management, also an affiliate of Arvida/JMB Partners, became the
manager. Both the previous and current Management Agreements provide
that the Manager rent and manage the project for a term of five years,
and thereafter for yearly periods, unless otherwise terminated by the
parties in accordance with the management agreement. Country Isles
Associates paid the Manager a management fee in an amount equal to 4% of
the monthly operating revenues from the operation of the property.
Notwithstanding the foregoing, until such time as the management agent
notifies owner of its election to receive the management fee discussed
immediately above, Country Isles Associates was to pay the Manager, in
lieu of the management fee, an amount equal to 15% of amounts paid by
tenants at the project on account of reimbursement of operating expenses,
excluding taxes and insurance. During 1997, 1996 and 1995, the property
incurred management fees of $68,600, $68,053, and $62,912, respectively.
<PAGE>
Item 2. Properties
The Partnership owns through joint venture partnerships the
properties referred to in Item 1. The three properties that the
Partnership has an interest in are described below:
Sycamore Mall Associates
The property is a retail shopping center located in Iowa City, Iowa, and
is situated on an approximate 21.2 acre site. It includes a main
building containing 213,206 square feet and an out parcel building
containing 27,000 square feet. A 14,000 square foot parcel which
contains a 4,590 square foot building is under a ground lease. The
property is owned fee simple by a partnership of which the Partnership is
a partner. It is subject to a first mortgage in the amount of $4,574,933
which bears interest at a rate of 8.125% payable in monthly installments
of principal and interest of $44,375 until March 1, 2002, when the
balance comes due.
The major tenants are Sears and Von Maur which occupy approximately 34%
and 17%, respectively, of the net rentable area. Occupancy at Sycamore
Mall has remained in the 94% - 99% range through 1995. 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 so that there was no adverse financial impact in 1996. Management
is currently negotiating with a potential replacement tenant, however
there can be no assurance that a new lease will be entered into. If this
space is not released, the ability of Sycamore Mall to meet its financial
obligations could be effected, as a result of decreased revenues. Sears,
Roebuck and Co. is a tenant under a lease which had an original
termination date of March 31, 1992. Prior to that termination, a ten-
year extension was agreed to which provided Sears an option to terminate
the lease at any time after March 31, 1997 by giving landlord a one year
written notice. Sears gave such notice on September 17, 1997 and will
terminate its lease on September 1, 1998. 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. The Von
Maur lease expires in 2009 and the annual rent is approximately $210,000.
Average total rents received per square foot at the property during the
last three years are $7.65 in 1997, $8.15 in 1996, and $8.14 in 1995.
There are currently no plans for any significant improvements to the
property. However, construction has begun on a new regional shopping
center in the area. The location of the new mall will create additional
competition for Sycamore Mall. Management is closely monitoring the
situation.
The following table illustrates the scheduled lease expirations for
Sycamore Mall, over the next ten years:
<TABLE>
<CAPTION>
# of
leases % of total
expiring square feet annual rent annual rent
<C> <S> <S> <S> <S>
1998 7 98,516 371,660 30%
1999 6 21,200 171,292 14%
2000 3 8,000 130,905 12%
2001 - - - -
2002 4 7,423 153,457 12%
2003 - - - -
2004 1 3,464 86,510 7%
2005 - - - -
2006 - - - -
2007 - - - -
</TABLE>
Management believes that the Sycamore Mall property has adequate
insurance coverage.
<PAGE>
Country Isles
The Country Isles Shopping Center, located in the Weston community of
Fort Lauderdale, Florida, is an approximately 106,000 square foot retail
shopping center containing approximately 71,000 square feet which opened
in 1986 and an additional expansion of approximately 35,000 square feet
which opened in 1989. On April 25, 1996, Country Isles Associates
completed the refinancing of Country Isles Plaza in Ft. Lauderdale,
Florida. The new mortgage provided funding of $8,100,000, the proceeds
of which were used to repay the outstanding balance of $6,807,669 on the
previous mortgage, pay the costs of completing the new loan
(approximately $174,000), and provide for property tax escrow and working
capital. Out of the remaining proceeds, the Partnership received a
distribution of $210,650 from Country Isles Associates. The Partnership
made a special distribution to the Limited Partners. As a result of the
refinancing, the interest rate was reduced from 9.75% to 7.00%, the
monthly payments have decreased from $60,141 to $57,250. The mortgage
was due to mature on May 1, 2001.
On December 17, 1997, Country Isles Associates, sold the Country
Isles Shopping Center in Fort Lauderdale, Florida, to Principal Mutual
Life Insurance Company ("Buyer"). The total purchase price received by
Country Isles was $13.2 million, which price was determined through arm's
length negotiations with Buyer. Of this total purchase price,
approximately $7.9 million was used to repay amounts owed to the lender
holding the mortgage on the shopping center and approximately $595,000
was used for customary additional selling expenses and prorations. The
net proceeds to Country Isles after these deductions were approximately
$4.7 million. Of these proceeds, the Partnership received approximately
$991,000 for its 21% interest.
Evanston Galleria Limited Partnership
Evanston Galleria is a mixed-use residential and retail property
located in Evanston, Illinois. The property, located on a 0.79 acre
site, contains 36,068 square feet of rentable retail space and 55 loft
apartments containing a total of 45,190 square feet of rentable area.
The apartments are leased on a one or two year lease term. The retail
space is generally leased with 5 to 10 year leases.
The property is owned fee simple by a partnership of which the
Partnership is a partner. The property is subject to a first mortgage
which matured May 1, 1996. Effective May 1, 1996, a modification of the
first mortgage was entered into which, among other modifications,
extended the maturity of the loan until May 1, 1998. Commencing on May
1, 1996, monthly payments were adjusted to $57,143, which represents
interest only payments at an annual rate of 8.25%, based on the
outstanding principal balance of the loan as of May 1, 1996.
Notwithstanding the pay rate of 8.25%, interest on the loan continues to
accrue and compound monthly on the unpaid principal balance at the annual
rate of 9.00%. The interest differential, as defined, will be paid only
from proceeds resulting from a sale or refinancing of the property or
from any remaining funds in the cash flow escrow. The unpaid interest
together with the unpaid principal balance of the loan will be due and
payable May, 1 1998. All net cash flow from the property, in excess of
the payments due for interest, shall be deposited into a cash flow escrow
account. If cash flow in any month is insufficient to pay amounts due
under the loan, then the amounts may be withdrawn from the cash flow
escrow account. Although management is attempting to refinance the loan,
there can be no assurance that a refinancing can be consummated. If the
loan is not refinanced, it is likely that the loan will be in default and
that the Partnership's interest in Evanston Galleria could be
jeopardized.
Evanston Galleria has no single tenant which accounts for more then 10%
of the rentable area. Occupancy in the apartments at Evanston Galleria
has remained in the 94% - 100% range during the last five years. The
retail space has had a problem with tenant defaults, which has reduced
overall occupancy to as low as 80% in 1991. As of December 31, 1996,
occupancy was 84%. Average total rents received per square foot at the
property during the last three years were $19.57 in 1997, $21.85 in 1996
and $18.21 in 1995.
