-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J4sXNpXDU0j7MxysCMaZX4qSjOanDnJHv84chkE5ny77BCWRhjDrnx6SNXxYpuRS Qvdqf/A3IHhxv3O4xX91Hw== 0000892626-97-000083.txt : 19970401 0000892626-97-000083.hdr.sgml : 19970401 ACCESSION NUMBER: 0000892626-97-000083 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JMB INCOME PROPERTIES LTD XII CENTRAL INDEX KEY: 0000765813 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363337796 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-16108 FILM NUMBER: 97569550 BUSINESS ADDRESS: STREET 1: 900 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3129151987 MAIL ADDRESS: STREET 1: 900 N MICHIGAN CITY: CHICAGO STATE: IL ZIP: 60611 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1996 Commission file no. 0-16108 JMB INCOME PROPERTIES, LTD. - XII (Exact name of registrant as specified in its charter) Illinois 36-3337796 (State of organization) (I.R.S. Employer Identification No.) 900 N. Michigan Ave., Chicago, Illinois 60611 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code 312-915-1987 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - ------------------- ------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: LIMITED PARTNERSHIP INTERESTS (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. Documents incorporated by reference: None TABLE OF CONTENTS Page ---- PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . 1 Item 2. Properties . . . . . . . . . . . . . . . . . . . 4 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . 6 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . 6 PART II Item 5. Market for the Partnership's Limited Partnership Interests and Related Security Holder Matters. . 6 Item 6. Selected Financial Data. . . . . . . . . . . . . 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . 11 Item 8. Financial Statements and Supplementary Data. . . 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . 45 PART III Item 10. Directors and Executive Officers of the Partnership . . . . . . . . . . . . . . . 45 Item 11. Executive Compensation . . . . . . . . . . . . . 48 Item 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . 49 Item 13. Certain Relationships and Related Transactions . 50 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . . . 50 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 53 i PART I ITEM 1. BUSINESS All references to "Notes" are to Notes to Consolidated Financial Statements contained in this report. Capitalized terms used herein, but not defined, have the same meanings as used in the Notes. The registrant, JMB Income Properties, Ltd. - XII (the "Partnership"), is a limited partnership formed in 1984 and currently governed under the Revised Uniform Limited Partnership Act of the State of Illinois to invest in improved income-producing commercial and residential real property. On August 23, 1985, the Partnership commenced an offering to the public of $100,000,000 (subject to increase by up to $150,000,000) in Limited Partnership Interests (the "Interests") pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration No. 2-96716). A total of 189,679 Interests were sold to the public at $1,000 per Interest and were issued to Investors in fiscal 1986. The offering closed on January 17, 1986. No Investor has made any additional capital contribution after such date. The Investors in the Partnership share in their portion of the benefits of ownership of the Partnership's real property investments according to the number of Interests held. The Partnership is engaged solely in the business of the acquisition, operation and sale and disposition of equity real estate investments. Such equity investments are held by fee title and/or through joint venture partnership interests. The Partnership's real estate investments are located throughout the nation and it has no real estate investments located outside of the United States. A presentation of information about industry segments, geographic regions, raw materials, or seasonality is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. Pursuant to the Partnership agreement, the Partnership is required to terminate no later than October 31, 2035. The Partnership is self-liquidating in nature. Upon sale of a particular property, the net proceeds, if any, are generally distributed or reinvested in existing properties rather than invested in acquiring additional properties. As discussed further in Item 7, the Partnership currently expects to conduct an orderly liquidation of its remaining investment portfolio as quickly as practicable and to wind up its affairs not later than December 31, 1999, barring any unforeseen economic developments. The Partnership has made the real property investments set forth in the following table:
SALE OR DISPOSITION DATE OR IF OWNED AT DECEMBER 31, 1996, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION (d) SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP - ---------------------- ---------- -------- ---------------------- --------------------- 1. Park Center Financial Plaza office buildings San Jose, California . . . . . 432,000 06/20/85 27% fee ownership of land and sq.ft. improvements (through n.r.a. joint venture partnership) (c)(g) 2. Topanga Plaza shopping center Los Angeles, California . . . . . 360,000 12/31/85 20% fee ownership of land and sq.ft. improvements (through g.l.a. joint venture partnership) (b)(c)(d)(e) 3. 40 Broad Street office building New York, New York . 247,800 12/31/85 29% fee ownership of land and sq.ft. improvements (through joint n.r.a. venture partnership) (c)(d) 4. Plaza Hermosa Shopping Center Hermosa Beach, California . . . . . 94,900 09/03/86 8% fee ownership of land and sq.ft. improvements (b)(d) g.l.a. 5. Mid Rivers Mall shopping center St. Peters (St. Louis), Missouri . . . . . . 323,100 12/12/86 1/30/92 fee ownership of land and sq.ft. improvements (through g.l.a. joint venture partnership) 6. First Financial Plaza office building Encino, California . . . . . 216,000 05/20/87 9/11/96 fee ownership of land and sq.ft. improvements (through joint n.r.a. venture partnership) (c)(f) - --------------- (a) The computation of this percentage for properties held at December 31, 1996 does not include amounts invested from sources other than the original net proceeds of the public offering as described above and in Item 7. (b) Reference is made to the Notes and to Schedule III filed with this annual report for the current outstanding principal balances and a description of the long-term mortgage indebtedness secured by the Partnership's real property investments. (c) Reference is made to the Notes for a description of the joint venture partnership through which the Partnership has made this real property investment. (d) Reference is made to Item 8 - Schedule III filed with this annual report for further information concerning real estate taxes and depreciation. (e) Reference is made to Item 6 - Selected Financial Data for additional operating and lease expiration data concerning this investment property. (f) The joint venture sold this property. Reference is made to the Notes for a further description of such sale. (g) In March 1996, the joint venture sold the 190 San Fernando building, one of the buildings in the Park Center Financial Plaza office complex comprising approximately 5% of the total occupied space, to an independent third party, and transferred title to one of the parking garages to the City of San Jose. The original capital percentage reflected for this property in the table has not been adjusted for such sale. Reference is made to the Notes for a description of such sale.
The Partnership's real property investments are subject to competition from similar types of properties (including in certain areas properties owned by affiliates of the General Partners) in the respective vicinities in which they are located. Such competition is generally for the retention of existing tenants. Additionally, the Partnership is in competition for new tenants in markets where significant vacancies are present. Reference is made to Item 7 below for a discussion of competitive conditions and future renovation and capital improvement plans of the Partnership and certain of its significant investment properties. Approximate occupancy levels for the properties are set forth in the table in Item 2 below to which reference is hereby made. The Partnership maintains the suitability and competitiveness of its properties in its markets primarily on the basis of tenant mix, property aesthetics, effective rents, tenant allowances and service provided to tenants. In the opinion of the Managing General Partner of the Partnership, all of the investment properties held at December 31, 1996 are adequately insured. Although there is earthquake insurance coverage for a portion of the value of certain of the Partnership's investment properties, the Managing General Partner does not believe that such coverage for the entire replacement cost of the investment properties is available on economic terms. In January 1994, an earthquake occurred in Los Angeles, California. Though significant portions of the mall suffered casualty damage, the approximate 360,000 square feet of mall shops owned by the Topanga Partnership did not suffer major structural damage. The costs at Topanga for which the joint venture was responsible were approximately $11.9 million. The majority of this cost was recovered under the final settlement, reached in the third quarter of 1995, with the joint venture's earthquake insurance provider. Additional business interruption insurance proceeds were also received. Reference is made to Item 7 and to the Notes for further description of such event. Reference is made to the Notes for a schedule of minimum lease payments to be received in each of the next five years, and in the aggregate thereafter, under leases in effect at the Partnership's properties as of December 31, 1996. In September 1996, the Partnership sold the First Financial Plaza office building. Reference is made to the Notes for a further description of such transaction. The Partnership has no employees other than personnel performing on- site duties at certain of the Partnership's properties, none of whom are officers or directors of the Managing General Partner of the Partnership. The terms of transactions between the Partnership, the General Partners and their affiliates are set forth in Item 11 below to which reference is hereby made for a description of such terms and transactions. ITEM 2. PROPERTIES The Partnership owns or owned directly or through joint venture partnerships the properties or interests in the properties referred to under Item 1 above to which reference is hereby made for a description of said properties. The following is a listing of principal businesses or occupations and approximate occupancy levels by quarter during fiscal years 1996 and 1995 for the Partnership's investment properties owned during 1996:
1995 1996 ------------------------- ------------------------- At At At At At At At At Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 ------------------ ---- ---- ---- ----- ---- ---- ----- ----- 1. Park Center Financial Plaza San Jose, California. . . . Accounting/ (1) (1) (1) (1) Legal 74% 77% 76% 77% 85% 85% 87% 85% 2. Topanga Plaza Shopping Center Los Angeles, California. . . . . . . . . Retail 95% 96% 96% 98% 98% 94% 98% 98% 3. 40 Broad Street New York, New York. . . . . Insurance/ Financial Services 76% 77% 77% 77% 75% 78% 81% 74% 4. Plaza Hermosa Shopping Center Hermosa Beach, California. . . . . . . . . Retail 93% 93% 95% 93% 95% 93% 92% 91% 5. First Financial Plaza Encino (Los Angeles), California. . . . . . . . . University/ Bank/Housing Developer 89% 86% 88% 89% 82% 83% N/A N/A - ---------- Reference is made to Item 6, Item 7, and to the Notes for further information regarding property occupancy, competitive conditions and tenant leases at the Partnership's investment properties. An "N/A" indicates that the property was sold and not owned by the Partnership at the end of the quarter. (1) Occupancy is now based on 408,300 square feet rather than 432,000 square feet due to the sale of the 190 San Fernando building in March 1996 as discussed more fully in the Notes.
ITEM 3. LEGAL PROCEEDINGS The Partnership is not subject to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of holders of Interests during 1995 and 1996. PART II ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS As of December 31, 1996, there were 15,158 record holders of Interests of the Partnership. There is no public market for Interests and it is not anticipated that a public market for Interests will develop. Upon request, the Managing General Partner may provide information relating to a prospective transfer of Interests to an investor desiring to transfer his Interests. The price to be paid for the Interests, as well as any economic aspects of the transaction, will be subject to negotiation by the investor. There are certain conditions and restrictions on the transfer of Interests, including, among other things, the requirements that the substitution of a transferee of Interests as a Limited Partner of the Partnership be subject to the written consent of the Managing General Partner, which, may be granted or withheld in its sole and absolute discretion. The rights of a transferee of Interests who does not become a substituted Limited Partner will be limited to the rights to receive his share of profits or losses and cash distributions from the Partnership, and such transferee will not be entitled to vote such Interests or have other rights of a Limited Partner. No transfer will be effective until the first day of the next succeeding calendar quarter after the requisite transfer form satisfactory to the Managing General Partner has been received by the Managing General Partner. The transferee consequently will not be entitled to receive any cash distributions or any allocable share of profits or losses for tax purposes until such succeeding calendar quarter. Profits or losses from operations of the Partnership for a calendar year in which a transfer occurs will be allocated between the transferor and the transferee based upon the number of quarterly periods in which was recognized as the holder of Interests, without regard to the results of Partnership's operations during particular quarterly periods and without regard to whether cash distributions were made to the transferor or transferee. Profits or losses arising from the sale or other disposition of Partnership properties will be allocated to the recognized holder of the Interests as of the last day of the quarter in which the Partnership recognized such profits or losses. Cash distributions to a holder of Interests arising from the sale or other disposition of Partnership properties will be distributed to the recognized holder of the Interests as of the last day of the quarterly period with respect to which distribution is made. Reference is made to Item 6 below for a discussion of cash distribu- tions to Investors. ITEM 6. SELECTED FINANCIAL DATA JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992 (NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
1996 1995 1994 1993 1992 ------------- ------------- ----------- ------------ ------------ Total income . . . . . . . . $ 29,639,293 33,940,506 31,152,216 30,055,775 31,061,115 ============ ============ =========== =========== =========== Operating earnings (loss). . . . . . . . . . . $ 3,303,539 (776,107) (5,376,818) (213,393) (18,250,294) Partnership's share of earnings (loss) from operations of uncon- solidated ventures. . . . . 611,483 709,164 441,700 (6,610,269) (3,123,534) Venture partners' share of consolidated ventures' operations before extraordinary item. . . . . (1,010,868) (1,568,232) 2,699,777 785,684 6,090,075 ------------ ------------ ----------- ----------- ----------- Net operating earnings (loss) . . . . . . 2,904,154 (1,635,175) (2,235,341) (6,037,978) (15,283,753) Partnership's share of gain on sale of invest- ment properties of unconsolidated venture. . . 1,412,610 -- -- -- -- Gain on sale of investment property, net . . . . . . . 1,611,977 -- -- -- 5,655,876 ------------ ------------ ----------- ----------- ----------- Net operating earnings (loss) before extra- ordinary item . . . . . . . 5,928,741 (1,635,175) (2,235,341) (6,037,978) (9,627,877) Extraordinary item (net of venture partners' share). . . . . . -- -- (2,300,838) -- -- ------------ ------------ ----------- ----------- ----------- Net earnings (loss). . . . . $ 5,928,741 (1,635,175) (4,536,179) (6,037,978) (9,627,877) ============ ============ =========== =========== =========== 1996 1995 1994 1993 1992 ------------- ------------- ----------- ------------ ------------ Net earnings (loss) per Interest (b): Net operating earnings (loss) . . . . . $ 14.70 (9.15) (12.41) (31.79) (80.48) Partnership's share of gain on sale of investment properties of unconsolidated venture. . . . . . . . . 7.37 -- -- -- -- Net gain on sale of investment property. . . 8.41 -- -- -- 29.52 Extraordinary item, net. . -- -- (11.65) -- -- ------------ ------------ ----------- ----------- ----------- Net earnings (loss) per Interest (b) . . . . $ 30.48 (9.15) (24.06) (31.79) (50.96) ============ ============ =========== =========== =========== Total assets . . . . . . . . $138,673,945 178,508,742 189,322,387 195,051,570 201,746,282 Long-term debt . . . . . . . $ 63,630,727 88,670,160 64,470,886 87,612,869 69,869,294 Cash distributions per Interest (c) . . . . . $ 79.50 15.00 10.00 12.50 50.00 ============ ============ =========== =========== =========== - ------------- (a) 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. (b) The net earnings (loss) per Interest is based upon the number of Interests outstanding at the end of each period (189,684). (c) Cash distributions from the Partnership are generally not equal to Partnership's income (loss) for financial reporting or Federal income tax purposes. Each Partner's taxable income (or loss) from the Partnership in each year is equal to his allocable share of the taxable income (loss) of the Partnership, without regard to the cash generated or distributed by the Partnership. Accordingly, cash distributions to the Limited Partners since the inception of the Partnership have not resulted in taxable income to such Limited Partners and have therefore represented a return of capital.
