UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........ to ........
Commission file number 0-19198
FIRST DEARBORN INCOME PROPERTIES L.P. II
(Exact name of registrant as specified in its charter)
Delaware 36-3591517
(State of organization) (IRS Employer Identification No.)
154 West Hubbard Street, Suite 250, Chicago, IL 60610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 464-0100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ____
Units outstanding as of September 30, 1999: 10,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Balance Sheets
September 30, 1999 and December 31, 1998
(Unaudited)
Assets
<CAPTION>
September 30, December 31,
1999 1998
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) 816,810 968,437
Rents and other receivables 91,549 168,676
Due from affiliates 12,424 13,147
Prepaid expense 23,652 21,279
Total current assets 944,435 1,171,539
Investment property, at cost (note 1):
Land 1,201,880 1,201,880
Building 7,302,137 7,273,400
8,504,017 8,475,280
Less accumulated depreciation (2,528,009) (2,315,063)
5,976,008 6,160,217
Investment in unconsolidated venture,
at equity (note 2) (93,749) (94,330)
Deferred leasing and loan costs 33,031 40,215
Total assets 6,859,725 7,277,641
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Balance Sheets
September 30, 1999 and December 31, 1998
(Unaudited)
Liabilities and Partners' Capital Accounts
<CAPTION>
September 30, December 31,
1999 1998
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses 274,656 297,921
Accrued interest 28,936 29,846
Current portion of long-term debt 190,500 180,993
Total current liabilities 494,092 508,760
Long-term debt 4,083,163 4,227,032
Venture partners' equity in consolidated
venture (note 2) 696,467 807,336
Tenant security deposits 5,433 5,433
Total long-term liabilities 4,785,063 5,039,801
Total liabilities 5,279,155 5,548,561
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions 1,000 1,000
Cumulative net income (3,251) (1,341)
(2,163) (341)
Limited partners:
Capital contributions 4,121,964 4,058,963
Cumulative net income (321,933) (132,844)
Cumulative cash distributions (2,217,298) (2,196,698)
1,582,733 1,729,421
Total partners' capital accounts 1,580,570 1,729,080
Commitments and contingencies (note 2)
Total Liabilities and Partners' Capital 6,859,725 7,277,641
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statement of Operations
Three months ended September 30, 1999 and 1998
(Unaudited)
<CAPTION>
1999 1998
<S> <C> <C>
Revenues:
Rental income 152,028 252,990
Tenant charges 88,125 112,077
Interest income 9,471 9,912
Total revenues 249,624 374,979
Expenses:
Property operating expenses 189,386 169,406
Interest 87,119 90,698
Depreciation 71,994 72,908
Amortization 2,395 2,395
General and administrative expenses 15,930 18,556
Total expenses 366,824 353,963
Operating income (loss) (117,200) 21,016
Partnership's share of operations
of unconsolidated ventures 2,217 43,640
Venture partner's share of consolidated
venture's operations (note 1) 49,811 1,013
Net income (loss) (65,172) 65,669
Net income (loss)
per limited partnership unit (6.45) 6.50
Cash distribution
per limited partnership unit - 2.06
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statement of Operations
Nine months ended September 30, 1999 and 1998
(Unaudited)
<CAPTION>
1999 1998
<S> <C> <C>
Revenues:
Rental income 577,693 833,045
Tenant charges 276,200 358,188
Interest income 27,289 34,964
Total revenues 881,182 1,226,197
Expenses:
Property operating expenses 607,401 626,558
Interest 264,106 274,628
Depreciation 213,034 215,109
Amortization 7,184 7,184
General and administrative expenses 91,837 91,536
Total expenses 1,183,562 1,215,015
Operating income (loss) (302,380) 11,182
Partnership's share of operations
of unconsolidated ventures 581 30,977
Venture partner's share of consolidated
venture's operations (note 1) 110,800 (18,876)
Net income (loss) (190,999) 23,283
Net income (loss)
per limited partnership unit (18.91) 2.31
Cash distribution
per limited partnership unit 2.06 78.18
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Cash Flows
Nine months ended September 30, 1999 and 1998
(Unaudited)
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) (190,999) 23,283
Items not requiring (providing)
cash or cash equivalents:
Depreciation 213,034 215,109
Amortization 7,184 7,184
Partnership's share of operations of
unconsolidated ventures (581) 8,198
Venture partners' share of consolidated
venture's operations (110,869) (168,440)
Changes in:
Rents and other receivables 77,850 123,101
Prepaid expenses (2,373) 18,817
Accounts payable and accrued expenses (24,175) 29,149
Net cash provided by (used in)
operating activities (30,929) 256,401
Cash flow from investment activities:
Additions to building and deferred costs (28,737) -
Net cash (used in) investment activities (28,737) -
Cash flows from financing activities:
Distributions to limited partners (20,600) (781,800)
Capital provided by reduction
in syndication costs 63,000 -
Principal payments on long-term debt (134,361) (123,908)
Net cash used in financing activities (91,961) (905,708)
Net (decrease) in cash and cash equivalents (151,627) (649,307)
<FN>
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
(Unaudited)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 1998,
which are included in the Partnership's 1998 Annual Report, as certain
footnote disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.