The residential leases have terms typically expiring in one year. During
1998 residential leases representing $698,640 of annual rent will expire.
During the fourth quarter of 1997, Evanston Galleria collected $50,000 as
a settlement for past due rents. Management has settled its legal
actions against the previously defaulted tenants. Also during the fourth
quarter of 1997, management was successful in signing two new leases. As
of December 31, 1997 occupancy was 83%. However, a lease has been
entered into to lease the lower level space of 11,300 square feet which
has increased occupancy to over 93%, subsequent to December 31, 1997.
The Evanston Bible Fellowship has leased the lower level through
September 30, 2002. Rents will be $45,142 in 1998, $69,486 in 1999,
$71,571 in 2000, $73,718 in 2001 and $56,523 in 2002.
<PAGE>
The following table illustrates the scheduled lease expirations relating
to the retail space, for Evanston Galleria, over the next ten years:
<TABLE>
<CAPTION>
# of
leases % of total
expiring square feet annual rent annual rent
<C> <S> <S> <S> <S>
1998 2 5,133 78,675 15%
1999 - - - -
2000 1 3,362 135,402 26%
2001 1 2,135 51,879 10%
2002 2 12,213 93,012 18%
2003 1 1,421 22,471 4%
2004 - - - -
2005 - - - -
2006 - - - -
2007 1 3,920 131,594 26%
</TABLE>
As of October 1, 1997, the Evanston Galleria property was considered to
be held for sale. In accordance with SFAS 121, no depreciation expense
relative to the property was recorded by the Partnership from October 1,
1997 through December 31, 1997. The net book value of the Evanston
Galleria property at December 31, 1997 and 1996 was $8,415,096 and
$8,675,592, respectively, and net loss from operations for the years
ended December 31, 1997, 1996 and 1995, net of the Venture Partners share
were $90,086, $78,686 and $96,309, respectively.
Management believes that the Evanston Galleria property has adequate
insurance coverage.
Occupancy Summary
The following is a list of approximate occupancy levels by quarter for
the Partnership's investment properties:
<TABLE>
<CAPTION>
1996 1997
at at at at at at at at
03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Evanston Galleria
Evanston,
Illinois 86% 86% 86% 84% 86% 86% 77% 83%
Country Isles (sold December 1997)
Ft. Lauderdale,
Florida 99% 98% 98% 99% 100% 99% 100% n/a
Sycamore Mall
Iowa City,
Iowa 95% 86% 87% 87% 88% 89% 89% 90%
</TABLE>
<PAGE>
Item 3. Legal Proceedings
The Partnership is not aware of any material pending legal
proceedings to which it or its properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
As of December 31, 1997, there were 532 Limited Partners holding
10,000 Units. There is no public market for Units and it is not
anticipated that a public market for Units will develop. Pursuant to the
terms of the Limited Partnership Agreement of the Partnership (the
"Partnership Agreement"), there are restrictions on the ability of the
Limited Partners to transfer their Units. In all cases, the General
Partners must consent to the substitution of a Limited Partner.
Distributions to Limited Partners, through December 31, 1997, have
totaled $1,394,298 since the Partnership's formation. This is
approximately $139.43 of cash distributions per Unit. Each Unit
originally sold for $500 and the offering was closed on January 31, 1991.
Reference is made to Item 6 herein for a summary of annual cash
distributions, per Unit, made to the Limited Partners.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
December 31, 1997, 1996, 1995, 1994 and 1993
(not covered by Independent Auditors' Report)
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Total revenues 1,847,296 1,955,397 1,965,788 1,786,895 1,769,190
Operating income 173,953 303,285 201,314 125,828 148,568
Partnership's share of
operations of unconsolidated
ventures (9,079) (45,145) (99,645) (68,131) (88,701)
Partnership's share of gain on sale
of investment property of
unconsolidated venture 698,447 - - - -
Venture partners' share of
consolidated venture's
operations (103,809) (177,269) (124,786) (96,382) (108,094)
Net income (loss) 759,512 80,871 (23,117) (38,685) (48,227)
Net income (loss)
per Unit (a) 75.19 8.01 (2.29) (3.83) (4.77)
Total assets 9,541,824 9,144,952 9,515,465 9,696,537 10,086,308
Long-term debt 4,408,018 4,574,933 4,728,865 4,881,129 4,951,845
Cash distributions
per Unit (a) 8.25 29.30 12.38 16.49 14.91
<FN>
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.
(a) The net income (loss) per Unit and cash distributions per Unit
are based on the number of Units outstanding at the end of each period
(10,000).
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources:
On February 1, 1989, the Partnership commenced a public offering of
$10,000,000 of units of Limited Partnership interest (the "Units")
(subject to increase by an additional $5,000,000 of Units) pursuant to a
Registration Statement on Form S-11 under the Securities Act of 1933.
The Partnership terminated the offering of Units on January 31, 1991,
having issued 10,000 Units, resulting in gross proceeds of $5,000,000 and
net proceeds to the Partnership (after deducting offering costs and
selling discounts related to the purchase of Units by the General
Partners and their affiliates) of $4,058,963.
At December 31, 1997, the Partnership had cash and cash equivalents
of $1,659,443 as compared to $592,001 as of December 31, 1996. The
increase in cash and cash equivalents results primarily from $991,000 of
net cash provided from the sale of Country Isles shopping center. The
partnership made a distribution, to its Limited Partners, during the
first quarter of 1998, in the amount of$740,600. Cash Flow from
operations has been sufficient to meet the Partnerships' obligations in
the past, however, past performance is not necessarily indicative of
future performance.
As of December 31, 1997, the Partnership has no material commitments
for capital expenditures. The Partnership does not anticipate any need
for external sources of liquidity. As of October 1, 1997, the Evanston
Galleria property was considered to be held for sale. In accordance with
SFAS 121, no depreciation expense relative to the property was recorded
by the Partnership from October 1, 1997 through December 31, 1997. The
net book value of the Evanston Galleria property at December 31, 1997 and
1996 was $8,415,096 and $8,675,592, respectively, and net loss from
operations for the years ended December 31, 1997, 1996 and 1995, net of
the Venture Partners share were $90,086, $78,686 and $96,309
respectively.
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
come from cash generated by the Partnership's investment properties and
from the sale and refinancing of such properties. To the extent a
property does not generate adequate cash flow to meet its working capital
requirements, the Partnership may (i) withdraw funds from the working
capital reserve it maintains, (ii) fund such shortfall from excess cash
generated by other properties owned or (iii) pursue outside financing
sources. However, the Partnership may decide not to, or may not be able
to, commit additional funds to certain of its investment properties.
Nonetheless, it is anticipated that the current and future capital
resources of the Partnership will be adequate to fund currently
anticipated short and long-term requirements of its investment portfolio
taken as a whole.
There are certain risks and uncertainties 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. To date, the Partnership has not experienced any
significant detrimental impact from these uncertainties and risks, except
at Evanston Galleria as more fully described in Note 2 (b) to the Notes
to Consolidated Financial Statements included in Item 8.