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1996
Property - -------- Topanga Plaza Shopping Center a) The gross leasable area ("GLA") occupancy rate and average base rent per square foot as of December 31 for each of the last five years were as follows: GLA Avg. Base Rent Per December 31, Occupancy Rate Square Foot (1) ------------ -------------- ------------------ 1992. . . . . . . 87% $25.11 1993. . . . . . . 94% 21.13 1994. . . . . . . 95% 24.84 1995. . . . . . . 98% 24.93 1996. . . . . . . 98% 28.03 (1) Average base rent per square foot is based on GLA occupied as of December 31 of each year.
Base Rent Scheduled Lease Lease b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option(s) ------------------- ----------- --------- --------------- ----------------- None - no single tenant represents more than 10% of the total gross leasable area at the property.
c) The following table sets forth certain information with respect to the expiration of leases for the next ten years at the Topanga Plaza Shopping Center: Annualized Percent of Number of Approx. Total Base Rent Total 1996 Year Ending Expiring GLA of Expiring of Expiring Base Rent December 31, Leases Leases (1) Leases Expiring ------------ --------- --------------- ----------- ---------- 1997 1 1,550 $ 45,000 0.5% 1998 6 17,106 394,024 4.0% 1999 8 15,822 385,950 3.9% 2000 9 16,107 450,636 4.6% 2001 8 8,663 422,632 4.3% 2002 14 22,513 796,807 8.1% 2003 13 36,495 787,766 8.0% 2004 15 36,181 992,656 10.0% 2005 22 63,067 1,828,898 18.5% 2006 27 86,397 2,179,446 22.0% (1) Excludes leases that expire in 1997 for which renewal leases or leases with replacement tenants have been executed as of February 28, 1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES As a result of the public offering as described in Item 1, the Partnership had approximately $171,306,000, after deducting selling expenses and other offering costs, with which to make investments in income-producing commercial real property, to pay legal fees and other costs (including acquisition fees) related to such investments and for working capital reserves. A portion of such proceeds was utilized to acquire the properties described in Item 1 above. Beginning in the second quarter of 1996 and through the first quarter of 1997 some of the Limited Partners in the Partnership received from unaffiliated third parties unsolicited tender offers to purchase up to 4.9% of the Interests in the Partnership at between $150 and $210 per Interest. The Partnership recommended against acceptance of these offers on the basis that, among other things, the offer prices were inadequate. Two such offers that have not as yet expired are currently scheduled to do so in April 1997. As of the date of this report, the Partnership is aware that 2,619 Interests have been purchased by such unaffiliated third parties either pursuant to such tender offers or through negotiated purchases. It is possible that other offers for Interests may be made by unaffiliated third parties in the future, although there is no assurance that any other third party will commence an offer for Interests, the terms of any such offer or whether any such offer, if made, will be consummated, amended or withdrawn. The board of directors of JMB Realty Corporation ("JMB") the managing general partner of the Partnership, has established a special committee (the "Special Committee") consisting of certain directors of JMB to deal with all matters relating to tender offers for Interests in the Partnership, including any and all responses to such tender offers. The Special Committee has retained independent counsel to advise it in connection with any potential tender offers for Interests and has retained Lehman Brothers Inc. as financial advisor to assist the Special Committee in evaluating and responding to any additional potential tender offers for Interests. At December 31, 1996, the Partnership had cash and cash equivalents of approximately $22,822,000, of which approximately $17,906,000 is held by the Partnership. The remaining $4,916,000 is held by the Partnership's consolidated joint ventures, of which approximately $3,004,000 represents the Partnership's share of undistributed cash flow from operations. These funds are available for distributions to partners, tenant and capital improvements, leasing commissions, and other expenditures including a possible reduction of the letter of credit enhancing the $6,400,000 loan at the Plaza Hermosa Shopping Center as such letter of credit will require renegotiation or reissuance upon its expiration in December 1997 (although an agreement in principle has been reached with the letter of credit holder to extend the letter of credit to December 1999). The Partnership and its consolidated ventures have currently budgeted in 1997 approximately $2,649,000 for tenant improvements and other capital expenditures. The Partnership's share of such items and its share of similar items for its unconsolidated ventures in 1997 is currently budgeted to be approximately $3,230,000. Actual amounts expended in 1997 may vary depending on a number of factors including actual leasing activity, results of property operations, liquidity considerations and other market conditions over the course of the year. Additionally, as more fully described in the Notes, distributions to the General Partners have been deferred in accordance with the subordination requirements of the partnership agreement. The source of capital for such items and for both short-term and long-term future liquidity and distributions is expected to be through cash generated by the Partnership's investment properties and through the sale of such investments. In such regard, reference is made to the Partnership's property specific discussions below and also to the Partnership's disclosure of certain property lease expirations in Item 6 above. The Partnership's and its ventures' mortgage obligations are separate non- recourse loans secured individually by the investment properties and are not obligations of the entire investment portfolio. The Partnership and its ventures are not personally liable for the payment of the mortgage indebtedness. Commencing in 1996, the Partnership changed from a quarterly distribution of cash flow from operations to a semi-annual distribution in May and November of each year. In February 1996, the Partnership paid an operating distribution of $476,581 ($2.50 per Interest) for the fourth quarter of 1995 to the Limited Partners. In May 1996, the Partnership paid an operating distribution of $953,162 ($5 per Interest) for the first and second quarters of 1996 to the Limited Partners. In May 1996, the Partnership distributed $2,859,486 ($15 per Interest) to the Limited Partners of proceeds related to the sale of the 190 San Fernando Building and one of the parking structures at the Park Center Financial Plaza investment property. In November 1996, the Partnership paid a distribution of $10,866,047 ($57 per Interest) to the Limited Partners consisting of $8,006,561 ($42 per Interest) of proceeds related to the sale of the First Financial office building, a special operating distribution of $1,906,324 ($10 per Interest) and $953,162 ($5 per Interest) representing cash flow from operations for the third and fourth quarters of 1996. 40 BROAD STREET Occupancy of this property decreased to 74% at the end of the year, down from 81% at the end of the third quarter primarily due to the lease expiration and move-out of Katten Muchin & Zavis (17,655 square feet or approximately 7% of the building's leasable square footage) and lease termination and move-out of Churchill Capital (7,664 square feet or approximately 3% of the building's leasable square footage). Churchill's original lease expiration date was in March 2004. As a result of certain non-monetary defaults which it failed to cure, the joint venture determined that it was in the best interest of the property to terminate Churchill's lease early. These move-outs were offset by the move-in of two smaller tenants occupying approximately 8,400 square feet or approximately 3% of the building's leasable square footage. The manager has signed leases with three tenants which will occupy approximately 32,000 square feet of space or approximately 12% of the building's leasable square footage in the first half of 1997. As evidenced by this recent leasing, leasing activity in the market has improved significantly over the last year. This is primarily due to very low effective rental rates offered, no new office developments, and improvements in the Lower Manhattan working environment resulting from the Lower Manhattan Revitalization Plan by which the city has created tax and zoning incentives to attract businesses to invest or locate in the market area. Nevertheless, the Financial East office market (competitive market for 40 Broad) remains depressed, with approximately a 29% vacancy factor. This vacancy factor is down, however, from a high of approximately 37% at the end of 1991. Effective rental rates achieved on recent leasing have also improved over the last year. The market, however, has only begun to recover the significant decreases in net effective rental rates and therefore, values experienced in the late 1980's to early 1990's. The property produced a nominal amount of cash flow for the Partnership in 1996. SAN JOSE During August 1994, JMB/San Jose Associates ("San Jose") received notification from the Redevelopment Agency of the City of San Jose of its offer to purchase one of the parking garage structures in the office building complex, for an approved Agency project, for $4,090,000. The price offered was deemed by the Agency to be just compensation in compliance with applicable laws governing eminent domain. During 1995, the Agency filed a condemnation action in court to proceed to obtain the garage pursuant to such laws. In late 1995, San Jose and the Agency reached a mutually acceptable agreement on the transfer of the garage. In March 1996, the sale was consummated. Reference is made to the Notes for a description of such sale. During March 1996, San Jose sold the 190 San Fernando Building and a parking garage structure to an independent third party. The sale price of the building was $1,753,000 (before selling costs), paid in cash at closing. Reference is made to the Notes for a description of such sale. The aggregate net sale proceeds to San Jose from both sales was approximately $5,800,000 after selling costs and prorations, of which the Partnership's share was approximately $2,900,000. Due to the proposed sales, the San Jose venture had classified the parking garage structures and the 190 San Fernando Building as held for sale or disposition as of January 1, 1996. The remaining assets have been classified as held for sale as of December 31, 1996, and will, therefore, not be subject to continued depreciation beyond such date. The San Jose market has seen considerable improvement during the last year, especially in class "A" office space. As this sector of the office market continues to tighten, the increased demand for office space has moved to class "B" space as well. The office complex contains both class "A" and class "B" space. Tenants occupying approximately 30,000 square feet (approximately 7% of the buildings) of the Park Center Financial Plaza investment property have leases that expire in 1997, for which there can be no assurance of renewals. In addition, new leases will likely require expenditures for lease commissions and tenant improvements prior to tenant occupancy. These anticipated costs upon re-leasing may result in a decrease in cash flow from operations over the near term. As previously reported, in 1996 San Jose completed a voluntary seismic upgrade to the 130 Park Center Financial Plaza building and the parking garage below the 100-130 buildings. The cost of the structural upgrade was approximately $860,000 (of which the Partnership's share was approximately $430,000). TOPANGA PLAZA SHOPPING CENTER On January 17, 1994, an earthquake occurred in Los Angeles, California. The epicenter was located in the town of Northridge, which is approximately six miles from the Topanga Plaza Shopping Center. Consequently, significant portions of the mall, including the four major department stores who own their own buildings, suffered some casualty damage. However, the approximate 360,000 square feet of mall shops owned by the Topanga Partnership did not suffer major structural damage. Reference is made to the Notes for a further description of the financial impact of this event. Occupancy at the Topanga Plaza Shopping Center at December 31, 1996 was approximately 98%. The Topanga venture has committed to a plan to sell the property and therefore has classified the property as held for sale as of December 31, 1996. The property will no longer be subject to continuing depreciation beyond such date. PLAZA HERMOSA SHOPPING CENTER Occupancy at the Plaza Hermosa Shopping Center at December 31, 1996 was approximately 91%. However, included in the occupancy percentage is a tenant, currently in bankruptcy, whose lease had expired in 1995 (approximately 6,800 square feet or 7% of the property) but remains in the center and pays rent pursuant to its original lease terms on a month-to- month basis. The Partnership is currently in negotiations with the tenant to renew its lease on a long-term basis. In addition, new leases will likely require expenditures for lease commissions and tenant improvements prior to tenant occupancy. These anticipated costs upon re-leasing may result in a decrease in cash flow from operations over the near term. The property was classified as held for sale or disposition as of December 1, 1996 and therefore was not subject to continued depreciation. During December 1996, the Partnership had entered into a non-binding letter of intent with an unaffiliated third party to sell the property. The buyer elected not to continue with the transaction under the agreed upon terms. FIRST FINANCIAL On September 11, 1996, the joint venture sold the First Financial office building for $37,900,000 (before selling costs). Reference is made to the Notes for a further description of such sale. GENERAL There are certain risks 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. As a result of the real estate market conditions discussed above, the Partnership continues to conserve its working capital. All expenditures are carefully analyzed and certain capital projects are deferred when appropriate. In an effort to reduce partnership operating expenses, the Partnership elected to make semi-annual rather than quarterly distributions of available operating cash flow commencing with the 1996 distributions. By conserving working capital, the Partnership will be in a better position to meet the future needs of its properties since the availability of satisfactory outside sources of capital may be limited given the portfolio's current debt levels. Due to these factors, the Partnership has held its remaining investment properties longer than originally anticipated in an effort to maximize the return to the Limited Partners. However, after reviewing the remaining properties and the marketplaces in which they operate, the General Partners of the Partnership expect to be able to conduct an orderly liquidation of its remaining investment portfolio as quickly as practicable. In such regard, certain of the Partnership's investment properties have been classified as held for sale as discussed above. Therefore, the affairs of the Partnership are expected to be wound up no later than December 31, 1999 (sooner if the properties are sold in the near