-----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, M+bI4In+/zGf6UBQHi9Jsiv18lacGu9TiQZNPfVOn608oX98B0VhCmgnyfPTXISj 1N08FXg7PlTAmfNaW7CfHg== 0000892626-98-000105.txt : 19980323 0000892626-98-000105.hdr.sgml : 19980323 ACCESSION NUMBER: 0000892626-98-000105 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19980320 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/A SEC ACT: SEC FILE NUMBER: 000-16108 FILM NUMBER: 98569525 BUSINESS ADDRESS: STREET 1: C/O JMB REALTY CORP STREET 2: 900 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3129151987 MAIL ADDRESS: STREET 1: C/O JMB REALTY CORP STREET 2: 900 N MICHIGAN CITY: CHICAGO STATE: IL ZIP: 60611 10-K405/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K405/A AMENDMENT NO. 1 Filed pursuant to Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 JMB INCOME PROPERTIES, LTD. - XII ----------------------------------------------------- (Exact name of registrant as specified in its charter) IRS Employer Identification Commission File No. 0-16108 No. 36-3337796 The undersigned registrant hereby amends the following sections of its Report for the year ended December 31, 1996 on Form 10-K405 as set forth in the pages attached hereto: PART II Item 6. Selected Financial Data. Pages 7-10 Item 8. Financial Statements and Supplementary Data. Pages 17 to 44. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JMB INCOME PROPERTIES, LTD. - XII By: JMB Realty Corporation Managing General Partner GAILEN J. HULL By: Gailen J. Hull Senior Vice President Dated: March 20, 1998 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, including gain on sale or dis- position of investment property in 1996 . . . . . $ 32,521,866 33,940,506 31,152,216 30,055,775 31,061,115 ============ ============ =========== =========== =========== 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) ============ ============ =========== =========== =========== 7 1996 1995 1994 1993 1992 ------------- ------------- ----------- ------------ ------------ Net earnings (loss) per Interest (b): Earnings (loss) before gains on sales of investment properties and extraordinary item. . . . . . . . . . $ 14.70 (9.15) (12.41) (31.79) (80.48) Net gain on sale or disposition of investment property . . 15.78 -- -- -- 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.
8 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.
9
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.
10 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. JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) INDEX Independent Auditors' Report Balance Sheets, December 31, 1996 and 1995 Statements of Operations, years ended December 31, 1996, 1995 and 1994 Statements of Partners' Capital Accounts, years ended December 31, 1996, 1995 and 1994 Statements of Cash Flows, years ended December 31, 1996, 1995 and 1994 Notes to Financial Statements. Schedule -------- 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. 17 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 18 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 ============ =========== 19 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.
20 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 Gain on sale of investment property . . . . . . . . 2,882,573 -- -- ----------- ----------- ----------- 32,521,866 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 ----------- ----------- ----------- 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 Partnership's share of gain on sale of investment properties of unconsolidated venture. . . . . . . . 1,412,610 -- -- Venture partners' share of consolidated ventures' operations before extraordinary item. . . . . . . . (1,010,868) (1,568,232) 2,699,777 Venture partner's share of gain on sale of investment property . . . . . . . . . . . . . . . . (1,270,596) -- -- ----------- ----------- ----------- 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) =========== =========== =========== 21 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: Earnings (loss) before gain on sale of investment property and extraordinary item . . . . . . . . . . . . . . . . . . . . . . $ 14.70 (9.15) (12.41) Gain on sale of investment property. . . . . . . . 15.78 -- -- 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.
22 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) ------- ------- ------- ------- ----------- ----------- ----------- ---------- 23 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.
24 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 ----------- ----------- ----------- 25 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 =========== =========== =========== 26 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.
27 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: 28
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) =========== =========== =========== ===========
29 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. 30 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. 31 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. 32 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. 33 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. 34 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. 35 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. 36 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 37 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 38 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 ======== 39 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. 40 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. . . . . . . . . . . . . . $ 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 earnings before gain on sale of investment property, 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. 41 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 =========== ========== =========== =========== ========== =========== ===========
42 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.