In response to the weakness in the real estate industry, the
Partnership is taking steps to preserve its working capital. Therefore,
the Partnership carefully scrutinizes the appropriateness of any possible
discretionary expenditures, particularly as the discretionary
expenditures relate to the amount of working capital reserves the
Partnership has available. By conserving working capital, the Partnership
expects to be in a better position to meet future needs of its properties
without having to rely on external financing sources. During 1997, the
Partnership working capital increased $1,156,086 from $327,393 at
December 31, 1996 to $1,483,479 at December 31, 1997.
<PAGE>
Results of Operations:
The results of operations for the years ended December 31, 1997,
December 31, 1996 and December 31, 1995 reflect the consolidated
operations of the Partnership and Sycamore Mall Associates (the "Sycamore
Partnership") and the Partnership's equity investments in Evanston
Galleria Limited Partnership (the "Galleria Partnership") and Country
Isles Associates ("Country Isles"). The results of operations of the
Sycamore Partnership reflect the operations of the Sycamore Mall Shopping
Center. The equity investment in the Galleria Partnership reflects the
Partnership's share of the operations of the Evanston Galleria. The
equity investment in Country Isles reflects the Partnership's share of
the operations of the Country Isles Plaza Shopping Center.
Changes from 1995 to 1996:
The Partnership's recognized net income of $80,871 in 1996 as
compared to a net loss in 1995 $23,117. This improvement of $103,988
resulted primarily from an improvement in operating income of $101,971.
The loss allocated from Evanston Galleria was $96,309 in 1995 as compared
to $78,686 in 1996. The improvement in operating results from the
Evanston Galleria resulted from a reduction in operating expenses. The
loss allocated from Country Isles in 1995 was $3,336 as compared to
income of $33,541 in 1996. Operations at Country Isles improved from the
prior year as a result in a reduction in repairs and maintenance expenses
and a reduction in interest expense. Maintenance expenses were higher in
1995 due to a non-recurring maintenance item and interest expense was
lower in 1996 as a result of the loan refinancing.
The Partnership's rental income increased $11,351, less than 1%,
from $1,344,444 in 1995 to $1,355,795 in 1996. Revenue from tenant
charges decreased $29,906 (5%) from $611,840 in 1995 to $581,934 in 1996.
This decrease is due to a decrease in operating expenses at Sycamore
Mall. The tenant charges represent the tenants' reimbursement of certain
property operating expenses.
Interest income increased $8,164 (86%) from $9,504 in 1995 to
$17,668 in 1996. The increase results from the increase in cash reserves
which have been held and invested by the Partnership.
Property operating expenses decreased to $871,550 for the year ended
December 31, 1996 from $913,541 for the year ended December 31, 1995.
This $41,991 (5%) decrease results primarily from an decrease of $61,485
in property taxes which was offset by increases other operating expenses.
Interest expense decreased $64,965 (14%) from $454,551 in 1995 to
$389,586 in 1996. Approximately $58,000 of the decrease resulted from
the reduction in the interest rate on the mortgage loan at Sycamore Mall.
The remaining $8,000 in reduction results from the repayment of mortgage
indebtedness throughout the year.
Amortization expense decreased $26,457 from $36,656 during the year
ended December 31, 1995 to $10,199 during the year ended December 31,
1996. This decrease is primarily due to the nonrecurring amortization of
the capitalized financing costs relating to the loan which was refinanced
in 1995.
Changes from 1996 to 1997:
The Partnership's net income in 1997 increased $678,641 from $80,871
in 1996 to $759,512 in 1997. This increase resulted primarily from the
Partnership's recognition of its share of the gain on the sale of the
Country Isles property in December 1997. The Partnership's share of the
gain was $698,447. The loss allocated from Evanston Galleria was $90,086
in 1997 as compared to $78,686 in 1996. The decrease in operating
results from the Evanston Galleria resulted from increased vacancy in the
commercial spaces at Evanston Galleria. The income allocated from
Country Isles in 1996 was $33,541 as compared to a gain of $81,007 in
1997. Operations at Country Isles continued to improve from increased
rental rates and increased occupancy.
The Partnership's rental income decreased $62,046 ( 5%) from
$1,355,795 in 1996 to $1,293,749 in 1997. The decrease in rental income
results from an increase in vacancy at Sycamore Mall. Occupancy fell
during the second quarter of 1996, although occupancy has been increasing
slightly since then, the overall average for the year was a decrease in
occupancy.
Revenue from tenant charges decreased $51,337 (9%) from $581,934 in
1996 to $530,597 in 1997. The decrease in rental income results from an
increase in the average vacancy at Sycamore Mall, over the year.
<PAGE>
Interest income increased $5,282 (30%) from $17,668 in 1996 to
$22,950 in 1997. The increase results from the increase in cash reserves
which have been held and invested by the Partnership.
Property operating expenses increased to $912,456 for the year ended
December 31, 1997 from $871,550 for the year ended December 31, 1996.
This $40,906 (5%) increase results primarily from an increase in
maintenance and landscaping expenses at Sycamore Mall.
Interest expense decreased $12,056 (3%) from $389,586 in 1996 to
$377,530 in 1997. The reduction results from the repayment of $153,932
of mortgage indebtedness throughout the year. Interest expense in 1998
is expected to decrease further as a result of the continued repayment of
the mortgage indebtedness.
General and administrative expense decreased $7,205 (8%) from
$86,852 during the year ended December 31, 1996 to $79,647 during the
year ended December 31, 1997. This decrease resulted in a decrease in
administrative costs charged by an affiliate of the General Partner.
Inflation:
The Partnership has completed its ninth full year of operations.
During the nine years the annual inflation rate has ranged from 3.01% to
5.40% with an average of 4.21%. The effect which inflation has had on
income from operations is minimal primarily due to the weak real estate
market.
Inflation in future periods may increase rental income levels (from
leases to new tenants or renewals of existing leases) in accordance with
normal market conditions. Such increases in rental income should offset
most of the adverse impact that inflation has on property operating
expenses with little effect on operating income. Continued inflation may
also tend to cause capital appreciation of the Partnership's investment
properties over a period of time as rental rates and replacement costs of
properties continue to increase.
Asset Impairment:
The Partnership adopted 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", on January 1, 1996. SFAS 121
requires that the Partnership record an impairment loss on its property
held for investment whenever the property's carrying value cannot be
fully recovered through estimated undiscounted cash flows from its
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. In addition, SFAS 121 provides that a
property may not be depreciated while being held for sale. As of October
1, 1997, the Evanston Galleria property was considered to be held for
sale. In accordance with SFAS 121, no depreciation expense relative to
the property was recorded from October 1, 1997 through December 31, 1997.
The net book value of the Evanston Galleria property at December 31, 1997
and 1996 was $8,415,096 and $8,675,592, respectively, and net loss from
operations for the years ended December 31, 1997, 1996 and 1995, net of
the Venture Partners share were $90,086, $78,686 and $96,309
respectively. The remaining properties are considered to be held for
investment at December 31, 1997. The adoption of SFAS 121 had no effect
on the financial reporting relative to the properties held for
investment.
Certain investment properties are pledged as security for the long-
term debt, for which there is no recourse to the Partnership, as
described in Note 3 of the Notes to Consolidated Financial Statements.