term), barring unforeseen economic developments. RESULTS OF OPERATIONS Significant variances between periods reflected in the accompanying consolidated financial statements are primarily the result of the sale of the First Financial Plaza office building in September 1996. The increase in cash and cash equivalents at December 31, 1996 as compared to December 31, 1995 is primarily due to the receipt of approximately $15,952,000 in distributions from the Partnership's consolidated ventures and unconsolidated San Jose venture, substantially offset by the payment in 1996 of approximately $15,155,000 of distributions to the Holders of Interests. Additionally, the increase in 1996 is due to the prepayment of rental income by tenants of approximately $520,000 at the Topanga Plaza investment property. The increase in escrow deposits at December 31, 1996 as compared to December 31, 1995 is primarily due to escrowing approximately $120,000 of additional funds pursuant to the terms of the letter of credit refinancing in December 1994 at the Plaza Hermosa investment property. The decrease in investment in unconsolidated ventures, at equity, at December 31, 1996 as compared to December 31, 1995 is due to the receipt of approximately $3,600,000 in distributions from the Partnership's unconsolidated venture, partially offset by approximately $2,000,000 representing the Partnership's share of income from such unconsolidated venture. The increase in unearned rents at December 31, 1996 as compared to December 31, 1995 is primarily due to the prepayment of approximately $520,000 of rental income by tenants in 1996 at the Topanga Plaza investment property. The decrease in rental income for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is substantially due to the sale of the First Financial Plaza office building in September 1996. The decrease in rental income for the year ended December 31, 1996 as compared to the year ended December 31, 1995 and the increase for the year ended December 31, 1995 as compared to December 31, 1994 is also partially due to the receipt of insurance proceeds of approximately $3,200,000, in the third quarter of 1995, relating to business interruption at the Topanga Plaza Shopping Center following the earthquake in early 1994. Furthermore, the decrease in rental income for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is partially offset by the receipt of proceeds totaling approximately $513,000, in the second quarter of 1996, from Robinson-May and Montgomery Ward, relating to their pro rata share of expenses and costs for repairs and restorations at the Topanga Plaza Shopping Center following the earthquake in early 1994. The increase in interest income for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due to higher effective yields earned on U.S. Government obligations in 1995. The decrease in mortgage and other interest for the year ended December 31, 1996 as compared to the years ended December 31, 1995 and 1994 is primarily due to the sale of the First Financial Plaza office building in September 1996 and the $4,000,000 loan paydown at the First Financial Plaza in 1995. The decrease in depreciation expense for the years ended December 31, 1996 as compared to the year ended December 31, 1995 and 1994 is primarily due to the First Financial Plaza being classified as held for sale as of April 1, 1996, thus no longer subject to depreciation, and the provision for value impairment recorded at the Plaza Hermosa investment property at September 30, 1995. The decrease in property operating expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the sale of the First Financial Plaza office building in September 1996. The decrease in property operating expenses for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due to a decrease in provision for doubtful accounts of approximately $238,000 as a result of the resolution of tenant rent disputes in 1994 associated with the earthquake damage in addition to the decrease in various operating expenses in 1995 as compared to 1994 due to the earthquake at the Topanga Plaza Shopping Center and a real estate tax refund of approximately $128,000 received in 1995 at the Plaza Hermosa investment property. The increase in amortization of deferred expenses for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due to the capitalization of certain expenses including refinancing costs at the First Financial Plaza and the Plaza Hermosa investment properties. The decreases in general and administrative expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 and the increases in general and administrative expenses for the year ended December 31, 1995 as compared to the year ended December 31, 1994 are primarily attributable to an increase in reimbursable costs to affiliates of the General Partners in 1995 including the recognition of certain additional prior year reimbursable costs to such affiliates. The provision for value impairment for the year ended December 31, 1995 is due to the Partnership recording a provision for value impairment of $5,500,000 at the Plaza Hermosa investment property at September 30, 1995. The provision for value impairment for the year ended December 31, 1994 is due to the Partnership recording a provision for value impairment of $6,475,138 at the First Financial Plaza. The decrease in Partnership's share of operations of unconsolidated ventures for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the sale of the 190 San Fernando building and one of the parking structures at the San Jose investment property in 1996, partially offset by the write-off of receivables in 1995 related to a certain tenant at the San Jose investment property. The increase in Partnership's share of operations of unconsolidated ventures for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due to a provision for value impairment recorded at the San Jose investment property at September 30, 1994 of which the Partnership's share was approximately $472,000. The decrease in venture partners' share of consolidated ventures' operations before extraordinary item for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the sale of the First Financial Plaza office building in September 1996. The decrease in venture partners' share of consolidated ventures' operations before extraordinary item for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due to the value impairment recorded at the First Financial Plaza office building in the year ended 1994. In addition, the Topanga Plaza venture received insurance proceeds of approximately $3,200,000 in 1995 relating to business interruption at the Topanga Plaza Shopping Center partially offset by the receipt of insurance proceeds in 1994 related to space taken back by Robinson-May. The Partnership's share of gain on sale of investment properties of unconsolidated venture of $1,412,610 in 1996 relates to the sale of the 190 San Fernando building and one of the parking structures at the San Jose investment property. The gain on sale of investment property of $1,611,977 in 1996 is due to the gain on the sale of the First Financial Plaza investment property in September 1996. The extraordinary item for the year ended December 31, 1994 is due to the earthquake damage at the Topanga Plaza and the First Financial Plaza investment properties. INFLATION Due to the decrease in the level of inflation in recent years, inflation generally has not had a material effect on rental income or property operating expenses. Inflation is not expected to significantly impact future operations due to the expected liquidation of the Partnership by 1999. However, to the extent that inflation in future periods would have an adverse impact on property operating expenses, the effect would generally be offset by amounts recovered from tenants as many of the long-term leases at the Partnership's commercial properties have escalation clauses covering increases in the cost of operating and maintaining the properties as well as real estate taxes. Therefore, there should be little effect from inflation on operating earnings if the properties remain substantially occupied. In addition, substantially all of the leases at the Partner- ship's shopping center investments contain provisions which entitle the Partnership to participate in gross receipts of tenants above fixed minimum amounts. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES INDEX Independent Auditors' Report Consolidated Balance Sheets, December 31, 1996 and 1995 Consolidated Statements of Operations, years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Partners' Capital Accounts, years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows, years ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements Schedule -------- Consolidated Real Estate and Accumulated Depreciation III Schedules not filed: All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. INDEPENDENT AUDITORS' REPORT The Partners JMB INCOME PROPERTIES, LTD. - XII: We have audited the consolidated financial statements of JMB Income Properties, Ltd. - XII (a limited partnership) and consolidated ventures 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 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 JMB Income Properties, Ltd. - XII and consolidated ventures at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, 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. As discussed in the Notes to the consolidated financial statements, in 1996, the Partnership and its consolidated ventures changed their method of accounting for long-lived assets and long-lived assets to be disposed of to conform with Statement of Financial Accounting Standards No. 121. KPMG PEAT MARWICK LLP Chicago, Illinois March 25, 1997 JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995 ASSETS ------
1996 1995 ------------ ----------- Current assets: Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 22,821,808 21,456,552 Rents and other receivables, net of allowance for doubtful accounts of $255,866 in 1996 and $784,652 in 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,650,108 2,542,548 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282,111 260,164 Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,053,916 900,561 ------------ ----------- Total current assets . . . . . . . . . . . . . . . . . . . . . . 25,807,943 25,159,825 ------------ ----------- Investment properties, at cost - Schedule III: Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,765,194 20,494,992 Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . 22,602,302 168,635,413 ------------ ----------- 24,367,496 189,130,405 Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . 14,873,703 52,390,756 ------------ ----------- Total properties held for investment, net of accumulated depreciation. . . . . . . . . . . . . . . . 9,493,793 136,739,649 Properties held for sale or disposition. . . . . . . . . . . . . . . . . 90,811,933 -- ------------ ----------- Total investment properties. . . . . . . . . . . . . . . . . . . 100,305,726 136,739,649 Investment in unconsolidated ventures, at equity . . . . . . . . . . . . . 4,848,158 6,412,066 Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,491,467 7,639,146 Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . 1,220,651 2,558,056 ------------ ----------- $138,673,945 178,508,742 ============ =========== JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED BALANCE SHEETS - CONTINUED LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS ------------------------------------------ 1996 1995 ------------ ----------- Current liabilities: Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . $ 458,557 746,306 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,601,488 2,038,017 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,951 510,622 Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595,723 23,320 ------------ ----------- Total current liabilities. . . . . . . . . . . . . . . . . . . . 3,159,719 3,318,265 Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . 200,990 492,214 Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . 63,630,727 88,670,160 ------------ ----------- Commitments and contingencies Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 66,991,436 92,480,639 Venture partners' subordinated equity in ventures. . . . . . . . . . . . . 16,922,369 22,041,429 Partners' capital accounts: General partners: Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . 11,123 11,123 Cumulative net earnings. . . . . . . . . . . . . . . . . . . . . . . 915,607 769,195 ------------ ----------- 926,730 780,318 ------------ ----------- Limited partners (189,684 interests): Capital contributions, net of offering costs . . . . . . . . . . . . 171,306,452 171,306,452 Cumulative net loss. . . . . . . . . . . . . . . . . . . . . . . . . (24,300,420) (30,082,749) Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (93,172,622) (78,017,347) ------------ ----------- 53,833,410 63,206,356 ------------ ----------- Total partners' capital accounts . . . . . . . . . . . . . . . . 54,760,140 63,986,674 ------------ ----------- $138,673,945 178,508,742 ============ =========== See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ------------ ------------ ------------ Income: Rental income. . . . . . . . . . . . . . . . . . . . . $28,415,164 32,608,714 30,166,883 Interest income. . . . . . . . . . . . . . . . . . . . 1,224,129 1,331,792 985,333 ----------- ----------- ----------- 29,639,293 33,940,506 31,152,216 ----------- ----------- ----------- Expenses: Mortgage and other interest. . . . . . . . . . . . . . 7,665,413 8,991,027 9,075,692 Depreciation . . . . . . . . . . . . . . . . . . . . . 4,625,655 5,598,646 5,640,425 Property operating expenses. . . . . . . . . . . . . . 12,174,612 12,602,194 13,695,140 Professional services. . . . . . . . . . . . . . . . . 307,504 333,970 244,951 Amortization of deferred expenses. . . . . . . . . . . 1,205,175 1,263,041 1,117,672 General and administrative . . . . . . . . . . . . . . 357,395 427,735 280,016 Provisions for value impairment. . . . . . . . . . . . -- 5,500,000 6,475,138 ----------- ----------- ----------- 26,335,754 34,716,613 36,529,034 ----------- ----------- ----------- Operating earnings (loss). . . . . . . . . . . 3,303,539 (776,107) (5,376,818) Partnership's share of earnings (loss) from operations of unconsolidated ventures. . . . . . . . . 611,483 709,164 441,700 Venture partners' share of consolidated ventures' operations before extraordinary item . . . . . . . . . (1,010,868) (1,568,232) 2,699,777 ----------- ----------- ----------- Net operating earnings (loss). . . . . . . . . 2,904,154 (1,635,175) (2,235,341) Partnership's share of gain on sale of investment properties of unconsolidated venture . . . . . . . . . 1,412,610 -- -- Gain on sale of investment property, net of venture partner's share of $1,270,596. . . . . . . . . 1,611,977 -- -- ----------- ----------- ----------- Net operating earnings (loss) before extraordinary item. . . . . . . . . . 5,928,741 (1,635,175) (2,235,341) Extraordinary item (net of venture partners' share of $1,588,537) . . . . . . . . . . . . . . . . . -- -- (2,300,838) ----------- ----------- ----------- Net earnings (loss). . . . . . . . . . . . . . $ 5,928,741 (1,635,175) (4,536,179) =========== =========== =========== JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED 1996 1995 1994 ------------ ------------ ------------ Net earnings (loss) per limited partnership interest: Net operating earnings (loss) . . . . . . . . . . . . $ 14.70 (9.15) (12.41) Partnership's share of gain on sale of investment properties of unconsolidated venture . . . . . . . . . . . . . . . . . . . . . . 7.37 -- -- Net gain on sale of investment property . . . . . . . 8.41 -- -- Extraordinary item, net . . . . . . . . . . . . . . . -- -- (11.65) ----------- ----------- ----------- Net earnings (loss) per limited partnership interest . . . . . . . . . . . . $ 30.48 (9.15) (24.06) =========== =========== =========== See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
