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, 2000
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, 2000: 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, 2000 and December 31, 1999
(Unaudited)
Assets
<CAPTION>
June 30, December 31,
2000 1999
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) 296,943 819,519
Rents and other receivables 1,937 135,404
Due from affiliates 704 36,365
Prepaid expense - 16,568
Total current assets 299,584 1,007,856
Investment property, at cost (note 1):
Land - 1,201,880
Building - 5,349,122
- 6,551,002
Less accumulated depreciation - (2,557,353)
- 3,993,649
Investment in unconsolidated venture (note 2) (65,816) (80,059)
Deferred leasing and loan costs - 30,637
Total assets 233,768 4,952,083
<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, 2000 and December 31, 1999
(Unaudited)
Liabilities and Partners' Capital Accounts
<CAPTION>
June 30, December 31,
2000 1999
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses - 227,769
Accrued interest - 86,495
Other current liabilities - 25,343
Current portion of long-term debt - 4,258,224
Total current liabilities - 4,597,831
Total liabilities - 4,597,831
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions 1,000 1,000
Cumulative net income (loss) (12,065) (14,833)
(11,065) (13,883)
Limited partners:
Capital contributions 4,058,963 4,058,963
Cumulative net income (loss) (1,196,832) (1,473,530)
Cumulative cash distributions (2,617,298) (2,217,298)
244,833 368,135
Total partners' capital accounts 233,768 354,252
Commitments and contingencies (note 2)
Total Liabilities and Partners' Capital 233,768 4,952,083
<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, 2000 and 1999
(Unaudited)
<CAPTION>
2000 1999
<S> <C> <C>
Revenues:
Rental income - 217,726
Tenant charges - 100,117
Interest income 5,996 9,015
Total revenues 5,996 326,848
Expenses:
Property operating expenses - 219,273
Interest - 88,042
Depreciation - 70,520
Amortization - 2,394
General and administrative expenses 62,166 45,875
Total expenses 62,166 426,104
Operating income (loss) (56,170) (99,256)
Partnership's share of operations
of unconsolidated ventures 7,880 5,620
Gain on sale of disposition
of investment property (11,947) -
Venture partner's share of consolidated
venture's operations (note 1) - 31,681
Net income (loss) (60,237) (61,955)
Net income (loss) per limited partnership unit 27.40 (6.13)
Cash distribution per limited partnership unit 40.00 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, 2000 and 1999
(Unaudited)
<CAPTION>
2000 1999
<S> <C> <C>
Revenues:
Rental income 56,765 425,665
Tenant charges 2,843 188,075
Interest income 15,262 17,818
Total revenues 74,870 631,558
Expenses:
Property operating expenses 32,500 418,015
Interest 88,000 176,987
Depreciation - 141,040
Amortization 2,395 4,789
General and administrative expenses 67,504 75,907
Total expenses 190,399 816,739
Operating income (loss) (115,529) (185,180)
Partnership's share of operations
of unconsolidated ventures 14,243 (1,636)
Gain on sale of disposition
of investment property 324,164 -
Venture partner's share of consolidated
venture's operations (note 1) - 60,989
Net income (loss) 222,878 (125,827)
Net income (loss) per limited partnership unit 22.06 (12.46)
Cash distribution per limited partnership unit 40.00 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 Statements of Cash Flows
Six months ended June 30, 2000 and 1999
(Unaudited)
<CAPTION>
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Ne income (loss) 222,878 (125,827)
Items not requiring (providing)
cash or cash equivalents:
Depreciation - 141,040
Amortization 2,395 4,789
Partnership's share of operations of
unconsolidated ventures (14,243) 1,636
Venture partners' share of
consolidated venture's operations - (60,989)
Gain on disposition of investment property (324,164) -
Changes in:
Rents and other receivables 133,467 59,725
Due from affiliates 35,661 -
Prepaid expenses 16,568 18,239
Accounts payable and accrued expenses (314,264) (43,740)
Other current liabilities (25,343) -
Deferred Costs 30,637 -
Net cash provided by (used in) operating activities (236,408) (5,127)
Cash flow from investment activities:
Additions to building and deferred costs - (7,166)
Disposition of investment property 4,372,056 -
Net cash provided by (used in) investment activities 4,372,056 (7,166)
Cash flows from financing activities:
Distributions to limited partners (400,000) (20,600)
Capital provided by
reduction in syndication costs - 63,000
Principal payments on long-term debt (4,258,224) (88,665)
Net cash used in financing activities (4,658,224) (46,265)
Net decrease in cash and cash equivalents (522,576) (58,558)
<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, 2000 and 1999
(Unaudited)
Readers of this quarterly report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1999, which are
included in the Partnership's 1999 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 months ended June 30, 2000 and June 30, 1999 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, 2000
and June 30, 1999.
