UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........ to ........
Commission file number 0-19198
FIRST DEARBORN INCOME PROPERTIES L.P. II
(Exact name of registrant as specified in its charter)
Delaware 36-3591517
(State of organization) (IRS Employer Identification No.)
154 West Hubbard Street, Suite 250, Chicago, IL 60610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 464-0100
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No ____
Units outstanding as of June 30, 1998: 10,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Balance Sheets
June 30, 1998 and December 31, 1997
(Unaudited)
Assets
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) 1,052,765 1,659,443
Rents and other receivables 156,007 317,315
Due from affiliates 13,472 14,122
Prepaid expense 3,328 19,122
Total current assets 1,225,572 2,010,002
Investment property, at cost (note 1):
Land 1,201,880 1,201,880
Building 8,372,099 8,372,099
9,573,979 9,573,979
Less accumulated depreciation (2,175,177) (2,032,976)
7,398,802 7,541,003
Investment in unconsolidated venture (note 2) (71,332) (58,669)
Deferred leasing and loan costs 45,004 49,488
Total assets 8,598,046 9,541,824
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Balance Sheets
June 30, 1998 and December 31, 1997
(Unaudited)
Liabilities and Partners' Capital Accounts
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses 412,361 328,632
Accrued interest 30,423 30,976
Current portion of long-term debt 170,500 166,915
Total current liabilities 613,284 526,523
Long-term debt 4,322,668 4,408,018
Venture partners' equity
in consolidated venture (note 2) 1,366,618 1,508,231
Tenant security deposits 5,433 5,433
Total long-term liabilities 5,694,719 5,921,682
Total liabilities 6,308,003 6,448,205
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions 1,000 1,000
Cumulative net income 3,856 4,280
4,856 5,280
Limited partners:
Capital contributions 4,058,963 4,058,963
Cumulative net income 381,722 423,674
Cumulative cash distributions (2,155,498) (1,394,298)
2,285,187 3,088,339
Total partners' capital accounts 2,290,043 3,093,619
Commitments and contingencies (note 2)
Total Liabilities and Partners' Capital 8,598,046 9,541,824
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statement of Operations
Three months ended June 30, 1998 and 1997
(Unaudited)
<CAPTION>
1998 1997
<S> <C> <C>
Revenues:
Rental income 286,969 323,104
Tenant charges 109,625 129,935
Interest income 9,915 5,406
Total revenues 406,509 458,445
Expenses:
Property operating expenses 219,694 254,354
Interest 91,548 94,782
Depreciation 71,100 72,880
Amortization 2,394 2,395
General and administrative expenses 26,962 20,640
Total expenses 411,698 445,051
Operating income (loss) (5,189) 13,394
Partnership's share of operations
of unconsolidated ventures (3,141) (396)
Venture partner's share of consolidated
venture's operations (note 1) (7,421) (12,779)
Net income (loss) (15,751) 220
Net income (loss)
per limited partnership unit (1.56) 0.02
Cash distribution
per limited partnership unit 2.06 2.06
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statement of Operations
Six months ended June 30, 1998 and 1997
(Unaudited)
<CAPTION>
1998 1997
<S> <C> <C>
Revenues:
Rental income 580,055 635,007
Tenant charges 246,111 285,445
Interest income 25,052 9,693
Total revenues 851,218 930,145
Expenses:
Property operating expenses 457,152 481,021
Interest 183,930 190,332
Depreciation 142,201 145,759
Amortization 4,789 4,996
General and administrative expenses 72,970 62,621
Total expenses 861,042 884,729
Operating income (loss) (9,824) 45,416
Partnership's share of operations
of unconsolidated ventures (12,663) (32,614)
Venture partner's share of consolidated
venture's operations (note 1) (19,889) (45,650)
Net income (loss) (42,376) (32,848)
Net income (loss)
per limited partnership unit (4.20) (3.25)
Cash distribution
per limited partnership unit 76.12 4.13
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Cash Flows
Six months ended June 30, 1998 and 1997
(Unaudited)
<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) (42,376) (32,848)
Items not requiring (providing)
cash or cash equivalents:
Depreciation 142,201 145,759
Amortization 4,789 4,996
Partnership's share of operations of
unconsolidated ventures 12,663 100,558
Venture partners' share of
consolidated venture's operations (141,613) (68,508)
Changes in:
Rents and other receivables 161,958 88,411
Prepaid expenses 15,794 27,002
Accounts payable and accrued expenses 83,176 5,436
Tenant deposits - (6)
Net cash provided by operating activities 236,592 263,640
Cash flow from investment activities:
Additions to building and deferred costs (305) -
Net cash (used in) investment activities (305) -
Cash flows from financing activities:
Distributions to limited partners (761,200) (41,303)
Principal payments on long-term debt (81,765) (75,406)
Net cash used in financing activities (842,965) (116,709)
Net increase (decrease)
in cash and cash equivalents (606,678) 146,931
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
(Unaudited)
Readers of this quarterly report should refer to the
Partnership's audited financial statements for the fiscal year ended
December 31, 1997, which are included in the Partnership's 1997 Annual
Report, as certain footnote disclosures which would substantially
duplicate those contained in such audited financial statements have
been omitted from this report.
(1) Basis of Accounting
For the three and six month periods ended June 30, 1998 and June
30, 1997 the accompanying consolidated financial statements include
the accounts of the Partnership and its consolidated venture -
Sycamore Mall Associates (the "Venture"). The effect of all
transactions between the Partnership and the Venture has been
eliminated.
The equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to the
Partnership's interest in Evanston Galleria Limited for the three and
six months ended June 30, 1998 and June 30, 1997 and Country Isle
Associates for the three and six months ended June 30, 1997.
The Partnership records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes.
The accompanying consolidated financial statements have been prepared
from such records after making appropriate adjustments, where
applicable, to present the Partnership's accounts in accordance with
generally accepted accounting principles (GAAP). Such adjustments are
not recorded on the records of the Partnership. The net effect of
these adjustments for the six months ended June 30, 1998 and 1997 is
summarized as follows:
<TABLE>
<CAPTION>
1998 1997
GAAP Tax GAAP Tax
Basis Basis Basis Basis
<S> <C> <C> <C> <C>
Net income (loss) (42,376) (39,300) (32,848) (49,301)
Net income (loss) per
limited partnership unit (4.20) (3.90) (3.25) (4.90)
</TABLE>
The net loss per limited partnership unit presented is based on
the weighted limited partnership units outstanding at the end of each
period (10,000).
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
Partnership distributions from unconsolidated ventures are
considered cash flow from operating activities to the extent of the
Partnership's cumulative share of net operating earnings before
depreciation and non-cash items. In addition, the Partnership records
amounts held in U.S. Government obligations, commercial paper and
certificates of deposit at cost which approximates market. For the
purposes of these statements, the Partnership's policy is to consider
all such investments with an original maturity of three months or less
($720,414 and $1,400,707 at June 30, 1998 and December 31, 1997,
respectively) as cash equivalents.
Deferred offering costs were charged to the partners' capital
accounts upon consummation of the offering. Deferred loan costs are
amortized over the terms of the related agreements using the straight-
line method.
Depreciation on the investment properties acquired has been
provided over the estimated useful lives of 5 to 30 years using the
straight-line method.
No provision for Federal income taxes has been made as any
liability for such taxes would be that of the partners rather than the
Partnership.
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 June 30, 1998.
(2) Venture Agreements
The Partnership has entered into three joint venture agreements
with partnerships sponsored by affiliates of the General Partners.