43 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 ============ =========== ===========
44 INDEPENDENT AUDITORS' REPORT The Partners JMB/SAN JOSE ASSOCIATES: We have audited the financial statements of JMB/San Jose Associates (a general partnership) as listed in the accompanying index. In connection with our audits of the financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These financial statements are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in all material respects, the financial position of JMB/San Jose Associates at December 31, 1996 and 1995, and the results of its operations and its 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 financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in the Notes to the financial statements, in 1996 the Partnership changed its 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 Chicago, Illinois March 21, 1997 44-a JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) BALANCE SHEETS DECEMBER 31, 1996 AND 1995 ASSETS ------
1996 1995 ----------- ----------- Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 2,260,010 2,266,686 Rents and other receivables, net of allowance for doubtful accounts of $1,648,319 in 1996 and $1,058,859 in 1995. . . . . . . . . . . . . . . . . . . . . . . . . . 2,111,845 2,510,594 Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,041 71,409 Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,223 306,800 ----------- ----------- Total current assets. . . . . . . . . . . . . . . . . . . . . . 4,538,119 5,155,489 ----------- ----------- Investment property - Schedule III: Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 6,848,918 Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . . -- 42,681,189 ----------- ----------- -- 49,530,107 Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . -- 18,574,214 ----------- ----------- Total property held for investment, net of accumulated depreciation . . . . . . . . . . . . . . . -- 30,955,893 ----------- ----------- Property held for sale or disposition . . . . . . . . . . . . . . . . . . 28,430,666 -- ----------- ----------- Total investment property . . . . . . . . . . . . . . . . . . . 28,430,666 30,955,893 Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 959,992 874,007 ----------- ----------- $33,928,777 36,985,389 =========== =========== 44-b JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) BALANCE SHEETS - CONTINUED LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS ------------------------------------------ 1996 1995 ----------- ----------- Current liabilities: Current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 92,988 85,989 Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,955 72,930 Accrued interest payable. . . . . . . . . . . . . . . . . . . . . . . . 163,563 164,125 ----------- ----------- Total current liabilities . . . . . . . . . . . . . . . . . . . 456,506 323,044 Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . . 79,599 48,870 Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . 23,338,875 23,431,863 ----------- ----------- Commitments and contingencies Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 23,874,980 23,803,777 Partners' capital accounts. . . . . . . . . . . . . . . . . . . . . . . . 10,053,797 13,181,612 ----------- ----------- $33,928,777 36,985,389 =========== =========== See accompanying notes to financial statements.
44-c JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ----------- ----------- ----------- Income: Rental income . . . . . . . . . . . . . . . . . . . $ 9,125,251 9,071,667 9,220,659 Interest income . . . . . . . . . . . . . . . . . . 112,917 110,779 50,160 Gain on sale of investment property . . . . . . . . 2,825,220 -- -- ----------- ----------- ----------- 12,063,388 9,182,446 9,270,819 ----------- ----------- ----------- Expenses: Mortgage and other interest . . . . . . . . . . . . 1,965,892 2,202,191 2,709,905 Depreciation. . . . . . . . . . . . . . . . . . . . 1,044,296 1,114,143 1,099,974 Property operating expenses . . . . . . . . . . . . 4,728,651 4,237,476 3,419,198 Amortization of deferred expenses . . . . . . . . . 276,364 210,308 214,006 Provision for value impairment. . . . . . . . . . . -- -- 944,335 ----------- ----------- ----------- 8,015,203 7,764,118 8,387,418 ----------- ----------- ----------- Net earnings. . . . . . . . . . . . . . . . $ 4,048,185 1,418,328 883,401 =========== =========== =========== See accompanying notes to financial statements.