<PAGE>
Item 8. Financial Statements and Supplementary Data
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
INDEX
Page (s)
Independent Auditors' Report 17
Consolidated Balance Sheets, December 31, 1997 and 1996 18 - 19
Consolidated Statements of Operations,
years ended December 31, 1997, 1996 and 1995 20
Consolidated Statements of Partners'
Capital Accounts (Deficits),
years ended December 31, 1997, 1996 and 1995 21
Consolidated Statements of Cash Flows,
years ended December 31, 1997, 1996 and 1995 22
Notes to Consolidated Financial Statements 23 - 29
Schedule
Consolidated Real Estate and Accumulated Depreciation III
Schedules not filed:
All schedules other than those indicated in the index have been omitted
as the required information is inapplicable or the information is
presented in the financial statements or the related notes.
<PAGE>
Independent Auditors' Report
The Partners
First Dearborn Income Properties L.P. II
We have audited the consolidated financial statements of First Dearborn
Income Properties L.P. II (a limited partnership) and consolidated
venture 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 the 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 First
Dearborn Income Properties L.P. II and consolidated venture as of
December 31, 1997 and 1996 and the results of their operations and their
cash flows for each of the years in the three-year period ended December
31, 1997, 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.
KPMG Peat Marwick LLP
Chicago, Illinois
March 25, 1998
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Balance Sheets
December 31, 1997 and 1996
Assets
<CAPTION>
1997 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) 1,659,443 592,001
Rents and other receivables 317,315 305,044
Due from affiliates 14,122 4,936
Prepaid expense 19,122 31,502
Total current assets 2,010,002 933,483
Investment property:
Land 1,201,880 1,201,880
Buildings and improvements 8,372,099 8,350,456
9,573,979 9,552,336
Less accumulated depreciation (2,032,976) (1,739,051)
7,541,003 7,813,285
Investment in unconsolidated ventures,
at equity (notes 2 and 7) (58,669) 338,911
Deferred leasing and loan costs 49,488 59,273
Total assets 9,541,824 9,144,952
<FN>
See accompanying notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Balance Sheets - Continued
December 31, 1997 and 1996
Liabilities and Partners' Capital Accounts (Deficits)
<CAPTION>
1997 1996
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses 328,632 412,980
Due to affiliates (note 6) - 7,160
Accrued interest 30,976 32,018
Current portion of long-term debt (note 3) 166,915 153,932
Total current liabilities 526,523 606,090
Long-term liabilities:
Long-term debt (note 3) 4,408,018 4,574,933
Venture partners' equity
in consolidated venture (note 2) 1,508,231 1,541,880
Tenant security deposits 5,433 5,439
Total long-term liabilities 5,921,682 6,122,252
Total liabilities 6,448,205 6,728,342
Partners' capital accounts (deficits) (notes 1 and 4):
General partners:
Capital contributions 1,000 1,000
Cumulative net income (losses) 4,280 (3,315)
Total general partners' capital (deficits) 5,280 (2,315)
Limited partners (10,000 units):
Capital contributions 4,058,963 4,058,963
Cumulative net income (losses) 423,674 (328,243)
Cumulative cash distributions (1,394,298) (1,311,795)
Total limited partners' capital 3,088,339 2,418,925
Total partners' capital accounts 3,093,619 2,416,610
Commitments and contingencies (notes 2 and 6)
Total liabilities and partners' capital $ 9,541,824 9,144,952
<FN>
See accompanying notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Operations
Years ended December 31, 1997, 1996, and 1995
<CAPTION>
1997 1996
1995
<S> <C> <C> <C>
Revenues:
Rental income $ 1,293,749 1,355,795 1,344,444
Tenant charges 530,597 581,934 611,840
Interest income 22,950 17,668 9,504
Total revenues 1,847,296 1,955,397 1,965,788
Expenses:
Property operating expenses 912,456 871,550 913,541
Interest 377,530 389,586 454,551
Depreciation 293,925 293,925 284,918
Amortization 9,785 10,199 36,656
General and administrative expenses 79,647 86,852
74,808
Total expenses 1,673,343 1,652,112 1,764,474
Operating income 173,953 303,285 201,314
Partnership's share of operations
of unconsolidated ventures (9,079) (45,145) (99,645)
Partnership's share of gain on sale of investment
property of unconsolidated venture 698,447 - -
Venture partners' share of consolidated
venture's operations (note 1) (103,809)
(177,269) (124,786)
Net income (loss) $ 759,512 80,871 (23,117)
Net income (loss) per limited partnership unit (note 1) $
75.19 8.01 (2.29)
<FN>
See accompanying notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Partners' Capital Accounts (Deficits)
Years ended December 31, 1997, 1996 and 1995
<CAPTION>
General Partners . Limited
Partners (10,000 Units) .
Net
Contributions, Net Cash
income net of income distrib-
Contributions (loss) Total offering
costs (loss) utions Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance (deficit)
at December 31, 1994 1,000 (3,893) (2,893) 4,058,963
(385,419) (894,938) 2,778,606
Net loss - (231) (231) - (22,886) - (22,886)
Cash distributions - - -
- - - (123,812) (123,812)
Balance (deficit)
at December 31, 1995 $ 1,000 (4,124) (3,124) 4,058,963
(408,305) (1,018,750) 2,631,908
Net income - 809 809 - 80,062 - 80,062
Cash distributions - - -
- - - (293,045) (293,045)
Balance (deficit)
at December 31, 1996 $ 1,000 (3,315) (2,315) 4,058,963
(328,243) (1,311,795) 2,418,925
Net income - 7,595 7,595 - 751,917 - 751,917
Cash distributions - - -
- - - (82,503) (82,503)
Balance (deficit)
at December 31, 1997 $ 1,000 4,280 5,280 4,058,963 423,674
(1,394,298) 3,088,339
<FN>
See accompanying notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $759,512 80,871 (23,117)
Items not requiring cash or cash equivalents:
Depreciation 293,925 293,925 284,918
Amortization 9,785 10,199 36,656
Partnership's share of operations of
unconsolidated ventures, net of distributions 104,686 341,931
148,455
Partnership's share of gain on sale of
investment property of unconsolidated venture (698,447) -
- -
Venture partners' share of consolidated venture's operations
103,809 177,269 124,786
Changes in:
Rents and other receivables (12,271) (15,651) (17,523)
Due from affiliates (9,186) 2,063 (2,290)
Prepaid expense 12,380 (9,946) 3,344
Accounts payable and accrued expenses (84,348) 6,840 93,322
Due to affiliates (7,160) (3,155) (3,958)
Accrued interest (1,042) (962) (6,738)
Tenant security deposits (6) (894) 175
Net cash provided by operating activities 471,637 882,490 638,030
Cash flows for investing activities:
Additions to investment property (21,643) (13,538) (57,292)
Distribution from sale of investment property
of unconsolidated venture 991,341 - -
Payment of deferred expenses - - (70,505)
Net cash provided by (used in) investing activities 969,698
(13,538) (127,797)
Cash flows for financing activities:
Venture partners' distributions from consolidated venture
(137,458) (195,479) (160,708)
Distributions to limited partners (82,503) (293,045) (123,812)
Principal payments on long-term debt (153,932) (141,958)
(81,022)
Net cash used in financing activities (373,893) (630,482) (365,542)
Net increase in cash and cash equivalents 1,067,442 238,470 144,691
Cash and cash equivalents at beginning of year 592,001 353,531
208,840
Cash and cash equivalents at end of year $ 1,659,443 592,001
353,531
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest $378,572 390,548
461,289
<FN>
See accompanying notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(1) Organization and Basis of Accounting
The Partnership was formed under the Delaware Revised Uniform
Limited Partnership Act by the recording of a Certificate of Limited
Partnership as of May 19, 1988. Initial capital contributions were
$1,000 by the General Partners and $1,000 by the Initial Limited Partner.