(1) Basis of Accounting
For the three and nine month periods ended September 30, 1999 and
September 30, 1998 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 nine months ended September
30, 1999 and September 30, 1998.
The Partnership records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments, where applicable, to present
the Partnership's accounts in accordance with generally accepted accounting
principles (GAAP). Such adjustments are not recorded on the records of the
Partnership. The net effect of these adjustments for the nine months ended
September 30, 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
1999 1999 1998 1998 -
GAAP Tax GAAP Tax
Basis Basis Basis Basis
<S> <C> <C> <C> <C>
Net income (loss) (190,999) (178,000) 23,283 9,300
Net income (loss)
per limited partnership unit (18.91) (17.62) 2.31 0.92
</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 $806,506 and $788,980 at September 30, 1999 and December 31,
1998, 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 September 30, 1999.
(2) Venture Agreements
The Partnership has entered into three joint venture agreements with
partnerships sponsored by affiliates of the General Partners. Pursuant to
such agreements, the Partnership has made capital contributions aggregating
$3,652,066 through September 30, 1999. 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 nine months ended
September 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Unpaid at
Sept 30,
1999 1998 1999
<S> <C> <C> <C>
Reimbursement (at cost) 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 nine months ended September 30, 1999 and September 30,
1998, is as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Total revenue 1,139,636 1,087,386
Operating income (loss) 2,742 4,830
Partnership's share of income (loss) 581 30,977
</TABLE>
(5) Adjustments
In the opinion of the Managing General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying consolidated financial
statements as of September 30, 1999 and 1998.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At September 30, 1999, the Partnership had cash and cash equivalents of
$816,810 which will be utilized for working capital requirements and for
future distributions to Partners. This is $151,627 less than the $968,437
balance at December 31, 1998. The Partnership made a distribution in the
amount of $20,600 ($2.06 per unit) to Limited Partners during the second
quarter of 1999. During the three and nine month periods ended September
30, 1998, the Partnership distributed $20,600 ($2.06 per unit) and $781,800
($78.18 per unit), respectively, to Limited Partners.
Net cash provided by operating activities during the nine month periods
ended September 30, 1998 was $256,401, as compared to cash utilized by
operations in the amount of $30,929 during the nine month periods ended
September 30, 1999. Poor operating results at the Sycamore Mall property is
the primary reason for the decrease in cash from operations. During the
first quarter of 1999, accounts payable was reduced by $63,000 as a result of
a write off of amounts which had been accrued from the organization of the
Partnership. Certain legal fees and printing costs were eventually forgiven
by the vendors. This amount was recorded as an increase in capital
contributions, since it reduced amounts capitalized as syndication costs,
which are deducted from capital for GAAP purposes.
During the first quarter of 1999, the Sycamore Mall continued to suffer
from a lack of occupancy. Management continues searching for replacement
tenants, but there can be no assurance that a replacement tenant will be
found. The ability of the Sycamore Mall to meet its financial obligations
has been effected as a result of decreased revenues. Leasing efforts have
been unsuccessful and the Partnership is currently evaluating its options as
it relates to this property.