44-d JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
AFFILIATED PARTNER JMB-XII TOTAL ----------- ----------- ----------- Balance at December 31, 1993. . . . . $ 4,077,776 3,720,296 7,798,072 Capital contributions . . . . . . . . 1,557,468 1,557,469 3,114,937 Net earnings. . . . . . . . . . . . . 441,701 441,700 883,401 ----------- ----------- ----------- Balance at December 31, 1994. . . . . 6,076,945 5,719,465 11,796,410 Capital contributions . . . . . . . . 1,233,436 1,233,437 2,466,873 Cash distributions. . . . . . . . . . (1,250,000) (1,250,000) (2,500,000) Net earnings. . . . . . . . . . . . . 709,165 709,164 1,418,329 ----------- ----------- ----------- Balance at December 31, 1995. . . . . 6,769,546 6,412,066 13,181,612 Cash distributions. . . . . . . . . . (3,588,000) (3,588,000) (7,176,000) Net earnings. . . . . . . . . . . . . 2,024,093 2,024,092 4,048,185 ----------- ----------- ----------- Balance at December 31, 1996. . . . . $ 5,205,639 4,848,158 10,053,797 =========== =========== =========== See accompanying notes to financial statements.
44-e JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994 ------------ ----------- ----------- Cash flows from operating activities: Net earnings. . . . . . . . . . . . . . . . . . . . . $ 4,048,185 1,418,328 883,401 Items not requiring (providing) cash: Depreciation. . . . . . . . . . . . . . . . . . . . 1,044,296 1,114,143 1,099,974 Amortization of deferred expenses . . . . . . . . . 276,364 210,308 214,006 Provision for value impairment. . . . . . . . . . . -- -- 944,335 Gain on sale of investment property . . . . . . . . (2,825,220) -- -- Changes in: Rents and other receivables . . . . . . . . . . . . 398,749 (19,820) (17,750) Prepaid expenses. . . . . . . . . . . . . . . . . . (20,632) -- 4,561 Escrow deposits . . . . . . . . . . . . . . . . . . 232,577 (268,535) 18,703 Accounts payable. . . . . . . . . . . . . . . . . . 134,662 (323,557) 166,650 Accrued interest payable. . . . . . . . . . . . . . (562) (32,398) (42,928) Tenant security deposits. . . . . . . . . . . . . . 30,729 (23,223) 1,796 ----------- ----------- ----------- Net cash provided by (used in) operating activities. . . . . . . . . . . . . 3,319,148 2,075,246 3,272,748 Cash flows from investing activities: Additions to investment property. . . . . . . . . . . (1,485,395) (156,254) (739,275) Payment of deferred expenses. . . . . . . . . . . . . (402,481) (218,059) (259,242) Proceeds from sale of investment property . . . . . . 5,824,041 -- -- Notes receivable. . . . . . . . . . . . . . . . . . . -- -- 5,836 ----------- ----------- ----------- Net cash provided by (used in) investing activities. . . . . . . . . . . . . 3,936,165 (374,313) (992,681) ----------- ----------- ----------- 44-f JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) STATEMENTS OF CASH FLOWS - CONTINUED 1996 1995 1994 ----------- ----------- ----------- Cash flows from financing activities: Principal payments on long-term debt. . . . . . . . . (85,989) (374,973) (372,045) Paydowns on long-term debt. . . . . . . . . . . . . . -- (2,418,722) (2,500,000) Capital contributed to venture. . . . . . . . . . . . -- 2,466,873 3,114,938 Distributions to partners . . . . . . . . . . . . . . (7,176,000) (2,500,000) -- ----------- ----------- ----------- Net cash provided by (used in) financing activities. . . . . . . . . . . . . . . . . . (7,261,989) (2,799,822) 242,893 ----------- ----------- ----------- Net increase (decrease) increase in cash and cash equivalents. . . . . . . . . (6,676) (1,098,889) 2,522,960 ----------- ----------- ----------- Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . 2,266,686 3,365,575 842,615 ----------- ----------- ----------- Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . $ 2,260,010 2,266,686 3,365,575 =========== =========== =========== Supplemental disclosure of cash flow information: Cash paid for mortgage and other interest . . . . . . $ 1,966,455 2,234,589 2,752,833 Non-cash investing and financing activities: Cash sale proceeds, net of selling expenses . . . . $ 5,824,041 -- -- Reduction in investment property, net . . . . . . . (2,966,325) -- -- Reduction in other assets and liabilities . . . . . (32,496) -- -- ----------- ----------- ----------- Gain recognized on sale of property . . . . . $ 2,825,220 -- -- =========== =========== =========== See accompanying notes to financial statements.