Pursuant to such agreements, the Partnership has made capital
contributions aggregating $3,652,066 through June 30, 1998. 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
(3) Transactions with Affiliates
Fees, commissions and other expenses required to be paid by the
Partnership to affiliates of the General Partners for the six months
ended June 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Unpaid at
June 30,
1998 1997 1998
<S> <C> <C> <C>
Reimbursement for administrative services 10,000 10,000 -
10,000 10,000 -
</TABLE>
(4) Unconsolidated Venture - Summary Information
Summary income statement information for Evanston Galleria
Limited Partnership for the six months ended June 30, 1998 and
Evanston Galleria Limited Partnership and Country Isle Plaza for the
six months ended June 30, 1997, is as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Total revenue 672,404 1,565,761
Operating income (loss) (46,635) (118,320)
Partnership's share of income (loss) (12,663) (32,614)
</TABLE>
(5) Adjustments
In the opinion of the Managing General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a
fair presentation have been made to the accompanying consolidated
financial statements as of June 30, 1998 and 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At June 30, 1998, the Partnership had cash and cash equivalents
of $1,052,765 which will be utilized for working capital requirements
and for future distributions to Partners. This is $653,941 less than
the $1,659,443 balance at December 31, 1997. The Partnership made a
distribution in the amount of $740,600 to Limited Partners during the
first quarter of 1998. The Partnership received a special
distribution in the amount of $991,000 from the December 1997 sale of
Country Isles Associates, which it then distributed to the Limited
Partners. During the three and six month periods ended June 30, 1998,
the Partnership distributed $20,600 ($2.06 per unit) and $761,200
($76.12 per unit), respectively, to Limited Partners. This compares
to $20,600 ( $2.06 per unit) and $41,303 ( $4.13 per unit) during the
three and six month periods ended June 30, 1997. The Partnership has
continued to build additional cash reserves for Sycamore Mall's
anticipated releasing program.
Net cash provided by operating activities during the six months
ended June 30, 1998 was $236,592, a decrease of $27,048 from the
$263,640 of cash provided by operating activities during the six
months ended June 30, 1997.
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.
During 1997, the Evanston Galleria experienced occupancy rates
which ranged from 77% to 86%. As of December 31, 1997 occupancy was
83%. However, a lease had been entered into to lease the lower level
space of 11,300 square feet. This tenant has taken occupancy along
with one additional retail tenant. This has increased occupancy to
95%, as of March 31, 1998. The first mortgage on the property
matured on May 1, 1998, however an amendment has been entered into
which extends the maturity of the loan to August 31, 1998.
Negotiations are currently underway for an additional extension of the
mortgage loan. There can be no assurance that such an extension will
be granted. The Evanston Galleria property is currently being
marketed for sale.
As the Partnership intends to distribute all "net cash receipts"
and "sales proceeds" in accordance with the terms of the Partnership
Agreement, and does not intend to reinvest any such proceeds, the
Partnership is intended to be self-liquidating in nature. The
Partnership's future source of liquidity and distributions is expected
to be through cash generated by the Partnership's investment
properties and from the sale and refinancing of such properties. To
the extent that additional payments are required under a purchase
agreement or a property does not generate an adequate cash flow to
meet its requirements, the Partnership may withdraw funds from the
working capital reserve which it maintains.
<PAGE>
Results of Operations - 1998 compared to 1997
For the three and six month periods ended June 30, 1998 and June
30, 1997, 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 for the three and six months ended June 30, 1998 and
June 30, 1997 and Country Isle Associates for the three and six months
ended June 30, 1997.
Net loss for the six months ended June 30, 1998 was $42,376 as
compared to $32,848 during the six months ended June 30, 1997. The
decrease in operating results is a result of decreased profitability
at Sycamore Mall which was partially offset by improvement at the
Evanston Galleria. The decreased profitability at Sycamore Mall is a
result of increased vacancy, averaging 82% in 1998 as compared to
87.5% in 1997. Management is currently negotiating with new tenants
for Sycamore Mall, but no new leases have been signed..