The prospective purchaser of the Evanston Galleria purchaser notified
management that it was defaulting under the purchase contract and forfeited
$50,000 of earnest money. The first mortgage on the Evanston Galleria
property matured on August 1, 1999, however an amendment was negotiated
which would extend the maturity of the loan for an 18 month period.
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.
Year 2000:
The General Partner has determined that it does not expect that the
consequences of the Partnership's year 2000 issues will have a material
effect on the Partnership's business, results of operations or financial
condition.
<PAGE>
Results of Operations - 1999 compared to 1998
For the three and nine month periods ended September 30, 1999 and
September 30, 1998, 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 nine months ended September 30, 1999 and September
30, 1998.
The $255,352 (31%) decrease in rental income for the nine month period
ended September 30, 1999 as compared to the nine month period ended September
30, 1998 is attributed to the increase in vacancy at Sycamore Mall.
Occupancy at Sycamore Mall has fallen to 44% as of September 30, 1999 from
85% as of March 31, 1998. Income from tenant charges decreased $81,988
(23%) during the nine months ended September 30, 1999 as compared to the nine
months ended September 30, 1998. This decrease results from the decreased
occupancy levels at Sycamore Mall.
The $19,157 (3%) decrease in property operating expenses for the nine
months ended September 30, 1999 as compared to the nine months ended
September 30, 1998 is attributable to a decrease in property taxes at
Sycamore Mall. Due to the low occupancy levels, the property was reassessed
to a lower valuation. Property operating expenses were also reduced due to
lower expenses attributable to the low occupancy.
The $10,522 (4%) decrease in interest expense for the nine months ended
September 30, 1999 as compared to nine months ended September 30, 1998 is
attributable to reductions in the outstanding balance of the mortgage
indebtedness at the Sycamore property.
The $30,396 decrease in Partnership's share of operations of
unconsolidated subsidiaries for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998 is attributable to a
decrease in profitability at Evanston Galleria.
The Partnership's allocation of consolidated venture's operations to
the venture partners was an income allocation of $110,800 during the nine
months ended September 30, 1999 as compared to a loss allocation of $18,876
during nine months ended September 30, 1998. Sycamore Mall is now operating
at a net loss due to the high vacancy rates. The Partnership allocates a
share of the income or loss from the Sycamore Mall property to its venture's
partners.
<PAGE>
OCCUPANCY
The following is a list of approximate occupancy levels by quarter for
the Partnership's investment properties:
<TABLE>
<CAPTION>
at at at at at at at
03/31/98 06/30/98 09/30/98 12/31/98 03/31/99 06/30/99 09/30/99
<S> <C> <C> <C> <C> <C> <C> <C>
Evanston Galleria
Evanston, IL 95% 94% 94% 97% 92% 97% 98%
Sycamore Mall
Iowa City, Iowa 85% 79% 84% 47% 47% 44% 44%
Part II - OTHER INFORMATION
Items 1, 2, 3, 4, and 5 of Part II are omitted because of the absence of
conditions under which they are required.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
No reports on Form 8-K were filed for the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(Registrant)
By: FDIP, Inc.
(Managing General Partner)
November 15, 1999 By: Robert S. Ross
President
(Principal Executive Officer)
November 15, 1999 By: Bruce H. Block
Vice President
(Principal Financial Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Sep-30-1999
<PERIOD-TYPE> 9-mos
<CASH> 816,437
<SECURITIES> 0
<RECEIVABLES> 91,549
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 944,435
<PP&E> 8,504,017
<DEPRECIATION> 2,528,009
<TOTAL-ASSETS> 6,859,725
<CURRENT-LIABILITIES> 494,092
<BONDS> 4,083,163
0
0
<COMMON> 0
<OTHER-SE> 1,580,570
<TOTAL-LIABILITY-AND-EQUITY> 6,859,725
<SALES> 853,893
<TOTAL-REVENUES> 881,182
<CGS> 0
<TOTAL-COSTS> 607,401
<OTHER-EXPENSES> 312,055
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 264,106
<INCOME-PRETAX> (190,999)
<INCOME-TAX> 0
<INCOME-CONTINUING> (190,999)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (190,999)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