44-g JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 BASIS OF ACCOUNTING The accompanying financial statements have been prepared for the purpose of complying with Rule 3.09 of Regulation S-X of the Securities and Exchange Commission. They include the accounts of the unconsolidated joint venture, JMB/San Jose Associates ("San Jose"), in which JMB Income Properties, Ltd.-XII ("JMB Income-XII" or "Partnership") and JMB Income Properties, Ltd.-XI ("JMB Income-XI" or "Affiliated Partner") are the partners. San Jose holds an equity investment in a commercial office complex in San Jose, California. Business activities consist of rentals to a wide variety of commercial companies and governmental entities, and the ultimate sale or disposition of such real estate. As San Jose has determined to sell the complex, all portions of the office complex have been classified as held for sale or disposition as of or during the period ended December 31, 1996. Therefore, the complex is not subject to continued depreciation. Certain portions of the office complex were sold during 1996. The results of operations of the property included in the accompanying financial statements were earnings of $1,110,048, $1,307,549, and $833,241 for the years ended December 31, 1996, 1995 and 1994, respectively. As more fully described in the Notes to the Consolidated Financial Statements of JMB Income - XII which description is hereby incorporated herein by reference, San Jose recorded in 1994, as a matter of prudent accounting practice, a provision for value impairment of $944,335 on the 170 Almaden and on the 100-130 Park Center Plaza buildings and certain parking areas. The preparation of financial statements in accordance with GAAP requires San Jose 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 amounts could differ from those estimates. The Partnership uses the allowance method of accounting for doubtful accounts. Provisions for uncollectible tenant receivables in the amounts of $588,052, $783,417 and $236,397 were recorded in 1996, 1995 and 1994, respectively. Bad debt expense is included in Property Operating Expenses. The accounting policies of San Jose are the same as those of the Partnership. Accordingly, reference is made to the Notes to the Partnership's consolidated financial statements filed with this annual report. Such notes are incorporated herein by reference. VENTURE AGREEMENT A description of the venture agreement and the management agreement is contained in the Notes to Consolidated Financial Statements of JMB Income - XII. Such note is incorporated herein by reference. MANAGEMENT AGREEMENT In December 1994, the property manager, an affiliate of the General Partners of the Partnership, sold substantially all of its assets and assigned its interest in the management contracts to an unaffiliated third party who continues to manage the complex. In addition, certain of the management personnel of the property manager became management personnel of the purchaser and its affiliates. 44-h LONG-TERM DEBT Long-term debt consists of the following at December 31, 1996 and 1995: 1996 1995 ---------- ---------- 7.85% mortgage note; secured by the 170 Almaden Building in San Jose, California; principal and interest payments of $13,537 are due monthly through September 2003 when the remaining principal of approximately $169,000 is due. . . . . . . . . . $ 931,863 1,017,852 8.4% mortgage note; secured by the 150 Almaden and 185 Park Avenue buildings, and certain related parking improvements in San Jose, California; interest only payments of $157,500 are due monthly through December 1997; principal and interest payments of $179,663 are due monthly through November 2001 when the entire principal of approximately $21,421,000 is due . . . . . . . . . . . . . . 22,500,000 22,500,000 ----------- ---------- Total debt. . . . . . . . . 23,431,863 23,517,852 Less current portion of long-term debt. . . . . 92,988 85,989 ----------- ---------- Total long-term debt. . . . $23,338,875 23,431,863 =========== ========== Five year maturities of long-term debt are as follows: 1997. . . . . . . . . . . $ 92,988 1998. . . . . . . . . . . 376,986 1999. . . . . . . . . . . 409,305 2000. . . . . . . . . . . 444,398 2001. . . . . . . . . . . 