The $54,952 (9%) decrease in rental income and the $39,334 (14%)
decrease in tenant charges, for the six month period ended June 30,
1998 as compared to the six month period ended June 30, 1997 is
attributed to an increase in vacancy at Sycamore Mall. The opening of
a new regional mall in the area of the Sycamore Mall has resulted in
the loss of several tenants. Management is currently negotiating with
prospective tenants which would significantly increase occupancy.
The $15,359 (158%) increase in interest income for the six month
period ended June 30, 1998 as compared to the six month period ended
June 30, 1997 is attributed to the increase in cash reserves which are
being maintained since the sale of the Country Isles property in
December 1997. The Partnership is maintaining these additional
reserves in anticipation of needed equity for the Sycamore Mall
releasing efforts..
The $23,869 (5%) decrease in property operating expenses for the
six month period ended June 30, 1998 as compared to the six month
period ended June 30, 1997 is attributed to a decrease in property
maintenance expenses at Sycamore Mall.
The $6,402 (3%) decrease in interest expenses for the six month
period ended June 30, 1998 as compared to the six month period ended
June 30, 1997 is attributable a reduction in the outstanding
indebtedness at Sycamore Mall.
The $10,349 (17%) increase in general and administrative expenses
for the six month period ended June 30, 1998 as compared to the six
month period ended June 30, 1997 is attributable to an increase in
professional fees related to the annual audit and tax return
preparation.
The Partnership's share of operations of unconsolidated
subsidiaries resulted in a loss allocation of $12,663 during the six
months ended June 30, 1998, as compared to a loss allocation of
$32,614 during the six month period ended June 30, 1997. Evanston
Galleria has released most of its retail space. Occupancy is running
at 95 % as compared to 86 % in the prior year.
<PAGE>
The Partnership's allocation of consolidated venture's operations
to the venture partners was an allocation of $19,889 during the six
months ended June 30, 1998 as compared to an allocation of $45,650
during the six months ended June 30, 1997. As a result of a decrease
in operating income at Sycamore Mall, the Partnership has decreased
the amount of the income which is then allocated to the venture's
partners.
OCCUPANCY
The following is a list of approximate occupancy levels by
quarter for the Partnership's investment properties:
<TABLE>
<CAPTION>
at at at at at at
03/31/97 06/30/97 09/30/97 12/31/97 03/31/98 06/30/98
<S> <C> <C> <C> <C> <C> <C>
Evanston Galleria
Evanston, IL 86% 86% 77% 83% 95% 94%
Country Isles
Ft. Lauderdale, FL 100% 99% 100% n/a n/a n/a
Sycamore Mall
Iowa City, Iowa 88% 89% 89% 90% 85% 79%
<PAGE>
Part II - OTHER INFORMATION
Items 1, 2, 3, 4, and 5 of Part II are omitted because of the absence
of conditions under which they are required.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
No reports on Form 8-K were filed for the period covered by this
report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(Registrant)
By: FDIP, Inc.
(Managing General Partner)
August 14, 1998 By: Robert S. Ross
President
(Principal Executive Officer)
August 14, 1998 By: Bruce H. Block
Vice President
(Principal Financial Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jun-30-1998
<PERIOD-TYPE> 6-mos
<CASH> 1,052,765
<SECURITIES> 0
<RECEIVABLES> 156,007
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,225,572
<PP&E> 9,573,979
<DEPRECIATION> 2,175,177
<TOTAL-ASSETS> 8,598,046
<CURRENT-LIABILITIES> 613,284
<BONDS> 4,322,668
0
0
<COMMON> 0
<OTHER-SE> 2,285,187
<TOTAL-LIABILITY-AND-EQUITY> 8,598,046
<SALES> 826,166
<TOTAL-REVENUES> 851,218
<CGS> 0
<TOTAL-COSTS> 457,152
<OTHER-EXPENSES> 219,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 183,930
<INCOME-PRETAX> (42,376)
<INCOME-TAX> 0
<INCOME-CONTINUING> (42,376)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (42,376)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