GENERAL PARTNERS LIMITED PARTNERS (189,684 INTERESTS) -------------------------------------------------- --------------------------------------------------- CONTRI- BUTIONS NET NET OF NET CONTRI- EARNINGS CASH OFFERING EARNINGS CASH BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL ------- ---------- ------------- ----------- ----------- ---------- ------------- ----------- Balance at December 31, 1993. . . . . $11,123 642,630 -- 653,753 171,306,452 (23,784,830) (73,251,535) 74,270,087 Cash distri- butions ($10 per limited partnership interest) . . -- -- -- -- -- -- (1,906,325) (1,906,325) Net earnings (loss). . . . -- 26,972 -- 26,972 -- (4,563,151) -- (4,563,151) ------- ------- ------- ------- ----------- ----------- ----------- ---------- Balance at December 31, 1994. . . . . 11,123 669,602 -- 680,725 171,306,452 (28,347,981) (75,157,860) 67,800,611 Cash distri- butions ($15 per limited partnership interest) . . -- -- -- -- -- -- (2,859,487) (2,859,487) Net earnings (loss). . . . -- 99,593 -- 99,593 -- (1,734,768) -- (1,734,768) ------- ------- ------- ------- ----------- ----------- ----------- ---------- JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS - CONTINUED GENERAL PARTNERS LIMITED PARTNERS (189,684 INTERESTS) -------------------------------------------------- --------------------------------------------------- CONTRI- BUTIONS NET NET OF NET CONTRI- EARNINGS CASH OFFERING EARNINGS CASH BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL ------- ---------- ------------- ----------- ----------- ---------- ------------- ----------- Balance at December 31, 1995. . . . . 11,123 769,195 -- 780,318 171,306,452 (30,082,749) (78,017,347) 63,206,356 Cash distri- butions ($79.50 per limited partnership interest) . . -- -- -- -- -- -- (15,155,275)(15,155,275) Net earnings (loss). . . . -- 146,412 -- 146,412 -- 5,782,329 -- 5,782,329 ------- ------- ------- ------- ----------- ----------- ----------- ---------- Balance at December 31, 1996. . . . . $11,123 915,607 -- 926,730 171,306,452 (24,300,420) (93,172,622) 53,833,410 ======= ======= ======= ======= =========== =========== =========== ========== See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ----------- ----------- ----------- Cash flows from operating activities: Net earnings (loss). . . . . . . . . . . . . . . . . . $ 5,928,741 (1,635,175) (4,536,179) Items not requiring (providing) cash or cash equivalents: Depreciation . . . . . . . . . . . . . . . . . . . . 4,625,655 5,598,646 5,640,425 Amortization of deferred expenses. . . . . . . . . . 1,205,175 1,263,041 1,117,672 Partnership's share of operations of unconsolidated venture . . . . . . . . . . . . . . (611,483) (709,164) (441,700) Partnership's share of gain on sale of investment properties of unconsolidated venture. . . . . . . . . . . . . . . . . . . . . . (1,412,610) -- -- Venture partners' share of ventures' operations, gain on sale and extraordinary item . . . . . . . . . . . . . . . . 2,281,464 1,568,232 (4,288,314) Total gain on sale of investment property. . . . . . (2,882,574) -- -- Provision for value impairment . . . . . . . . . . . -- 5,500,000 6,475,138 Write-off of assets. . . . . . . . . . . . . . . . . -- -- 1,174,125 Extraordinary item, net of insurance recoveries of $1,174,125 . . . . . . . . . . . . . -- -- 3,889,375 Changes in: Rents and other receivables. . . . . . . . . . . . . 794,648 (380,342) (836,355) Prepaid expenses . . . . . . . . . . . . . . . . . . (21,947) (33,566) 41,120 Escrow deposits. . . . . . . . . . . . . . . . . . . (153,355) (192,229) 685,195 Casualty insurance receivable. . . . . . . . . . . . -- 853,000 (853,000) Accrued rents receivable . . . . . . . . . . . . . . 585,975 (151,292) (757,729) Accounts payable . . . . . . . . . . . . . . . . . . (436,529) (1,802,619) (318,280) Accrued interest . . . . . . . . . . . . . . . . . . (6,671) 488,126 22,496 Unearned rents . . . . . . . . . . . . . . . . . . . 572,414 (41,486) 47,003 Tenant security deposits . . . . . . . . . . . . . . (291,224) (17,279) 99,261 ----------- ----------- ----------- Net cash provided by (used in) operating activities . . . . . . . . . . . . 10,177,679 10,307,893 7,160,253 ----------- ----------- ----------- JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1996 1995 1994 ----------- ----------- ----------- Cash flows from investing activities: Net sales and maturities (purchases) of short-term investments. . . . . . . . . . . . . . -- 14,176,812 7,789,504 Cash proceeds on sale of investment property . . . . . 12,985,931 -- -- Additions to investment properties, net of related payables and, in 1994, net of insurance recoveries of $6,647,000. . . . . . (1,583,556) (1,658,644) (2,908,722) Partnership's distributions from unconsolidated ventures. . . . . . . . . . . . . . . 3,588,000 1,250,000 -- Partnership's contributions to unconsolidated ventures. . . . . . . . . . . . . . . -- (1,233,437) (1,557,469) Payment of deferred expenses . . . . . . . . . . . . . (624,372) (577,311) (1,480,284) ----------- ----------- ----------- Net cash provided by (used in) investing activities . . . . . . . . . . . . 14,366,003 11,957,420 1,843,029 ----------- ----------- ----------- Cash flows from financing activities: Principal payments on long-term debt . . . . . . . . . (622,627) (4,593,543) (575,431) Advances from venture partners . . . . . . . . . . . . -- (435,000) (300,000) Venture partners' contributions to venture . . . . . . 161,356 1,580,310 604,973 Distributions to venture partners. . . . . . . . . . . (7,561,880) (2,723,400) (75,000) Distributions to limited partners. . . . . . . . . . . (15,155,275) (2,859,487) (1,906,325) ----------- ----------- ----------- Net cash provided by (used in) financing activities . . . . . . . . . . . . (23,178,426) (9,031,120) (2,251,783) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . 1,365,256 13,234,193 6,751,499 Cash and cash equivalents, beginning of year. . . . . . . . . . . . . . 21,456,552 8,222,359 1,470,860 ----------- ----------- ----------- Cash and cash equivalents, end of year. . . . . . . . . . . . . . . . . $22,821,808 21,456,552 8,222,359 =========== =========== =========== Supplemental disclosure of cash flow information: Cash paid for mortgage and other interest. . . . . . . $ 7,672,084 8,502,901 9,053,196 =========== =========== =========== JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1996 1995 1994 ----------- ----------- ----------- Non-cash investing and financing activities: Change in accounts payable. . . . . . . . . . . . . . $ -- -- 3,189,483 Change in accounts receivable . . . . . . . . . . . . -- -- 699,892 ----------- ----------- ----------- Total extraordinary item-earthquake damage at Topanga Mall and First Financial Plaza. . . . . . $ -- -- 3,889,375 =========== =========== =========== Total sales proceeds from sale of investment property, net of selling expenses . . . . . . . . $37,690,486 -- -- Principal balance due on mortgage payable . . . . . (24,704,555) -- -- ----------- ----------- ----------- Cash proceeds from sale of investment property, net of selling expenses. . . . . . $12,985,931 -- -- =========== =========== =========== See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 OPERATIONS AND BASIS OF ACCOUNTING GENERAL The Partnership holds (either directly or through joint ventures) an equity investment portfolio of United States real estate. Business activities consist of rentals to a wide variety of commercial and retail companies, and the ultimate sale or disposition of such real estate. The Partnership currently expects to conduct an orderly liquidation of its remaining investment portfolio and wind up its affairs not later than December 31, 1999. The accompanying consolidated financial statements include the accounts of the Partnership and its majority-owned ventures, Topanga Plaza Partnership ("Topanga"), JMB-40 Broad Street Associates ("Broad Street"), JMB First Financial Associates ("First Financial", prior to its sale in September 1996) and First Financial's venture (prior to its sale in September 1996), JMB Encino Partnership, ("Encino"). The effect of all transactions between the Partnership and its consolidated ventures have been eliminated. The equity method of accounting has been applied in the accompanying consolidated financial statements with respect to the Partnership's venture interest in JMB/San Jose Associates ("San Jose"). Accordingly, the accompanying consolidated financial statements do not include the accounts of San Jose. The Partnership's 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 to present the Partnership's accounts in accordance with generally accepted accounting principles ("GAAP") and to consolidate the accounts of the ventures as described above. Such GAAP and consolidation adjustments are not recorded on the records of the Partnership. The net effect of these items for the years ended December 31, 1996 and 1995 is summarized as follows:
1996 1995 ------------------------------------------------------------- TAX BASIS TAX BASIS GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED) ------------ ---------- ------------ ---------- Total assets . . . . . . . . . . . . . $138,673,945 103,781,808 178,508,742 119,118,630 Partners' capital accounts (deficits): General partners . . . . . . . . . 926,730 (1,184,427) 780,318 (1,143,498) Limited partners . . . . . . . . . 53,833,410 98,323,758 63,206,356 113,755,473 Net earnings (loss): General partners . . . . . . . . . 146,412 (40,931) 99,593 (70,410) Limited partners . . . . . . . . . 5,782,329 (276,439) (1,734,768) (1,689,836) Net earnings (loss) per limited partnership interest . . . . . . . . . . . . . . 30.48 (1.46) (9.15) (8.91) =========== =========== =========== ===========
The net earnings (loss) per limited partnership interest is based upon the number of limited partnership interests outstanding at the end of each period (189,684). The preparation of financial statements in accordance with GAAP requires the Partnership to make estimates and assumptions that affect the reported or disclosed amount of 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. Statement of Financial Accounting Standards No. 95 requires the Partnership to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. Partnership distributions from its unconsolidated ventures are considered cash flow from operating activities to the extent of the Partnership's cumulative share of net earnings. In addition, the Partnership records amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these financial statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($21,768,622 and $18,402,684 at December 31, 1996 and 1995, respectively) as cash equivalents, which includes investments in an institutional mutual fund which holds U.S. Government obligations, with any remaining amounts (generally with original maturities of one year or less) reflected as short-term investments being held to maturity. Deferred expenses consist primarily of commitment fees and loan related costs which are amortized over the term of the related mortgage loans, and lease commissions which are amortized over the term of the related leases, using the straight-line method. Although certain leases of the Partnership provide for tenant occupancy during periods for which no rent is due and/or increases in the minimum lease payments over the term of the lease, rental income is accrued for the full period of occupancy on a straight-line basis. Statement of Financial Accounting Standards No. 107 ("SFAS 107"), "Disclosures about Fair Value of Financial Instruments" (as amended), requires certain large entities to disclose the SFAS 107 value of all financial assets and liabilities for which it is practicable to estimate. Value is defined in the Statement as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes the carrying amount of its financial instruments classified as current assets and liabilities (excluding current portion of long-term debt) approximates SFAS 107 value due to the relatively short maturity of these instruments. There is no quoted market value available for any of the Partnership's other instruments. The debt, with a carrying balance of $64,089,284, has been calculated to have an SFAS 107 value of $68,379,542 by discounting the scheduled loan payments to maturity. Due to restrictions on transferability and prepayment and the inability to obtain comparable financing due to current levels of debt, previously modified debt terms or other property specific competitive conditions, the Partnership would be unable to refinance these properties to obtain such calculated debt amounts reported. The Partnership has no other significant financial instruments. No provision for State or Federal income taxes has been made as the liability for such taxes is that of the partners rather than the Partnership. However, in certain circumstances, the Partnership has been required under applicable law to remit directly to the tax authorities amounts representing withholding from distributions paid to partners. The Partnership has acquired, either directly or through joint ventures three shopping centers, two office buildings and an office complex. The Partnership sold its interest in the Mid Rivers Mall in St. Louis, Missouri in January 1992. In March 1996, the San Jose venture sold its interest in the 190 San Fernando Building and one of the parking structures at the Park Center Financial Plaza investment property. The Partnership sold its interest in the First Financial Plaza office building in September 1996. All of the remaining properties were in operation at December 31, 1996. The cost of the investment properties represents the total cost to the Partnership or its consolidated ventures plus miscellaneous acquisition costs. Depreciation on the properties has been provided over the estimated useful lives of the various components as follows: YEARS ----- Building and improvements -- straight-line. . . 30 Personal property -- straight-line. . . . . . . 5 == Maintenance and repairs are generally charged to operations as incurred. Significant betterments and improvements are capitalized and depreciated over their estimated useful lives. 