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 three months ended June 30, 2000 and 1999
is summarized as follows:
<TABLE>
<CAPTION>
2000 2000 1999 1999
GAAP Tax GAAP Tax
Basis Basis Basis Basis
<S> <C> <C> <C> <C>
Net loss 222,878 (1,672,000) (125,827) (118,000)
Net loss per
limited partnership unit 22.06 (165.53) (12.46) (11.68)
</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
($271,258 and $788,980 at June 30, 2000 and December 31, 1999, 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
March 31, 2000. As of December 31, 1999, the Sycamore Mall property was
considered to be held for disposal. In response to the uncertainty relative
to the Sycamore property, as a matter of prudent accounting practices and for
financial reporting purposes, the Partnership recorded a provision for value
impairment in 1999 and 1998 in the amount of $1,890,000 and $1,100,000,
respectively. As a result of the inability to find new tenants, the Sycamore
Mall property was unable to meet its financial obligations and beginning in
October of 1999, payments to the lender were halted. This resulted in a
default of the loan terms and on March 13, 2000, title to the land buildings
and improvements as well as the other assets and liabilities of the property
was transferred to the lender in consideration of a discharge of the mortgage
loan.
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(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, 2000. The Partnership acquired, through these
ventures, interests in a mixed use retail/residential property and two
shopping centers.
(3) Disposition of Sycamore Mall
In March 2000, title to the land buildings and improvements as well as the
other assets and liabilities of the Sycamore Mall property was transferred to
the lender in consideration of a discharge of the mortgage loan. Total
consideration from the lender was $4,741,517. The outstanding mortgage balance
was $4,258,224 and there was $453,293 of accrued interest, prepayment
penalties and other costs associated with the transfer. All operating
liabilities and assets were also assumed as a part of this transaction. This
disposition resulted in a net gain of $336,111 to the Partnership. No net
cash flow was realized from this disposition.
(4) 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, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Unpaid at
June 30,
2000 1999 2000
<S> <C> <C> <C>
Reimbursement for administrative services 10,000 10,000 -
10,000 10,000 -
</TABLE>
<PAGE>
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(5) Unconsolidated Venture - Summary Information
Summary income statement information for Evanston Galleria Limited
Partnership for the six months ended June 30, 2000 and the six months ended
June 30, 1999, is as follows:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Total revenue 757,961 740,757
Operating income (loss) 67,823 (7,717)
Partnership's share of income (loss) 14,243 (1,636)
</TABLE>
On July 12, 2000, Evanston Galleria was sold for a sale price in the amount of
$9,900,000. Coincidentally, there was a settlement of the original claims of
the partnership against the original developers of the project. Evanston
Galleria was relieved of $175,000 of second mortgage debt and accrued interest
thereon. From the $9,900,000 sale proceeds, Evanston Galleria repaid
$8,311,740 of first mortgage debt. Property tax prorations totaled $314,680,
and other closing related prorations and expenses totaled $560,809. Net
proceeds from the sale totaled $703,771. It is anticipated that approximately
$210,000 will be received by the Partnership upon the liquidation of Evanston
Galleria LP.
The Evanston Galleria property was the only remaining real estate investment
of the Partnership. It is expected that the Partnership will be liquidated
prior to December 31, 2000.
(6) 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, 2000 and 1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At June 30, 2000, the Partnership had cash and cash equivalents of
$296,943 which will be utilized for working capital requirements and for
future distributions to Partners. This is $522,576 less than the $819,519
balance at December 31, 1999. The decrease results from a $400,000
distribution to limited partners which as made during the second quarter of
2000 and to operating losses.