The Initial Limited Partner (an affiliate of the Managing General
Partner) withdrew as a Limited Partner upon the admission of the first
additional Limited Partners on October 16, 1989 when the initial closing
of the offering was consummated. The Agreement of Limited Partnership
authorized the issuance of up to 20,000 additional Units (subject to
increase by an additional 10,000 Units) at $500 per Unit. A total of
7,789 Units was subscribed for and issued between February 1, 1989 and
December 31, 1990. An additional 2,211 Units were issued during 1991 of
which 1,669 Units were purchased by an affiliate of the General Partners
pursuant to its Agreement to Purchase Units. The offering terminated on
January 31, 1991 at which time an aggregate 10,000 Units had been sold.
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 Limited Partnership and Country Isles
Associates.
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 for the
Partnership. The net effect of these is as follows:
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
1997 1997 1996 1996
GAAP Tax GAAP Tax
Basis Basis
Basis Basis
<S> <C> <C> <C> <C>
Total assets $9,541,824 4,255,943 9,144,952 3,583,310
Partners' capital accounts (deficits):
General partners 5,280 0 (2,315) (2,796)
Limited partners 3,088,339 4,077,621 2,418,925 3,400,624
Net income:
General partners 7,595 2,796 809 70
Limited partners 751,917 759,652 80,062 51,591
Net income per limited partnership unit $ 75.19 75.97
8.01 5.16
<FN>
The net income (loss) per limited partnership unit presented is
based on the limited partnership units outstanding at the end of each
period (10,000). All distributions to partners through December 31, 1997
have been considered to be a return of capital.
</TABLE>
<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 income. 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 ($1,400,707 and $312,653 at December 31, 1997 and 1996,
respectively), as cash equivalents.
Deferred offering costs were charged to the partners' capital
accounts upon consummation of the offering. Deferred organization costs
were amortized over a 60-month period using the straight-line method.
Deferred loan costs are amortized over the terms of the related
agreements using the straight-line method. Leasing commissions are
amortized over the terms of the related tenant leases 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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
The Partnership adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets
and for Long Lived Assets to be Disposed Of", on January 1, 1996. SFAS
121 requires that the Partnership record an impairment loss on its
property held for investment whenever the property's carrying value
cannot be fully recovered through estimated undiscounted cash flows from
its 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. In addition, SFAS 121 provides
that a property may not be depreciated while being held for sale. As of
October 1, 1997, the Evanston Galleria property was considered to be held
for sale. In accordance with SFAS 121, no depreciation expense relative
to the property was recorded by the Partnership from October 1, 1997
through December 31, 1997. The net book value of the Evanston Galleria
property at December 31, 1997 and 1996 was $8,415,096 and $8,675,592,
respectively, and net loss from operations for the years ended December
31, 1997, 1996 and 1995, net of the Venture Partners share were $90,086,
$78,686 and $96,309 respectively. The remaining properties are
considered to be held for investment at December 31, 1997. The adoption
of SFAS 121 had no effect on the financial reporting relative to the
properties held for investment.
(2) Venture Agreements
(a) General
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 December 31, 1997. The Partnership has
acquired, through these ventures, interests in a mixed use
retail/residential property and two shopping centers.
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(b) Evanston Galleria Limited Partnership
On October 31, 1989, the Partnership acquired an interest in
Evanston Galleria Limited Partnership (the "Galleria Partnership") which
owns a 100% beneficial interest in the Evanston Galleria, a mixed-use
residential and retail property located in Evanston, Illinois. The
property, located on a .79 acre site, contains 36,068 square feet of
rentable retail space and 55 loft apartments. The Partnership's
acquisition of its interest was effected through its acquisition of an
18.30% general partnership interest in the Galleria Partnership from
First Dearborn Evanston Associates Limited Partnership ("Evanston
Associates"), an affiliate of the General Partners. Evanston Associates
originally agreed to purchase a 76.67% interest in the Galleria
Partnership by agreeing to contribute an aggregate $2,313,125 to the
Galleria Partnership. The Partnership acquired a portion of the 76.67%
general partnership interest on the same terms by contributing $552,066
for its 18.30% general partnership interest. The seller retained a
23.33% limited partnership interest.
The Partnership and Evanston Associates, as general partners of the
Galleria Partnership, have certain preferences from operating cash flow
and distributions from sales or refinancing. Profits are generally
allocated in accordance with cash distributions (including preferences)
and then in accordance with the respective partner's interest. Losses
are allocated first to partners with positive capital account balances
and then in accordance with the respective partner's interest.
The limited partners ("Guarantors") of the Galleria Partnership had
provided the Partnership and Evanston Associates with a guaranty of
minimum rentals on certain retail space, maximum debt service levels and
maximum real estate tax expenses in the Galleria Partnership. The
property has failed to perform as expected and the Galleria Partnership
has called upon the Guarantors to satisfy their obligations under the
guaranties. The Guarantors have failed to fulfill their obligations to
the Partnership, and the General Partners have taken actions to protect
the rights of the Partnership, including receipt of an assignment in
favor of the Partnership of the Guarantors' limited partnership interests
in the Galleria Partnership of 5.57% and the receipt of security
interests in certain other limited partnership interests owned by the
Guarantors. Amounts owned pursuant to such guaranties which are secured
by the limited partners' partnership interests will be recorded upon
receipt.
The property is managed by an affiliate of the General Partners.
During 1997 and 1996, management fees totaling $41,550 and $25,091,
respectively, were paid to an affiliate of the General Partners. No
management fee was paid in 1995.
The property was subject to a first mortgage which matured May 1,
1996. Effective May 1, 1996, a modification of the first mortgage was
entered into which, among other modifications, extended the maturity of
the loan until May 1, 1998. Commencing on May 1, 1996, monthly payments
were adjusted to $57,143, which represents interest only payments at an
annual rate of 8.25%, based on the outstanding principal balance of the
loan as of May 1, 1996. Notwithstanding the pay rate of 8.25%, interest
on the loan continues to accrue and compound monthly on the unpaid
principal balance at the annual rate of 9.00%. The interest
differential, as defined, will be paid only from proceeds resulting from
a sale or refinancing of the property or from any remaining funds in the
cash flow escrow. The unpaid interest together with the unpaid principal
balance of the loan will be due and payable May 1, 1998. Although
management is attempting to refinance the loan, there can be no assurance
that a refinancing can be consummated. If the loan is not refinanced, it
is likely that the loan will be in default and that the Partnership's
interest in Evanston Galleria could be jeopardized. All net cash flow
from the property, in excess of the payments due for interest, shall be
deposited into a cash flow escrow account. If cash flow in any month is
insufficient to pay amounts due under the loan, then the amounts may be
withdrawn from the cash flow escrow account.