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" was issued in March 1995. The Partnership adopted SFAS 121 as required in the first quarter of 1996. SFAS 121 requires that the Partnership record an impairment loss on its properties held for investment whenever their carrying value cannot be fully recovered through estimated undiscounted future cash flows from their 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. The Partnership's policy is to consider a property to be held for sale or disposition when the Partnership has committed to a plan to sell or dispose of such property and active marketing activity has commenced or is expected to commence in the near term or the Partnership has concluded that it may dispose of the property by no longer funding operating deficits or debt service requirements of the property thus allowing the lender to realize upon its security. In accordance with SFAS 121, any properties identified as "held for sale or disposition" are no longer depreciated. Adjustments for impairment loss for such properties (subsequent to the date of adoption of SFAS 121) are made in each period as necessary to report these properties at the lower of carrying value or fair value less costs to sell. In certain situations, such estimated fair value could be less than the existing non-recourse debt which is secured by the property. There can be no assurance that any estimated fair value of these properties would ultimately be realized by the Partnership in any future sale or disposition transaction. Under the prior impairment policy, provisions for value impairment were recorded with respect to investment properties whenever the estimated future cash flows from a property's operations and projected sale were less than the property's net carrying value. The amount of any such impairment loss recognized by the Partnership was limited to the excess, if any, of the property's carrying value over the outstanding balance of the property's non-recourse indebtedness. The results of operations for consolidated properties classified as held for sale or disposition as of December 31, 1996 or sold or disposed of during the past three years were profits of $2,429,837 and losses of $2,020,174 and $10,725,252, respectively, for the years ended December 31, 1996, 1995 and 1994. In addition, the accompanying consolidated financial statements include $611,483, $709,164 and $441,700, respectively, of the Partnership's share of total unconsolidated property operations of $1,222,965, $1,418,328 and $883,401 of the properties owned by the San Jose venture held for sale or disposition as of December 31, 1996 or sold or disposed of in the past three years. Certain investment properties are pledged as security for the long- term debt, for which there is no recourse to the Partnership. INVESTMENT PROPERTIES PLAZA HERMOSA SHOPPING CENTER During September 1986, the Partnership acquired a multi-building neighborhood shopping center in Hermosa Beach, California. The Partnership's purchase price for the shopping center was $18,290,000, of which $11,890,000 was paid in cash at closing. The balance of the purchase price was represented by bond financing in the amount of $6,400,000. This financing was secured by a letter of credit facility which was ultimately secured by a deed of trust on the property. In December 1994, upon expiration of the letter of credit, the Partnership obtained a long- term replacement letter of credit with a new lender and simultaneously retired the original bond financing and issued new bonds to the existing bondholders in the aggregate amount of $6,400,000. The replacement letter of credit is scheduled to expire in December 1997. However, in December 1996, the lender agreed in principle to extend the letter of credit for a two year period. As a result of reduced projected cash flows, the upcoming maturity of the letter of credit facility in 1999 as discussed below and the expected holding period of the property, there is uncertainty as to the Partnership's ability to recover the net carrying value of the Plaza Hermosa investment property through future operations or sale over its revised expected holding period. Therefore, the Partnership made a provision for value impairment at September 30, 1995 of $5,500,000 to reflect the then estimated fair value of the property based upon an analysis of discounted estimated future cash flows over the projected holding period. The property is managed by an affiliate of the General Partners of the Partnership for a fee calculated as 4% of gross receipts of the property. As the Partnership has committed to a plan to sell the property, the property has been classified as held for sale as of December 31, 1996 and therefore will not be subject to continued depreciation. VENTURE AGREEMENTS - GENERAL The Partnership at December 31, 1996 is a party to three operating venture agreements and has made capital contributions to the respective ventures as discussed below. Under certain circumstances, either pursuant to the venture agreements or due to the Partnership's obligations as a general partner, the Partnership may be required to make additional cash contributions to the ventures. There are certain risks 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. SAN JOSE The Partnership acquired, through San Jose, an interest in an existing office building complex in San Jose, California (Park Center Financial Plaza) consisting of ten office buildings, a parking and retail building (185 Park Avenue) and two parking garage structures. In September 1986, San Jose obtained a mortgage loan in the amount of $25,000,000 secured by the 150 Almaden and 185 Park Avenue buildings and certain parking areas. Due to the scheduled maturity of the loan, San Jose, during the fourth quarter of 1994, finalized a loan extension and modification with the mortgage lender. The refinancing resulted in the 1994 partial paydown of the outstanding principal balance in the amount of $2,500,000. After reviewing and analyzing San Jose's potential options with regard to its investment in the 100-130 Park Center Plaza portion of the complex, San Jose determined that it was in the best interest of the venture to repay the mortgage obligations secured by this portion of the complex and did so in October 1995. The outstanding principal balances, at the time of repayment, were $2,418,722 of which the Partnership's share was $1,209,361. The property was managed by an affiliate of the General Partners of the Partnership for a fee calculated as 3% of gross receipts until December 1994 when the affiliated property manager sold substantially all of its assets and assigned its interests in its management contracts to an unaffiliated third party. The partners of San Jose are the Partnership and JMB Income Properties, Ltd.-XI, another partnership sponsored by the Managing General Partner of the Partnership ("JMB-XI"). The terms of San Jose's partnership agreement generally provide that contributions, distributions, cash flow, sale or refinancing proceeds and profits and losses will be distributed or allocated to the Partnership and JMB-XI in their respective 50% ownership percentages. During August 1994, San Jose received notification from the Redevelopment Agency of the City of San Jose of its offer to purchase one of the parking garage structures in the office building complex, for an approved Agency project for $4,090,000. The price offered was deemed by the Agency to be just compensation in compliance with applicable laws concerning eminent domain. During 1995, the Agency filed a condemnation action in court to proceed to obtain the garage pursuant to such laws. In late 1995, San Jose and the Agency reached a mutually acceptable agreement on the transfer of the garage. In March 1996, the sale was consummated. Under the transfer agreement, San Jose received replacement parking spaces for its tenants in a nearby city-owned parking structure for a term of fifty-five years in addition to the aforementioned purchase price of $4,090,000. San Jose recognized a gain of approximately $2,036,000 and $1,857,000, respectively, for financial reporting and Federal income tax purposes in 1996, of which approximately $1,018,000 and $928,500, respectively, was allocated to the Partnership. In March 1996, San Jose sold the 190 San Fernando Building to an independent third party. The sale price of the building was $1,753,000 (before selling costs), and was paid in cash at closing. San Jose recognized a gain of approximately $789,000 and $21,000, respectively, for financial reporting and Federal income tax purposes in 1996, of which approximately $394,500 and $10,500, respectively, was allocable to the Partnership. At September 30, 1994, San Jose made provisions for value impairment on the 100-130 Park Center Plaza buildings and certain parking areas and the 170 Almaden building of $944,335 in the aggregate. Such provisions were recorded to reduce the net carrying values of these buildings to the then outstanding balances of the related non-recourse financing. As San Jose had committed to a plan to sell the properties, the 190 San Fernando Building and the parking structures were classified as held for sale or disposition as of January 1, 1996 and therefore were not subject to continued depreciation. The San Jose venture has subsequently committed to a plan to sell the balance of the complex, and has classified the remaining assets as held for sale as of December 31, 1996 and these assets will, therefore, no longer be subject to continued depreciation. TOPANGA In December 1985, the Partnership acquired a 58% interest in the Topanga Plaza Shopping Center in the Woodland Hills area of Los Angeles, California. The aggregate purchase price for the Partnership's interest in the venture was approximately $25,263,000, which was paid in cash at closing. Under the terms of the joint venture agreement, the Partnership generally will be allocated or distributed 58% of profits and losses, cash flow from operations and sale or refinancing proceeds. On January 17, 1994, an earthquake occurred in Los Angeles, California with its epicenter in the town of Northridge, approximately six miles from Topanga Plaza Shopping Center. Consequently, significant portions of the mall, including the four major department stores who own their own buildings, suffered some casualty damage. However, the approximate 360,000 square feet of mall shops owned by the Topanga Partnership did not suffer major structural damage. The estimated costs at Topanga for which the joint venture was responsible was approximately $11.9 million (which did not include costs associated with the space taken back by Robinson-May as discussed below). The majority of these costs were subject to recovery under the joint venture's earthquake insurance policy. The deductible on the earthquake casualty and business interruption coverages was approximately $2.1 million which was funded by Topanga from operations in 1995 and/or offset by other insurance recoveries as discussed below. The $11.9 million of total costs has been reimbursed through insurance proceeds. Approximately $3.2 million of additional insurance proceeds were collected as a final settlement during the third quarter of 1995. Such amount represented recoveries under the joint venture's business interruption policy and was reflected as rental income in the accompanying consolidated financial statements. All of the mall's 114 shops and the four major department stores reopened within several months of the earthquake. Subsequent to the earthquake, sales at the mall shops increased due to the greater extent of damage at a nearby competing mall. However, in August 1995, the competing mall was re-opened, which has had an adverse effect on Topanga's sales. One department store at Topanga, Robinson-May, had a portion of their store condemned by city inspectors in 1994. One consequence of this partial condemnation is that Robinson-May took back in 1994 the approximately 25,000 square feet of that store which had been leased to the joint venture in 1990, pursuant to the terms of its lease. Topanga has lost approximately $150,000 in annual net income from subleases of the eight tenants which had previously subleased this space. Topanga was insured in case of such event and received, in July 1994, insurance proceeds in the amount of $2,500,000 (net of the related deductible) for the cost of the unamortized tenant improvements and the loss of rents related to this space. As a result of the take back of space by Robinson-May, Topanga wrote off, in 1994, approximately $1.2 million of unamortized leasehold improvements discussed above. Topanga recorded in 1994, an extraordinary loss of $2,889,000 (of which the Partnership's share was approximately $1,676,000) which included Topanga's share of repair costs of approximately $2.1 million, and approximately $789,000 of other costs. The earthquake did result in some adverse effect on the operations of the center in early 1994. In the second quarter of 1996, Topanga received, in the aggregate, approximately $513,000 from Robinson-May and Montgomery Ward, relating to their prorata share of expenses and costs for repairs and restorations to the Topanga Plaza Shopping Center following the earthquake. The joint venture partner advanced funds to the joint venture for expenses incurred for certain development costs related to a potential future expansion of Topanga Plaza. The balance of these advances was $435,000 at December 31, 1994. Although such an expansion of the Shopping Center is still an option, such advances were repaid to the joint venture partner in early 1995 from available cash at the venture. The shopping center is subject to fire, life and safety code and ordinance requirements, which have changed since the property's original construction. Accordingly, the Partnership intends to comply with such revised regulations and fund certain retrofit costs. In conjunction with the renovation, a substantial portion of certain retrofit costs have been completed. The Partnership currently expects to fund any remaining costs from operations, as tenant leases expire, until the entire building conforms to such requirements. The shopping center was subject to a long-term management agreement with an affiliate of the joint venture partner. Under the terms of the management agreement, the manager was entitled to receive a management fee based on a formula which relates to direct and general overhead costs and expenses incurred in the operation of the property. During 1994, the manager of the Topanga Plaza Shopping Center, an affiliate of the joint venture partner, was sold to an unaffiliated third party, who assumed management at the property on the same terms which existed prior to the sale. As previously reported, Sears had agreed to acquire the Broadway store site at the Shopping Center. Broadway closed in February 1996 and Sears completed its remodeling of the store and opened in October 1996. The Topanga venture has committed to a plan to sell the property and therefore has classified the property as held for sale as of December 31, 1996. The property will no longer be subject to continuing depreciation beyond such date. 40 BROAD STREET During December 1985, the Partnership acquired, through Broad Street, a joint venture with JMB Income Properties, Ltd.