21,723,357 =========== LEASES At December 31, 1996, San Jose's principal asset is an office building complex. San Jose has determined that all leases relating to this property are properly classified as operating leases; therefore, rental income is reported when earned and the cost of the property, excluding the cost of the land, was depreciated over the estimated useful lives of the properties prior to their being classified as held for sale or disposition as described above. Leases with tenants range in term from one to twenty-five years and provide for fixed minimum rent and partial reimbursement of operating costs. 44-i 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 . . . . . . . . . . . . . . $ 6,434,687 1998 . . . . . . . . . . . . . . 6,270,264 1999 . . . . . . . . . . . . . . 5,640,920 2000 . . . . . . . . . . . . . . 4,232,298 2001 . . . . . . . . . . . . . . 3,884,020 Thereafter . . . . . . . . . . . 12,589,967 ----------- $39,052,156 =========== TRANSACTIONS WITH AFFILIATES Fees, commissions and other expenses required to be paid by San Jose to the General Partners and their affiliates as of December 31, 1996 and for the years ended December 31, 1996, 1995 and 1994 were as follows: UNPAID AT DECEMBER 31, 1996 1995 1994 1996 -------- -------- -------- ------------ Property management and leasing fees. . . $ 77,870 60,000 281,748 -- Insurance commissions . 25,768 30,140 25,176 -- -------- ------- ------- ------ $103,638 90,140 306,924 -- ======== ======= ======= ====== 44-j SCHEDULE III JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
INITIAL COST TO GROSS AMOUNT AT WHICH CARRIED PARTNERSHIP (A) COSTS AT CLOSE OF PERIOD (B) ------------------------------ CAPITALIZED ------------------------------------------ BUILDINGS SUBSEQUENT TO BUILDINGS AND ACQUISITION AND ENCUMBRANCE LAND IMPROVEMENTS (C) (D) LAND IMPROVEMENTS TOTAL (D) ----------- ----------- ------------ -------------- ---------- ------------ ---------- OFFICE BLDS: San Jose, California . $23,431,863 21,078,745 62,309,815 (37,204,551) 5,867,750 40,316,259 46,184,009 =========== ========== ========== =========== ========== ========== ===========
44-k SCHEDULE III - CONTINUED JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
LIFE ON WHICH DEPRECIATION IN LATEST STATEMENT OF 1996 ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE DEPRECIATION(E) CONSTRUCTION ACQUIRED IS COMPUTED TAXES ---------------- ------------ ---------- --------------- ----------- OFFICE BUILDINGS: San Jose, 6/20/85 California . . . . . . . . $17,753,343 1970 and 5/2/86 5-30 years 553,747 =========== ======= - -------------- Notes: (A) The initial cost to San Jose represents the original purchase price of the property, 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 approximately $41,350,548. (C) Through December 31, 1996, San Jose has recorded provisions for value impairment totaling $45,811,547. (D) During 1996, San Jose sold the 190 San Fernando Building and one of the parking garage structures in the complex in two separate transactions as described more fully in the Notes to Consolidated Financial Statements of the Partnership.
44-l SCHEDULE III - CONTINUED JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP) REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 (D) Reconciliation of real estate owned:
1996 1995 1994 ------------ ------------ ------------ Balance at beginning of period. . . . . . . . . . . $49,530,107 49,373,853 49,578,913 Additions during period . . . . . . . . . . . . . . 1,485,395 156,254 739,275 Provision for value impairment (C). . . . . . . . . -- -- (944,335) Sales of investment property. . . . . . . . . . . . (4,831,493) -- -- ----------- ----------- ----------- Balance at end of period. . . . . . . . . . . . . . $46,184,009 49,530,107 49,373,853 =========== =========== =========== (E) Reconciliation of accumulated depreciation: Balance at beginning of period. . . . . . . . . . . $18,574,214 17,460,071 16,360,097 Sales of investment property. . . . . . . . . . . . (1,865,167) -- -- Depreciation expense. . . . . . . . . . . . . . . . 1,044,296 1,114,143 1,099,974 ----------- ----------- ----------- Balance at end of period. . . . . . . . . . . . . . $17,753,343 18,574,214 17,460,071 =========== =========== ===========
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