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(c) Sycamore Mall Associates
On October 26, 1990, the Partnership contributed $2,275,000 to
acquire a 53.40% general partnership interest in Sycamore Mall
Associates, a general partnership formed to acquire the Sycamore Mall
Shopping Center in Iowa City, Iowa. The property, situated on an
approximate 21.2 acre site, includes a main building containing 213,206
square feet and an out parcel building containing 27,000 square feet. A
14,000 square foot parcel which contains a 4,590 square foot building is
under a ground lease. Sycamore Mall Associates acquired the property on
October 26, 1990 for a purchase price of $9,400,000, subject to a
purchase money note of $5,140,000 bearing interest at 10% payable
interest only until maturity on October 26, 1995. On August 8, 1991,
Sycamore Mall Associates obtained a first mortgage in the amount of
$5,140,000 which bore interest at a rate of 9.625% payable in monthly
installments of principal and interest of $45,355 commencing October 1,
1991 for 60 months until September 30, 1996. The proceeds of this first
mortgage were used to repay the original purchase money note. In October
1995, the first mortgage loan was modified. The terms of the
modification reduced the interest rate to 8.125%, reduced the monthly
payments of principal and interest to $44,375 and extended the maturity
to March 1, 2002.
First Dearborn Income Properties L.P., a public limited partnership
affiliated with the General Partners of the Partnership, and First
Dearborn Sycamore Associates Limited Partnership ("FDSALP"), a privately
offered limited partnership also affiliated with the General Partners,
are the joint venture partners in Sycamore Mall Associates and
contributed a total of $1,075,000 and $910,000 for 25.24% and 21.36% of
the general partner interests, respectively.
The terms of the Sycamore Mall Associates partnership agreement
provide that cash flow, sale or refinancing proceeds and profit and loss
will be distributed or allocated in proportion to the partners' ownership
interests.
The property is managed by an affiliate of the General Partners and
an affiliate of the seller under a five year management agreement that
provides for a fee equal to 5% of the effective gross income, of which 1%
is paid to an affiliate of the General Partners. During 1997, 1996 and
1995 the property incurred management fees of $93,053, $96,048 and
$97,270, respectively.
(d) Country Isles
The Country Isles Shopping Center, located in the Weston community
of Fort Lauderdale, Florida, is an approximately 106,000 square foot
retail shopping center containing approximately 71,000 square feet which
opened in 1986 and an additional expansion of approximately 35,000 square
feet which opened in 1989. The Country Isles Shopping Center is managed
by an affiliate of the seller.
On April 25, 1996, Country Isles Associates completed the
refinancing of Country Isles Plaza in Ft. Lauderdale, Florida. The new
mortgage provided funding of $8,100,000, the proceeds of which were used
to repay the outstanding balance of $6,807,669 on the previous mortgage,
pay the costs of completing the new loan (approximately $174,000), and
provide for property tax escrow and working capital. Out of the
remaining proceeds, the Partnership received a distribution of $210,650
from Country Isles Associates. The Partnership made a special
distribution to the Limited Partners. No significant impact to the
property is anticipated as a result of the increased mortgage
indebtedness. As a result of the refinancing, the interest rate was
reduced from 9.75% to 7.00%, the monthly payments have decreased from
$60,141 to $57,250. The mortgage was scheduled to mature on May 1, 2001.
On December 17, 1997, Country Isles Associates, sold the Country
Isles Shopping Center in Fort Lauderdale, Florida, to Principal Mutual
Life Insurance Company ("Buyer"). The total purchase price received by
Country Isles was $13.2 million, which price was determined through arm's
length negotiations with Buyer. Of this total purchase price,
approximately $7.9 million was used to repay amounts owed to the lender
holding the mortgage on the shopping center and approximately $595,000
was used for customary additional selling expenses and prorations. The
net proceeds to Country Isles after these deductions were approximately
$4.7 million. Of these proceeds, the Partnership received approximately
$991,000 for its 21% interest.
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
Through March of 1992, Country Isles Shopping Center was managed by
Arvida Management, Limited Partnership, a Delaware limited partnership
which is affiliated with Arvida/JMB Partners. In March of 1992, JMB
Property Management, also an affiliate of Arvida/JMB Partners, became the
manager. Both the previous and current Management Agreements provide
that the Manager will rent and manage the project for a term of five
years, and thereafter for yearly periods, unless otherwise terminated by
the parties in accordance with the agreement. Country Isles Associates
shall pay the Manager a management fee in an amount equal to 4% of the
monthly operating revenues from the operation of the property.
Notwithstanding the foregoing, until such time as the management agent
notifies owner of its election to receive the management fee discussed
immediately above, Country Isles Associates shall pay the Manager, in
lieu of the management fee, an amount equal to 15% of amounts paid by
tenants at the project on account of reimbursement of operating expenses,
excluding taxes and insurance. During 1997, 1996 and 1995, the property
incurred management fees of $68,600, $68,053, $ and $62,912,
respectively.
(3) Long-Term Debt
Long-term debt consists of the following at December 31, 1997 and
1996:
<TABLE>
<CAPTION
1997
1996
<S> <C> <C>
$4,899,448 mortgage note, bearing interest at 8.125%, payable
in monthly installments of principal and interest of $44,375 until
maturity on March 1, 2002 when the remaining principal
balance of $3,780,785 is payable; secured by the real and personal
property of Sycamore Mall Shopping Center. $4,574,933 4,728,865
Less current portion of long-term debt
166,915 153,932
Total long-term debt $4,408,018
4,574,933
</TABLE>
Five year maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1998 166,915
1999 180,993
2000 179,290
2001 211,382
2002 3,836,353
</TABLE>
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(4) Partnership Agreement
Pursuant to the terms of the Partnership Agreement, net profits or
losses of the Partnership for Federal income tax purposes from operations
generally will be allocated 99% to the Limited Partners and 1% to the
General Partners. Net profits for Federal income tax purposes from the
sale or refinancing of properties will be allocated as follows: (i)
first, to the Partners who have a deficit capital account balance in an
amount equal to their deficit balance; (ii) second, to the Limited
Partners in an amount equal to their contributed capital plus a
stipulated return thereon; and (iii) thereafter, 90% to the Limited
Partners and 10% to the General Partners. Net losses from the sale or
refinancing of properties will be allocated as follows: (i) first, to
the Partners who have a positive capital account balance in an amount
equal to their positive balance; and (ii) thereafter, 99% to the Limited
Partners and 1% to the General Partners.
Operating Cash Flow, as defined in the Partnership Agreement, prior
to the date the public offering terminated was distributed 100% to the
Limited Partners. Operating Cash Flow subsequent to termination of the
public offering will be distributed during the first five years, 99% to
the Limited Partners and 1% to the General Partners and, thereafter, 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. Any
remaining sale or refinancing proceeds will then be distributed 90% to
the Limited Partners and 10% to the General Partners.