-X, a partnership sponsored by an affiliate of the Managing General Partner, a 68.56% interest in the 40 Broad Street office building in New York, New York. Broad Street's purchase price for the building, which was paid in cash at closing, was approximately $65,100,000 of which the Partnership provided approximately $44,630,000. The Partnership will be allocated or distributed profits and losses, cash flow from operations and sale or refinancing proceeds in the ratio of its capital contributions to Broad Street which is 68.56%. The property was managed by an affiliate of the General Partners of the Partnership for a fee calculated as 2% of gross receipts until December 1994 when the affiliated property manager sold substantially all of its assets and assigned its interests in its management contracts to an unaffiliated third party. FIRST FINANCIAL On May 20, 1987, the Partnership, through First Financial, a joint venture with JMB-XIII, acquired an interest in a general partnership ("Encino") with an affiliate of the developer ("Encino Venture Partner"). Encino owned an office building in Encino (Los Angeles), California. First Financial made an initial investment in the aggregate amount of approximately $49,812,000 to Encino. In November 1987, First Financial caused Encino to obtain a third party first mortgage loan in the amount of $30,000,000. The proceeds of such loan were distributed to First Financial to reduce its contribution and to the Encino Venture Partner who subsequently repaid a $15,500,000 loan from First Financial. Thus, the total cash investment of First Financial for its interest in the office building, after consideration of the funding of the $30,000,000 permanent financing, was approximately $20,000,000, of which the Partnership's share was approximately $12,500,000. The first mortgage loan on the property matured November 1, 1995. Effective November 1, 1995, Encino and the existing lender amended and restated the existing mortgage loan. The new principal balance of the amended note at November 1, 1995 was $24,970,148. This amount was comprised of the then outstanding principal portion of $28,970,148 on the original $30,000,000 note less a required $4,000,000 principal paydown by Encino, all of which was advanced by First Financial at closing of which the Partnership's share of such paydown was $2,500,000. The amended loan had an interest rate of 8.67% and a term of two years resulting in a maturity date of November 1, 1997. In order to finalize the loan extension described above, the Partnership and its affiliated partner advanced approximately $4.0 million (approximately $2.5 million by the Partnership) to the joint venture to fund the required principal paydown and related loan fees. A capital call had been made on the unaffiliated joint venture partner for its share of the total required amount; however, the unaffiliated joint venture partner indicated that it did not intend to fund its required share. The Partnership and its affiliated partner reached an agreement with the unaffiliated partner to modify the joint venture agreement. In April 1996, the unaffiliated partner became a limited partner as a result of this modification. Due to the uncertainty of Encino's ability to recover the net carrying value of the First Financial office building investment property through future operations and sale during the estimated holding period, Encino recorded, as a matter of prudent accounting practice, a provision for value impairment of such investment of approximately $6,475,000, all of which was allocated to First Financial. The Partnership's share of such provision to First Financial was approximately $4,047,000. Such provision was recorded at December 31, 1994 to reduce the net carrying value of the investment property to its then estimated fair value based upon an analysis of discounted estimated future cash flows over the projected holding period. As previously reported, the First Financial office building appeared to have experienced only minor cosmetic damage as a result of the January 17, 1994 Northridge earthquake in southern California. On February 22, 1995, the city council of the city of Los Angeles passed an ordinance requiring certain buildings (identified by building type and location) to perform testing on the welded steel moment connections to determine if the earthquake had weakened such joint weldings and to repair such joint weldings if weakness is detected. This property qualified for the testing under the ordinance and therefore Encino retained a structural engineer to perform the testing. Results of the testing by the structural engineer indicated that some of the building's joint weldings suffered damage which, in accordance with the ordinance, were required to be repaired. Encino's structural engineer informed Encino that the damage detected did not pose a life safety risk for the building's tenants. All testing and repairs necessary to comply with such ordinance were completed as of October 1995. The total cost of such testing and repairs was approximately $826,000 (of which the Partnership's share was approximately $516,250). The First Financial office building was classified as held for sale as of April 1, 1996 and therefore was not subject to continued depreciation since that time. On September 11, 1996, the joint venture sold the First Financial office building to an unaffiliated third-party for a sale price of $37,900,000 (before selling expenses and prorations). The joint venture received approximately $13,000,000 of net sale proceeds at closing (which reflected the assumption by the buyer of the mortgage loan with a current balance of approximately $24,700,000 and closing costs), substantially all of which were allocable to JMB/First Financial pursuant to the Encino venture agreement. The sale resulted in approximately $2,880,000 and $18,800,000 of gain for financial reporting purposes and Federal income tax purposes in 1996, respectively, of which approximately $1,612,000 and $2,000 of gain was allocated to the Partnership, respectively. The Partnership made a cash distribution of $42 per Interest from the sales proceeds in November 1996. The Encino partnership agreement generally provided that First Financial was entitled to receive (after any participating amounts due to Pepperdine University pursuant to its tenant lease) from cash flow from operations (as defined) an annual cumulative preferred return equal to 9.05% through April 30, 1995 (and 8.9% thereafter) of its capital contri- butions. Any remaining cash flow was to be split equally between First Financial and the Encino Venture Partner. Pepperdine University, under its tenant lease, was entitled to an amount based on 6.6% of the Venture Partner's share of the office building's net operating profit and net sale profit (as defined). All of Encino's operating profits and losses before depreciation were allocated to First Financial in 1994, 1995 and 1996. The Encino partnership agreement also generally provided that net sale proceeds and net refinancing proceeds (as defined), after any amounts due to Pepperdine University pursuant to its tenant lease, were to be distributed: first, to First Financial in an amount equal to the deficiency, if any, in its cumulative preferred return as described above; next, to First Financial in the amount of its capital contributions; next, to the Encino Venture Partner in an amount equal to $600,000; any remaining proceeds were to be split equally between First Financial and the Encino Venture Partner. The terms of the First Financial partnership agreement provided that annual cash flow, net sale or refinancing proceeds, and tax items were to be distributed or allocated, as the case may be, to the Partnership in proportion to its 62.5% share of capital contributions. The office building was managed by an affiliate of the Encino Venture Partner for a fee based upon a percentage of rental receipts (as defined) of the property. LONG-TERM DEBT Long-term debt consists of the following at December 31, 1996 and 1995: 1996 1995 ----------- ----------- 10-1/8% mortgage note secured by the Topanga Plaza shopping center in Los Angeles, California; payable in monthly installments of principal and interest of $523,225 through January 2002 when the remaining balance is due and payable. . . . . $57,689,284 58,103,860 Floating rate bond financing (certificates), secured by the Plaza Hermosa Shopping Center in Hermosa Beach, California; the certificates bear interest based on a floating rate which is adjustable weekly (as defined), with a maximum interest rate of 13.5%, interest only is payable monthly through December 2023 when the entire outstanding balance is due and payable . . . . . . . . . . . . . . 6,400,000 6,400,000 1996 1995 ----------- ----------- 8.67% mortgage note, secured by the First Financial Plaza Office Building; principal and interest payments of $209,077 were due monthly; retired in September 1996 at sale. . . . . . . -- 24,912,606 ----------- ----------- Total debt . . . . . . . . 64,089,284 89,416,466 Less current portion of long-term debt. . . . 458,557 746,306 ----------- ----------- Total long-term debt . . . $63,630,727 88,670,160 =========== =========== Five year maturities of long-term debt are summarized as follows: 1997 . . . . . . . . . . . $458,557 1998 . . . . . . . . . . . 507,202 1999 . . . . . . . . . . . 561,008 2000 . . . . . . . . . . . 620,521 2001 . . . . . . . . . . . 686,348 ======== PARTNERSHIP AGREEMENT Pursuant to the terms of the Partnership Agreement, net profits or losses of the Partnership from operations are allocated 96% to the Limited Partners and 4% to the General Partners. Profits from the sale or refinancing of investment properties will be allocated to the General Partners: (i) in an amount equal to the greater of 1% of such profits or the amount of cash distributable to the General Partners from any such sale or refinancing (as described below); and (ii) in order to reduce deficits, if any, in the General Partners' capital accounts to a level consistent with the gain anticipated to be realized from the sale of properties. Losses from the sale or refinancing of investment properties will be allocated 1% to the General Partners. The remaining sale or refinancing profits and losses will be allocated to the Limited Partners. The General Partners are not required to make any capital contri- butions except under certain limited circumstances upon termination of the Partnership. In general, distributions of cash from operations will be made 90% to the Limited Partners and 10% to the General Partners. However, a portion of such distributions to the General Partners is subordinated to the Limited Partners' receipt of a stipulated return on capital. The Partnership Agreement provides that the General Partners shall receive as a distribution from the sale of a real property by the Partnership amounts equal to the cumulative deferrals of any portion of their 10% cash distribution and 2-1/2% of the selling price, and that the remaining proceeds (net after expenses and retained working capital) be distributed 85% to the Limited Partners and 15% to the General Partners. However, notwithstanding such allocations, the Limited Partners shall receive 100% of such net sale proceeds until the Limited Partners (i) have received cash distributions of sale or refinancing proceeds in an amount equal to the Limited Partners' aggregate initial capital investment in the Partnership, (ii) have received cumulative cash distributions from the Partnership's operations which, when combined with sale or refinancing proceeds previously distributed, equal a 6% annual return on the Limited Partners' average capital investment for each year (their initial capital investment as reduced by sale or refinancing proceeds previously distributed) commencing with the second fiscal quarter of 1986 and (iii) have received cash distributions of sale and refinancing proceeds and of the Partnership's operations, in an amount equal to the Limited Partners' initial capital investment in the Partnership plus a 10% annual return on the Limited Partners' average capital investment. As the above levels of return are not expected to be achieved, approximately $773,000 of sale proceeds from the sale of the Partnership's interest in Mid Rivers Mall has been deferred by the General Partners. In such regard, the general partners waived their right to receive the allocation of sale proceeds from the sale of the First Financial Plaza in 1996. LEASES At December 31, 1996, the Partnership and its consolidated ventures' principal assets are two shopping centers and one office building. The Partnership has determined that all leases relating to these properties are properly classified as operating leases; therefore, rental income is reported when earned and the cost of the properties, excluding the cost of the land, is depreciated over the estimated useful lives. Leases with tenants range in term from month-to-month to twenty-five years and provide for fixed minimum rent and partial reimbursement of operating costs. In addition, substantially all of the leases with shopping center tenants provide for additional rent based upon percentages of tenants' sales volumes. With respect to the Partnership's shopping center investments, a substantial portion of the ability of retail tenants to honor their leases is dependent on the retail economic sector. Cost and accumulated depreciation of the leased assets are summarized as follows at December 31, 1996: Office Building: Cost. . . . . . . . . . . . . . . . . . $ 24,367,496 Accumulated depreciation. . . . . . . . (14,873,703) ------------ 9,493,793 ------------ Shopping Centers: Cost. . . . . . . . . . . . . . . . . . 121,714,657 Accumulated depreciation. . . . . . . . (30,902,724) ------------ 90,811,933 ------------ $100,305,726 ============ 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: 1997. . . . . . . . . . . . . . . . . . . $ 15,517,979 1998. . . . . . . . . . . . . . . . . . . 15,516,993 1999. . . . . . . . . . . . . . . . . . . 15,228,538 2000. . . . . . . . . . . . . . . . . . . 13,728,271 2001. . . . . . . . . . . . . . . . . . . 13,011,952 Thereafter. . . . . . . . . . . . . . . . 43,092,812 ------------ Total . . . . . . . . . . . . . . . . $116,096,545 ============ Contingent rent (based on sales by property tenants) included in rental income was as follows: 1994. . . . . . . . . . . . . . . . . . . $662,271 1995. . . . . . . . . . . . . . . . . . . 438,733 1996. . . . . . . . . . . . . . . . . . . 301,919 ======== TRANSACTIONS WITH AFFILIATES The Partnership, pursuant to the Partnership Agreement, is permitted to engage in various transactions involving the Managing General Partner and its affiliates including the reimbursement for salaries and salary- related expenses of its employees, certain of its officers, and other direct expenses relating to the administration of the Partnership and the operation of the Partnership's investments. Fees, commissions and other expenses required to be paid by the Partnership to the General Partners and their affiliates as of December 31, 1996, 1995 and 1994 are as follows: UNPAID AT DECEMBER 31, 1996 1995 1994 1996 -------- -------- -------- ------------ Property management and leasing fees. . . . . $ 70,792 67,422 184,881 -- Insurance commissions . . . . . . . 34,632 75,330 74,228 -- Reimbursement (at cost) for accounting services. . . . . . . . . 9,642 90,577 70,947 988 Reimbursement (at cost) for portfolio manage- ment services . . . . . . 25,996 38,217 31,466 6,015 Reimbursement (at cost) for legal services. . . . 8,683 4,222 11,445 1,232 Reimbursement (at cost) for administrative charges and other out-of-pocket expenses. . 1,026 170,348 6,516 -- -------- -------- -------- ------ $150,771 446,116 379,483 8,235 ======== ======== ======== ====== Certain of the Partnership's properties are managed by affiliates of the General Partners or their assignees for fees computed as a percentage of certain rents received by the properties. During 1994, certain officers and directors of the Managing General Partner acquired interests in a company which provides certain property management services to a property owned by the Partnership. The fees earned by such company from the Partnership for the years ended December 31, 1996 and 1995 were approximately $39,000 and $30,000, respectively, all of which has been paid at December 31, 1996. In accordance with the subordination requirements of the Partnership Agreement, the General Partners have deferred receipt of their distri- butions of net cash flow from the Partnership. The cumulative amount of such deferred distributions aggregated $8,049,064 at December 31, 1996. The amount is being deferred in accordance with the subordination requirements of the Partnership Agreement as discussed above. The Partnership does not expect that the subordination requirements of the Partnership Agreement will be satisfied to permit payment of the majority of these amounts. These amounts or amounts currently payable do not bear interest. INVESTMENT IN UNCONSOLIDATED VENTURE Summary of financial information for San Jose as of and for the years ended December 31, 1996 and 1995 is as follows: 1996 1995 ------------ ------------ Current assets . . . . . . . . . . . $ 4,538,120 5,155,489 Current liabilities. . . . . . . . . (456,506) (323,044) ------------ ------------ Working capital. . . . . . . . 4,081,614 4,832,445 Investment property, net . . . . . . 28,430,666 30,955,893 Other assets, net. . . . . . . . . . 959,991 874,007 Long-term debt . . . . . . . . . . . (23,338,875) (23,431,863) Other liabilities. . . . . . . . . . (79,599) (48,870) Venture partners' equity . . . . . . (5,205,639) (6,769,546) ------------ ------------ Partnership's capital. . . . . $ 4,848,158 6,412,066 ============ ============ Represented by: Invested capital . . . . . . . . . $ 48,767,680 48,767,680 Cumulative distributions . . . . . (25,490,500) (21,902,500) Cumulative loss. . . . . . . . . . (18,429,022) (20,453,114) ------------ ------------ $ 4,848,158 6,412,066 ============ ============ Total income . . . . . . . . . . . . $ 9,238,168 9,182,446 ============ ============ Expenses applicable to operating income . . . . . . . . . . . . . . $ 8,015,203 7,764,118 ============ ============ Gain on disposition of investment property. . . . . . . . $ 2,825,220 -- ============ ============ Net earnings . . . . . . . . . . . . $ 4,048,185 1,418,328 ============ ============ Reference is made to the San Jose investment property discussion above regarding the provision for value impairment of $944,335 which was recorded in 1994 by the San Jose joint venture. Total income, expenses related to operating earnings, and net earnings for the above-mentioned venture for the year ended December 31, 1994 were $9,270,819, $8,387,418 and $883,401, respectively. SCHEDULE III JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