During the first quarter of 2000, title to the land buildings and
improvements as well as the other assets and liabilities of the Sycamore Mall
property was transferred to the lender in consideration of a discharge of the
mortgage loan. This disposition resulted in a net gain of $324,164. No net
cash flow was realized from this disposition.
On February 22, 2000, a contract was signed for the sale of the Evanston
Galleria. Closing occurred during the third quarter of 2000. The purchase
price, net of closing costs and prorations was sufficient to repay all
liabilities of the Evanston Galleria Limited Partnership, including the
first mortgage. However there will not be a significant distribution to the
Partnership. The Partnership is expected to recognize a gain on the sale of
approximately $100,000.
As the Partnership intends to distribute all "net cash receipts" and
"sales proceeds" in accordance with the terms of the Partnership Agreement,
and does not intend to reinvest any such proceeds, the Partnership is
intended to be self-liquidating in nature. The Partnership's future source
of liquidity and distributions is expected to be through cash generated by the
Partnership's investment properties and from the sale and refinancing of such
properties. To the extent that additional payments are required under a
purchase agreement or a property does not generate an adequate cash flow to
meet its requirements, the Partnership may withdraw funds from the working
capital reserve, which it maintains.
Results of Operations - 2000 compared to 1999
For the three and six month periods ended June 30, 2000 and June 30, 1999,
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 months ended
June 30, 2000 and June 30, 1999.
The $368,900 (87%) decrease in rental income and the $185,232 (98%)
decrease in tenant charges income for the six month period ended June 30, 2000
as compared to the six month period ended June 30, 1999 and the elimination of
rental income and tenant charges income in the second quarter of 2000 is
attributed to the disposition of the Sycamore Mall property which occurred in
the first quarter of 2000.
<PAGE>
The $385,515 (92%) decrease in property operating expenses for the six
months ended June 30, 2000 as compared to the six months ended June 30, 1999
and the elimination of property operating expenses during the second quarter
of 2000 is attributed to the disposition of the Sycamore Mall property which
occurred in the first quarter of 2000.
The $141,040 (100%) decrease in depreciation expense for the six months
ended June 30, 2000 as compared to the six months ended June 30, 1999 is
attributable to the fact that the Sycamore property was considered to be held
for sale during the first quarter of 2000. In accordance with SFAS 121, a
property may not be depreciated while being held for sale.
The $8,403 (11%) decrease in general and administrative expenses for the
six month periods ended June 30, 2000 as compared to the six month periods
ended June 30, 1999 is attributable to the disposition of the Sycamore Mall
property.
The Partnership's share of operations of unconsolidated subsidiaries
resulted in an income allocation of $14,243, during the six months ended
June 30, 2000, as compared to a loss allocation of $1,636 during the six
month period ended June 30, 1999. Evanston Galleria's allocation shows an
improvement which results from the improved operations at Evanston Galleria.
The Partnership's allocation of consolidated venture's operations to the
venture partners was an income allocation of $60,989 during the six months
ended June 30, 1999. Sycamore Mall was disposed of during the first quarter of
2000 and no allocation of income or loss was made for the benefit of the
venture's partners. A gain of $324,164 was recognized upon the disposition of
Sycamore during the six month period ended June 30, 2000.
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
03/31/99 06/30/99 09/30/99 12/31/99 03/31/00 06/30/00
<S> <C> <C> <C> <C> <C> <C>
Evanston Galleria
Evanston, IL 92% 97% 98% 92% 92% 92%
Sycamore Mall
Iowa City, Iowa 47% 44% 44% 44% n/a n/a
<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
Form 8-K reporting the disposition of the Sycamore Mall property was
filed on March 23, 2000. Form 8-K reporting the disposition of the Evanston
Galleria property was filed on July 25, 2000.
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, 2000 By: Robert S. Ross
President
(Principal Executive Officer)
August 14, 2000 By: Bruce H. Block
Vice President
(Principal Financial Officer)
</TABLE>