For financial reporting purposes, net profits or losses from
operations are allocated 99% to the Limited Partners and 1% to the
General Partners. The General Partners are not required to make any
capital contributions except under certain limited circumstances upon
dissolution and termination of the Partnership.
(5) Leases
The Partnership has determined that all leases relating to the
properties are properly classified as operating leases; therefore, rental
income is reported when earned and the cost of the property, excluding
the cost of the land, is depreciated over the estimated useful life of
the property. Leases with tenants range in term from one to thirty years
and provide for fixed minimum rent and partial to full reimbursement of
operating costs. In addition, many of the leases provide for additional
rent based upon percentages of tenants' sales volume.
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:
<TABLE
[S] [C]
1998 $ 1,229,081
1999 785,569
2000 582,679
2001 568,274
2002 479,718
Thereafter 2,369,956
$6,015,277
[/TABLE]
Percentage rents (based on tenants' sales volume) included in rental
income were $192,100, $180,846 and $171,305 for the years ended December
31, 1997, 1996 and 1995, respectively.
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(6) Transactions with Affiliates
Affiliates of the General Partners are entitled to receive from the
Partnership acquisition fees, equal to 9% of the gross proceeds from the
offering of Units, in connection with the evaluation, investigation,
negotiation, selection and purchase of the Partnership's investment
properties. 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.
Fees, commissions and other expenses required to be paid by the
Partnership to affiliates of the General Partners for the years ended
December 31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Unpaid at
1997 1996 1995 Dec. 31, 1997
<S> <C> <C> <C> <C>
Reimbursement (at cost) for out of pocket expenses $ 1,168 1,168
2,375 $ 0
Reimbursement (at cost) for administrative services 1,364 14,992
14,224 0
$ 2,532 16,160 16,599 $
0
</TABLE>
(7) Investment in Unconsolidated Ventures
Summary combined financial information for Evanston Galleria Limited
Partnership and Country Isles Associates as of December 31, 1997 and 1996
is as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Current assets $ 399,709
456,459
Current liabilities (9,003,623)
(792,256)
Working capital (8,603,914)
(335,797)
Deferred expenses 42,859
258,468
Ventures partners' equity 262,290
4,611,217
Investment property, net 8,415,096
12,319,923
Long-term debt (175,000)
(16,514,900)
Partnership's capital $ (58,669) $
338,911
Represented by:
Invested capital 1,548,815
1,548,815
Cumulative cash distributions (1,588,495)
(501,547)
Cumulative loss (18,989) (708,357)
$(58,669) $
338,911
Total revenues
(including gain in sale of investment property)
12,171,902 3,198,453
Total expenses 3,046,611 3,368,380
Net income (loss) $ 9,125,291 $ (169,927)
</TABLE>
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
The total revenues, expenses and net loss for the above ventures for the
year ended December 31, 1995 were $3,059,677, $3,479,039 and $419,362,
respectively.
(8) Subsequent Event
In March 1998, the Partnership paid cash distributions of $740,600
to the Limited Partners.
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
December 31, 1997
Schedule III
Consolidated Real Estate and Accumulated Depreciation
<CAPTION>
(a)
(b)
Initial Cost to
Partnership Additions Gross amount of asset at period end
Building & Building & Building &
Accumulated Date of Date Depreciable
Encumbrance Land Improvements
Improvements Land Improvements Total Depreciation
Construction Acquired Lives
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Center 1969
Iowa City, IA $4,574,933 1,201,880 7,910,902 461,197 1,201,880 8,372,099
9,573,979 2,032,976 1972 10/26/90 5-30 years
<FN>
(a) The initial cost represents the original purchase price of the properties.
(b) The aggregate cost of the above real estate at December 31, 1997 for
Federal income tax purposes is $9,573,979.
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
(c) Reconciliation of real estate owned
Balance at beginning of period $9,552,336 9,538,798 9,481,506
Additions 21,643 13,538 57,292
Balance at end of period 9,573,979 9,552,336 9,538,798
(d) Reconciliation of accumulated depreciation
Balance at beginning of period 1,739,051 1,445,126 1,160,208
Depreciation expense 293,925 293,925 284,918
Balance at end of period $2,032,976 1,739,051 1,445,126
</TABLE>
<PAGE>
Item 9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Partnership are:
FDIP, Inc., an Illinois corporation, Managing General Partner; and
FDIP Associates, an Illinois general partnership, Associate General
Partner.
FDIP, Inc., the Managing General Partner, is a corporation formed
under the laws of the State of Illinois. Its issued and outstanding
shares are owned by Messrs. Bruce H. Block and Robert S. Ross. The
officers of the Managing General Partner are Robert S. Ross, President,
and Bruce H. Block, Vice President and Secretary. Messrs. Block and
Ross are its sole directors.
FDIP Associates, the Associate General Partner, was formed under
the laws of the State of Illinois and has a nominal net worth. Its
constituent partners are First Dearborn Partners, an Illinois general
partnership formed in January, 1984, whose constituent partners are
Messrs. Block and Ross, and Hampshire Syndications, Inc., a New
Hampshire corporation. Hampshire Syndications, Inc. is wholly owned by
Hampshire Funding, Inc., a New Hampshire corporation, which is a wholly-
owned subsidiary of Chubb Life Insurance Company of America. The
officers and directors of Hampshire Syndications, Inc. are Ronald
Angarella, President and Director, Charles C. Cornelio, Vice President,
Counsel, Secretary and Director, Frederick H. Condon, Vice President
and Director, John A. Weston, Treasurer.
Messrs. Block and Ross are not affiliated with Chubb Securities
Corporation, except that each is affiliated with the Associate General
Partner.
The persons listed below occupy key management position with the
General Partners:
Mr. Bruce H. Block, age 60, has been a principal in numerous
real estate ventures which own, have an interest in, or have owned
various types of property that have included apartment and office
buildings, shopping centers and vacant land. Mr. Block is an
Illinois licensed attorney, a certified public accountant and a
licensed real estate broker in the State of Illinois. Mr. Block
practiced corporate and real estate law in Chicago for over 20 years
and is a shareholder in the Chicago law firm of Ross & Block, P.C.
Mr. Robert S. Ross, age 60, has been a principal in many real
estate ventures which own, have an interest in, or have owned various
types of property including apartment and office buildings, shopping
centers and vacant land. Mr. Ross is an Illinois licensed attorney, a
licensed real estate broker in the State of Illinois and is an
affiliate member of Real Estate Securities and Syndication Institute.
He also practiced general and real estate law in the Chicago area for
over 22 years and is a shareholder in the Chicago law firm of Ross &
Block P.C.
Mr. Ronald R. Angarella, age 40, currently serves as President,
Chairman and Director of Chubb Securities Corporation and Hampshire
Funding, Inc. and President and Director of Hampshire Syndications,
Inc. Mr. Angarella is also President and Director of Chubb America
Fund, Inc., Senior Vice President and Director of Chubb Investment
Funds, Inc. and Senior Vice President, Sales of Chubb Life Insurance
Company of America. Mr. Angarella is a graduate of Providence College
and Brown University.