COSTS CAPITALIZED INITIAL COST TO SUBSEQUENT GROSS AMOUNT AT WHICH CARRIED PARTNERSHIP (A) TO ACQUISITION AT CLOSE OF PERIOD (B) ------------------------- -------------- ------------------------------------ BUILDINGS BUILDINGS BUILDINGS AND AND AND ENCUMBRANCE LAND IMPROVEMENTS IMPROVEMENTS(D) LAND IMPROVEMENTS TOTAL (E) ----------- ----------- ------------ -------------- ---------- ------------ ----------- SHOPPING CENTERS: Los Angeles, California (C) . . . . . $57,689,284 8,506,014 54,714,281 45,287,841 8,506,014 100,002,122 108,508,136 Hermosa Beach, California. . 6,400,000 5,106,570 13,131,181 (5,031,230) 3,176,525 10,029,996 13,206,521 OFFICE BUILDING: New York, New York (C) . . . . . -- 13,201,780 55,095,008 (43,929,292) 1,765,194 22,602,302 24,367,496 ----------- ---------- ----------- ----------- ---------- ----------- ----------- Total. . . $64,089,284 26,814,364 122,940,470 (3,672,681) 13,447,733 132,634,420 146,082,153 =========== ========== =========== =========== ========== =========== ===========
SCHEDULE III - CONTINUED JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED DECEMBER 31, 1996
LIFE ON WHICH DEPRECIATION IN LATEST STATEMENT OF 1996 ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE DEPRECIATION(F) CONSTRUCTION ACQUIRED IS COMPUTED TAXES ---------------- ------------ ---------- --------------- ----------- SHOPPING CENTERS: Los Angeles, California (C) . . . . . . . . . . . $ 26,570,333 1964 12/31/85 5-30 years 716,161 Hermosa Beach, California. . . . . . . . . . . . . 4,332,391 1985 09/03/86 5-30 years 165,213 OFFICE BUILDING: New York, New York (C) . . . . . . . . . . . . 14,873,703 1983 12/31/85 5-30 years 1,560,954 ----------- ---------- Total. . . . . . . . . . . . . . . $45,776,427 2,442,328 =========== ========== - ------------------ Notes: (A) The initial cost to the Partnership represents the original purchase price of the properties, including amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired. (B) The aggregate cost of real estate owned at December 31, 1996 for Federal income tax purposes was $184,654,977. (C) Properties owned and operated by joint venture. (D) In 1992 and 1991, the affiliated joint ventures recorded provisions for value impairment totaling $22,908,606 and $28,870,198, respectively (which included a reduction in deferred costs of approximately $30,000) at the 40 Broad Street investment property. In 1994, the affiliated joint venture recorded provisions for value impairment totaling $6,475,138 (which included a reduction in deferred costs of $37,299) at First Financial Plaza. In 1995, the Partnership recorded a provision for value impairment totaling $5,500,000 (which included a reduction in deferred costs of $15,671) at the Plaza Hermosa Shopping Center.
SCHEDULE III - CONTINUED JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED DECEMBER 31, 1996 (E) Reconciliation of real estate owned:
1996 1995 1994 ------------ ------------ ------------ Balance at beginning of period . . . . . . . . . . . $189,130,405 193,298,414 199,493,970 Additions during period. . . . . . . . . . . . . . . 1,583,556 1,316,320 2,401,281 Sale or disposal during period . . . . . . . . . . . (44,631,808) -- (4,401,376) Provision for value impairment . . . . . . . . . . . -- (5,484,329) (4,195,461) ------------ ----------- ----------- Balance at end of period . . . . . . . . . . . . . . $146,082,153 189,130,405 193,298,414 ============ =========== =========== (F) Reconciliation of accumulated depreciation: Balance at beginning of period . . . . . . . . . . . $ 52,390,756 46,792,110 41,724,753 Depreciation expense . . . . . . . . . . . . . . . . 4,625,655 5,598,646 5,640,425 Sale or disposal during period . . . . . . . . . . . (11,239,984) -- (313,240) Provision for value impairment . . . . . . . . . . . -- -- (259,828) ------------ ----------- ----------- Balance at end of period . . . . . . . . . . . . . . $ 45,776,427 52,390,756 46,792,110 ============ =========== ===========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no changes of or disagreements with accountants during 1995 and 1996. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP The Managing General Partner of the Partnership is JMB Realty Corporation ("JMB"), a Delaware corporation, substantially all of the outstanding stock of which is owned, directly or indirectly, by certain of its officers, directors, members of their families and their affiliates. JMB has responsibility for all aspects of the Partnership's operations. ABPP Associates, L.P., is an Illinois limited partnership with JMB as its sole general partner, is one of the Associate General Partners of the Partnership and is also the sole general partner of Income Partners - XII, an Illinois limited partnership that is the other Associate General Partner of the Partnership. The limited partners of ABPP Associates, L.P. are generally officers, directors and affiliates of JMB or its affiliates. The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that the General Partners and their affiliates are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership or its investment properties by affiliates of the General Partners, including property management services and insurance brokerage services. In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership under certain circumstances, including, in certain geographical markets, for tenants for properties and/or for the sale of properties. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell or refinance a property, the establishment and maintenance of reasonable reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations. The names, positions held and length of service therein of each director and the executive and certain other officers of the Managing General Partner of the Partnership are as follows: SERVED IN NAME OFFICE OFFICE SINCE - ---- ------ ------------ Judd D. Malkin Chairman 5/03/71 Director 5/03/71 Chief Financial Officer 2/22/96 Neil G. Bluhm President 5/03/71 Director 5/03/71 Burton E. Glazov Director 7/01/71 Stuart C. Nathan Executive Vice President 5/08/79 Director 3/14/73 A. Lee Sacks Director 5/09/88 John G. Schreiber Director 3/14/73 H. Rigel Barber Executive Vice President 1/02/87 Chief Executive Officer 8/01/93 Glenn E. Emig Executive Vice President 1/01/93 Chief Operating Officer 1/01/95 Gary Nickele Executive Vice President 1/01/92 General Counsel 2/27/84 Gailen J. Hull Senior Vice President 6/01/88 Howard Kogen Senior Vice President 1/02/86 Treasurer 1/01/91 There is no family relationship among any of the foregoing directors or officers. The foregoing directors have been elected to serve a one-year term until the annual meeting of the Managing General Partner to be held on June 7, 1997. All of the foregoing officers have been elected to serve one-year terms until the first meeting of the Board of Directors held after the annual meeting of the Managing General Partner to be held on June 7, 1997. There are no arrangements or understandings between or among any of said directors or officers and any other person pursuant to which any director or officer was elected as such. JMB is the corporate general partner of Carlyle Real Estate Limited Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX ("Carlyle-IX"), Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle- XVII"), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II"), and the managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI ("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI") and JMB Income Properties, Ltd.-XIII ("JMB Income-XIII"). JMB is also the sole general partner of the associate general partner of most of the foregoing partnerships. Most of the foregoing directors and officers are also officer and/or directors of various affiliated companies of Arvida/JMB Managers, Inc. (the general partner Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB Managers-II, Inc. (the general partner Arvida/JMB Partners, L.P.-II ("Arvida-II")) and Income Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")). Most of such directors and officers are also partners of certain partnerships which are associate general partners in the following real estate limited partnerships: Carlyle-VII, Carlyle-IX, Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB Income-VII, JMB Income-X, JMB Income-XI, JMB Income-XIII, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG. The business experience during the past five years of each such director and officer of the Managing General Partner of the Partnership in addition to that described above is as follows: Judd D. Malkin (age 59) is an individual general partner of JMB Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc. ("USC, Inc."), an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. He is a Certified Public Accountant. Neil G. Bluhm (age 59) is an individual general partner of JMB Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since August, 1970. Mr. Bluhm is a director of USC, Inc. He is a member of the Bar of the State of Illinois and a Certified Public Accountant. Burton E. Glazov (age 58) has been associated with JMB since June, 1971 and served as an Executive Vice President of JMB until December 1990. He is a member of the Bar of the State of Illinois and a Certified Public Accountant. Stuart C. Nathan (age 55) has been associated with JMB since July, 1972. Mr. Nathan is also a director of Sportmart Inc., a retailer of sporting goods. He is a member of the Bar of the State of Illinois. A. Lee Sacks (age 63) (President and Director of JMB Insurance Agency, Inc.) has been associated with JMB since December, 1972. John G. Schreiber (age 50) has been associated with JMB since December, 1970 and served as an Executive Vice President of JMB until December 1990. Mr. Schreiber is President of Schreiber Investments, Inc., a company which is engaged in the real estate investing business. He is also a senior advisor and partner of Blackstone Real Estate Partners, an affiliate of the Blackstone Group, L.P. Since 1994, Mr. Schreiber has also served as a trustee of Amli Residential Property Trust, a publicly-traded real estate investment trust that invests in multi-family properties. Mr. Schreiber is also a director of USC, Inc. as well as a director of a number of investment companies advised or managed by T. Rowe Price Associates and its affiliates. He holds a Masters degree in Business Administration from Harvard University Graduate School of Business. H. Rigel Barber (age 47) has been associated with JMB since March, 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois. Glenn E. Emig (age 49) has been associated with JMB since December, 1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig was Executive Vice President and Treasurer of JMB Institutional Realty Corporation. He holds a Masters Degree in Business Administration from the Harvard University Graduate School of Business and is a Certified Public Accountant. Gary Nickele (age 44) has been associated with JMB since February, 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois. Gailen J. Hull (age 48) has been associated with JMB since March, 1982. He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant. Howard Kogen (age 61) has been associated with JMB since March, 1973. He is a Certified Public Accountant. ITEM 11. EXECUTIVE COMPENSATION The Partnership has no officers or directors. The General Partners of the Partnership are entitled to receive a share of cash distributions, when and as cash distributions are made to the Investors, and a share of profits or losses. Reference is also made to the Notes for a description of such transactions, distributions and allocations. No such cash distributions were paid to the General Partners in 1996, 1995 and 1994. Affiliates of the Managing General Partner provided property management services to the Partnership for 1996 for the Plaza Hermosa Shopping Center in Hermosa Beach, California at a fee calculated at 4% of the gross receipts of the property and for the 40 Broad Street office building in New York, New York until December 1994 at a fee calculated at 2% of the gross receipts of the property. In 1996, the affiliates earned property management and leasing fees amounting to $70,792 all of which were paid at December 31, 1996. As set forth in the Prospectus of the Partnership, the Managing General Partner must negotiate such agreements on terms no less favorable to the Partnership than those customarily charged for similar services in the relevant geographical area and such agreements must be terminable by either party thereto, without penalty, upon 60 days' notice. The General Partners of the Partnership may be reimbursed for their salaries, salary-related and direct expenses relating to the administration of the Partnership and the operation of the Partnership's real property investments. In 1996, the Managing General Partner received reimbursement for such expenses and salaries in the amount of $45,347 of which $8,235 was unpaid at December 31, 1996. The Managing General Partner received no disbursement agent and data processing fees in 1996. JMB Insurance Agency, Inc., an affiliate of the Managing General Partner of the Partnership, earned and received insurance brokerage commissions in 1996 aggregating $34,632 in connection with the providing of insurance coverage for the real property investments of the Partnership. Such commissions are at rates set by insurance companies for the classes of coverage involved. The Partnership is permitted to engage in various transactions involving affiliates of the Managing General Partner of the Partnership. The relationship of the Managing General Partner (and its directors and officers) to its affiliates is set forth above in Item 10 above and Exhibit 21 hereto.