<PAGE>
Mr. Charles C. Cornelio, age 38, is Vice President, General
Counsel and Secretary of Chubb Securities Corporation, Hampshire
Syndications, Inc. and Hampshire Funding, Inc. He is also Executive
Vice President and Chief Administrative Officer of Chubb Life Insurance
Company of America, Vice President and General Counsel of Chubb America
Fund, Inc. and Chubb Investment Funds, Inc.
Mr. Frederick H. Condon, age 63, is a Director of Hampshire
Funding, Inc. and Chubb Securities Corporation. Mr. Condon also serves
as Senior Vice President, General Counsel and Secretary of Chubb Life
Insurance Company of America, Director, Senior Vice President, General
Counsel and Secretary of Chubb Colonial Life Insurance Company and
Chubb Sovereign Life Insurance Company.
John Weston, age 38, Treasurer of Hampshire Funding, Inc., Chubb
Securities Corporation, Hampshire Syndications, Inc., Chubb Investment
Funds, Inc., Chubb America Fund, Inc. and Chubb Investment Advisory
Corporation. Mr. Weston also serves as Assistant Vice President of
Chubb Life Insurance Company of America.
Item 11. Executive Compensation
The Partnership has no officers or directors and instead is
managed by FDIP, Inc., its Managing General Partner.
Officers and directors of the Managing General Partner receive no
direct remuneration in such capacities from the Partnership. In
addition, the Partnership is a registrant that qualifies as a small
business issuer as defined in Item 10(a)(1) of Regulation S-B.
Accordingly, certain of the disclosures typically required by Item 402
are not applicable to the Partnership and the information set forth
herein has been appropriately modified.
The Partnership is required to pay certain fees to the General
Partners or their affiliates and the General Partners are entitled to
receive a share of cash distributions, when and as cash distributions
are made to the Limited Partners, and a share of profits or losses as
described under the caption "Compensation Table" at pages 9-10 of the
Prospectus, a copy of which descriptions is filed herewith and is
hereby incorporated herein by reference. Reference is also made to
Note 4 of Notes to Consolidated Financial Statements filed with this
annual report for a description of such distributions and allocations.
Certain compensation has accrued to the General Partners and their
affiliates for services rendered on behalf of the Partnership.
Affiliates of the General Partners are entitled to receive from the
Partnership acquisition fees, equal to 9% of the gross proceeds from
the offering of Units, in connection with the evaluation,
investigation, negotiation, selection and purchase of the Partnership's
investment properties.
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.
Fees, commissions and other expenses required to be paid by the
Partnership to affiliates of the General Partners for the years ended
December 31, 1997, 1996 and 1995 are as follows:
<TABLE
<CAPTION
Unpaid at
1997 1996 1995 Dec. 31, 1997
[S] [C] [C] [C] [C]
Reimbursement (at cost) for out of pocket expenses $ 1,168 1,168
2,375 $ 0
Reimbursement (at cost) for administrative services 1,364 14,992
14,224 0
$ 2,532 16,160 16,599 $
0
[/TABLE]
There are no compensatory plans or arrangements regarding
termination of employment or change of control.
<PAGE>
Item 12. Security ownership of certain Beneficial Owners and
Management
(a) No person or group is known by the Partnership to own
beneficially more than 5% of the outstanding Units of the Partnership.
(b) The following table sets forth information regarding the
beneficial ownership of Units as of December 31, 1997 by directors
and/or general partners of the General Partners, and by all officers,
directors and for general partners of the General Partners as a group:
<TABLE>
<CAPTION
Amount and
Title Name and address of nature of Percent
Class Beneficial Owner Ownership of Class
<S> <C> <C> <C>
Limited Robert S. Ross 0 Units 0%
Partnership 154 W. Hubbard
Units Chicago, IL
Limited Chubb Life 1,689 Units (1) 16.9%
Partnership Insurance Company
Units One Granite Place,
Concord, NH 03301
Limited All officers 15 Units (1) less than 1%
Partnership directors, and
Units general partners
as a group
<FN>
(1) During January 1991, Chubb Life Insurance Company of America
(Chubb Life), an affiliate of Hampshire Syndication, Inc., acquired
1,669 Units under an agreement with the Partnership. During 1993,
Chubb Securities Corporation, a wholly owned subsidiary of Chubb Life
(CSC), acquired 20 Units pursuant to an arbitration order. Because CSC
is owned entirely by Chubb Life, the units owned by CSC have been
attributed in this table to Chubb Life.
</TABLE>
Item 13. Certain Relationships and Related Transactions
There were no significant transactions or business relationships
with the Managing General Partner, affiliates, or other management
other than those described in Item 10 and 11 above, and Note 6 to the
Consolidated Financial Statements.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a) (1)(2) See Index to Financial Statements and Financial
Statement Schedules on page 16.
(3) Exhibits
(3-A) The Prospectus of the Partnership dated February
1, 1989 as supplemented February 24, 1989, October 27, 1989, April 26,
1990, October 9, 1990 and December 24, 1990 filed pursuant to Rule
424(b) under the Securities Act of 1933 as amended (File No. 33-23048),
is hereby incorporated herein by reference.
(3-B) Amended Agreement of Limited Partnership set
forth as Exhibit A to the Prospectus, pursuant to Rule 424(b) under the
Securities Act of 1933 as amended (File No. 33-23048), is hereby
incorporated herein by reference.
(b) No reports on Form 8-K were filed in the last quarter of
1997.
(c) An annual report for the fiscal year 1997 will be sent to the
Limited Partners subsequent to this filing and the Partnership will
furnish copies of such report to the Securities and Exchange Commission
at that time.
(d) Exhibits - See Item 14(a) - (3).
(e) Financial Statement Schedules. See Index to Financial
Statements and Financial Statement Schedules on page 16.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Partnership 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)
Date: March 30, 1998 BY: /s/ Robert S. Ross
Its: President
BY: FDIP Associates II
(Associate General Partner)
BY: First Dearborn Partners,
a Partner
Date: March 30, 1998 BY: /s/ Bruce H. Block
a Partner
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signatures Title Date
/s/ Robert S. Ross President and Director
March 30, 1998
Robert S. Ross of FDIP, Inc. (Principal
Executive Officer)
/s/ Bruce H. Block Secretary and Director
March 30, 1998
Bruce H. Block of FDIP, Inc. (Principal
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Dec-31-1997
<PERIOD-TYPE> 12-mos
<CASH> 1,659,443
<SECURITIES> 0
<RECEIVABLES> 317,315
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,010,002
<PP&E> 9,573,979
<DEPRECIATION> 2,032,976
<TOTAL-ASSETS> 9,541,824
<CURRENT-LIABILITIES> 526,523
<BONDS> 4,408,018
0
0
<COMMON> 0
<OTHER-SE> 3,093,619
<TOTAL-LIABILITY-AND-EQUITY> 9,541,824
<SALES> 1,824,346
<TOTAL-REVENUES> 1,847,296
<CGS> 0
<TOTAL-COSTS> 912,456
<OTHER-EXPENSES> 383,357
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 377,530
<INCOME-PRETAX> 759,512
<INCOME-TAX> 0
<INCOME-CONTINUING> 759,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 759,512
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