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 Interests of the Partnership. (b) The Managing General Partner, its officers and directors and the Associate General Partners own the following Interests of the Partnership: NAME OF AMOUNT AND NATURE BENEFICIAL OF BENEFICIAL PERCENT TITLE OF CLASS OWNER OWNERSHIP OF CLASS - -------------- ---------- ----------------- -------- Limited Partnership Interests JMB Realty Corporation 5 Interests (1) Less than 1% indirectly Limited Partnership Interests Managing General Partner, 5 Interests (1) Less than 1% its officers and indirectly directors and the Associate General Partners as a group (1) Includes 5 interests owned by the Initial Limited Partner of the Partnership for which JMB Realty Corporation, as its indirect majority shareholder, is deemed to have sole voting and investment power. No officer or director of the Managing General Partner of the Partnership possesses a right to acquire beneficial ownership of Interests of the Partnership. Reference is made to Item 10 for information concerning ownership of the Managing General Partner. (c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date result in a change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There were no significant transactions or business relationships with the Managing General Partner, affiliates or their management other than those described in Items 10 and 11 above. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1. Financial Statements (See Index to Financial Statements filed with this annual report). 2. Exhibits. 3-A. The Prospectus of the Partnership dated August 23, 1985 as supplemented December 9, 1985 and January 10, pursuant to Rules 424 (b) and 424 (c), as filed with the Commission is hereby incorporated herein by reference. Copies of pages 8-12, 61-64 and A-8 to A-12 are hereby incorporated herein by reference to Exhibit 3-A to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993. 3-B. Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which agreement is hereby incorporated herein by reference to Exhibit 3-B to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993. 3-C. Acknowledgement of rights and duties of the General Partners of the Partnership between ABPP Associates, L.P. (a successor Associated General Partner of the Partnership) and JMB Realty Corporation as of December 31, 1995 is hereby incorporated herein by reference to the Partnership's report for June 30, 1996 on Form 10-Q (File No. 0-16108) dated August 9, 1996. 4-A. Mortgage loan agreement between Topanga and Connecticut General Life Insurance Company dated January 31, 1992 relating to Topanga Plaza in Los Angeles, California is hereby incorporated herein by reference to Exhibit 4-A to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993. 4-B. Amended and restated mortgage loan agreement between First Financial and The Prudential Insurance Company of America dated November 21, 1995 relating to First Financial Plaza in Encino, California is hereby incorporated herein by reference to the Partnership's Report for December 31, 1995 on Form 10-K (File No. 0-16108) dated March 25, 1996. 4-C. Mortgage loan modification agreement between Topanga and Connecticut General Life Insurance dated January 31, 1993 relating to Topanga Plaza in Los Angeles, California is hereby incorporated herein by reference to Exhibit 4 of the Partnership's Report on Form 10-Q (File No. 0-16108) dated November 11, 1993. 4-D. Letter of credit agreement between JMB Income Properties, Ltd-XII and Dresdner Bank AG dated November 15, 1994 relating to the letter of credit extension at Plaza Hermosa is hereby incorporated herein by reference to Exhibit 4-D of the Partnership's Report on Form 10-K for December 31, 1994 (File No. 0-16108) dated March 27, 1995. 4-E. Mortgage loan agreement, Amended and Restated Deed of Trust, Security Agreement with assignment of Rents and Fixture Filing and Real Estate tax escrow and Security Agreement between San Jose and Connecticut General Life Insurance Co. dated November 30, 1994 is hereby incorporated herein by reference to Exhibit 4-E to the Partnership's Report on Form 10-K for December 31, 1994 (File No. 0-16108) dated March 27, 1995. 10-A. Acquisition documents including the venture agreement relating to the purchase by the Partnership of Topanga Plaza in Los Angeles, California, are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated December 31, 1985. 10-B. Acquisition documents including the venture agreement relating to the purchase by the Partnership of First Financial Plaza in Encino, California are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated June 3, 1987. 10-C. Acquisition documents including the venture agreement relating to the purchase by the Partnership of 40 Broad Street in New York, New York, are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated December 31, 1985. 10-D. Third Amendment to amended and restated partnership agreement of JMB Encino Partnership L.P. dated April 24, 1996 between JMB First Financial Associates and JMB Encino Partnership are hereby incorporated by reference to the Partnership's report on Form 10-Q (File No. 0-16108) dated May 10, 1996. 10-E. Purchase Agreement and Amendments thereto dated August 9, 1996 relating to the sale of First Financial Plaza by JMB Encino Partnership, L.P. are hereby incorporated herein by reference to the Partnership's report for September 11, 1996 on Form 8-K (File No. 0-16108) dated September 26, 1996. 21. List of Subsidiaries 24. Powers of Attorney 27. Financial Data Schedule - ---------------- Although certain additional long-term debt instruments of the Registrant have been excluded from Exhibit 4 above, pursuant to Rule 601(b)(4)(iii), the Registrant commits to provide copies of such agreements to the Securities and Exchange Commissions upon request. (b) No Reports on Form 8-K were required or filed since the beginning of the last quarter of the period covered by this report. No annual report or proxy material for 1996 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JMB INCOME PROPERTIES, LTD. - XII By: JMB Realty Corporation Managing General Partner GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date: March 25, 1997 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. By: JMB Realty Corporation Managing General Partner JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 25, 1997 NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 25, 1997 H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 25, 1997 GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 25, 1997 GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 25, 1997 A. LEE SACKS* By: A. Lee Sacks, Director Date: March 25, 1997 By: STUART C. NATHAN* Stuart C. Nathan, Executive Vice President and Director Date: March 25, 1997 *By: GAILEN J. HULL, Pursuant to a Power of Attorney GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 25, 1997 JMB INCOME PROPERTIES, LTD. - XII EXHIBIT INDEX DOCUMENT INCORPORATED BY REFERENCE PAGE ------------- ---- 3-A. Pages 8-12, 61-64 and A-8 to A-12 of the Prospectus of the Partnership dated August 23, 1985, as supple- mented on December 9, 1985 and January 10, 1986 Yes 3-B. Amended and Restated Agreement of Limited Partnership Yes 3-C. Acknowledgement of rights and duties of the General Partners of the Partnership dated August 9, 1996 between ABPP Associates, L.P. and JMB Realty Corporation Yes 4-A. Mortgage loan agreement related to Topanga Plaza Yes 4-B. Mortgage loan agreement related to First Financial Plaza Yes 4-C. Mortgage loan modification agreement related to Topanga Plaza Yes 4-D. Letter of credit agreement related to Plaza Hermosa Yes 4-E. Mortgage loan agreement related to Park Center Plaza Yes 10-A. Acquisition documents related to Topanga Plaza Yes 10-B. Acquisition documents related to First Financial Plaza Yes 10-C. Acquisition documents related to 40 Broad Street Yes 10-D. Third Amendment to amended and restated partnership agreement of JMB Encino Partnership L.P. dated April 24, 1996 between JMB First Financial Associates and JMB Encino Partnership Yes 10-E. Purchase Agreement and Amendments thereto dated August 9, 1996 relating to the sale of First Financial Plaza by JMB Encino Partnership, L.P. Yes 21. List of Subsidiaries No 24. Powers of Attorney No 27. Financial Data Schedule No EX-21 2 EXHIBIT 21 LIST OF SUBSIDIARIES The Partnership is a general partner in JMB/San Jose Associates, an Illinois general partnership which holds title to Park Center Financial Plaza. The Partnership is a general partner in Topanga Plaza Partnership, a California general partnership which holds title to Topanga Plaza. The Partnership is a general partner in JMB-40 Broad Street Associates, an Illinois general partnership which holds title to the 40 Broad Street Building. The Partnership's interest in the foregoing joint venture partnerships, and the results of their operations are included in the consolidated financial statements of the Partnership filed with this annual report. EX-24 3 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB Realty Corporation, the managing general partner of JMB INCOME PROPERTIES, LTD. - XII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the undersigned with full power of authority to sign in the name and on behalf of the undersigned officers a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1996, and any and all amendments thereto, hereby ratifying and confirming all that said attorneys and agents and any of them may do by virtue hereof. IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney the 22nd day of January, 1997. H. RIGEL BARBER - ----------------------- H. Rigel Barber Chief Executive Officer GLENN E. EMIG - ----------------------- Glenn E. Emig Chief Operating Officer The undersigned hereby acknowledge and accept such power of authority to sign, in the name and on behalf of the above named officers, a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1996, and any and all amendments thereto, the 22nd day of January, 1997. GARY NICKELE ----------------------- Gary Nickele GAILEN J. HULL ----------------------- Gailen J. Hull DENNIS M. QUINN ----------------------- Dennis M. Quinn EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB Realty Corporation, the managing general partner of JMB INCOME PROPERTIES, LTD. - XII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the undersigned with full power of authority to sign in the name and on behalf of the undersigned officers a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1996, and any and all amendments thereto, hereby ratifying and confirming all that said attorneys and agents and any of them may do by virtue hereof. IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney the 22nd day of January, 1997. NEIL G. BLUHM - ----------------------- President and Director Neil G. Bluhm JUDD D. MALKIN - ----------------------- Chairman and Chief Financial Officer Judd D. Malkin A. LEE SACKS - ----------------------- Director of General Partner A. Lee Sacks STUART C. NATHAN - ----------------------- Executive Vice President Stuart C. Nathan Director of General Partner The undersigned hereby acknowledge and accept such power of authority to sign, in the name and on behalf of the above named officers, a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1996, and any and all amendments thereto, the 22nd day of January, 1997. GARY NICKELE ----------------------- Gary Nickele GAILEN J. HULL ----------------------- Gailen J. Hull DENNIS M. QUINN ----------------------- Dennis M. Quinn EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT. 12-MOS DEC-31-1996 DEC-31-1996 22,821,808 0 2,986,135 0 0 25,807,943 24,367,496 14,873,703 138,673,945 3,159,719 63,630,727 0 0 0 54,760,140 138,673,945 28,415,164 29,639,293 0 18,005,442 664,899 0 7,665,413 3,303,539 0 2,904,154 3,024,587 0 0 5,928,741 30.48 30.48
-----END PRIVACY-ENHANCED MESSAGE-----