-----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, LyhQEGnMSPZbG9hXNquc5QlBEG1FznlT5e90PQLHPrkFdw/XraXVBZzHgwZUmog9 jf08cXgxeZg48rj2PrkHWA== 0000892626-98-000131.txt : 19980330 0000892626-98-000131.hdr.sgml : 19980330 ACCESSION NUMBER: 0000892626-98-000131 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JMB INCOME PROPERTIES LTD XIII CENTRAL INDEX KEY: 0000790603 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363426137 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-19496 FILM NUMBER: 98576216 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 AVE CITY: CHICAGO STATE: IL ZIP: 60611 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1997 Commission file no. 000-19496 JMB INCOME PROPERTIES, LTD. - XIII ------------------------------------------------------ (Exact name of registrant as specified in its charter) Illinois 36-3426137 (State of organization) (I.R.S. Employer Identification No.) 900 N. Michigan Ave., Chicago, Illinois 60611 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code 312-915-1987 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - ------------------- ------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: LIMITED PARTNERSHIP INTERESTS AND ASSIGNEE INTERESTS THEREIN (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ X ] State the aggregate market value of the voting stock held by non-affiliates of the registrant. Not applicable. Documents incorporated by reference: None TABLE OF CONTENTS Page ---- PART I Item 1. Business . . . . . . . . . . . . . . . . . . 1 Item 2. Properties . . . . . . . . . . . . . . . . . 5 Item 3. Legal Proceedings. . . . . . . . . . . . . . 7 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . 7 PART II Item 5. Market for the Partnership's Limited Partnership Interests and Related Security Holder Matters. . . . . . . 7 Item 6. Selected Financial Data. . . . . . . . . . . 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . 12 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . 15 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . 16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 44 PART III Item 10. Directors and Executive Officers of the Partnership . . . . . . . . . . . . . 44 Item 11. Executive Compensation . . . . . . . . . . . 47 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . 48 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . 49 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . 49 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 51 i PART I Item 1. Business All references to "Notes" are to Notes to Consolidated Financial Statements contained in this report. Capitalized terms used herein, but not defined, have the same meanings as used in the Notes. The registrant, JMB Income Properties, Ltd. - XIII (the "Partnership"), is a limited partnership formed in 1986 and currently governed by the Revised Uniform Limited Partnership Act of the State of Illinois to invest in income-producing properties, primarily existing commercial real properties. On August 20, 1986, the Partnership commenced an offering to the public of $100,000,000 (subject to increase by up to $250,000,000) in Limited Partnership Interests (the "Interests") pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration No. 33-4107). A total of 126,409 Interests (at an offering price of $1,000 per Interest, before discounts) were sold to the public during 1987. The offering closed on April 14, 1987. No investor has made any additional capital contribution after such date. The investors in the Partnership share in their portion of the benefits of ownership of the Partnership's real property investments according to the number of Interests held. The Partnership is engaged solely in the business of the acquisition, operation, and sale and disposition of equity real estate investments. Such equity investments are held by fee title and/or through joint venture partnership interests. The Partnership's remaining real property investment is located in California, and it had no real estate investments located outside the United States. A presentation of information about industry segments, geographic regions, raw materials or seasonality is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. Pursuant to the Partnership Agreement, the Partnership is required to terminate no later than October 31, 2036. The Partnership is self-liquidating in nature. At sale of a particular property, the net proceeds, if any, are generally distributed or reinvested in existing properties rather than invested in acquiring additional properties. As discussed further in Item 7, the Partnership currently expects to conduct an orderly liquidation of its remaining investment property as quickly as practicable and to wind up its affairs no later than December 31, 1999, barring any unforeseen economic developments. The Partnership has made the real property investments set forth in the following table:
SALE OR DISPOSITION DATE OR IF OWNED AT DECEMBER 31, 1997, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP - ---------------------- ---------- -------- ---------------------- --------------------- 1. Mid Rivers Mall St. Peters (St. Louis), Missouri. . . . . . 323,100 12/12/86 1/30/92 Fee ownership of land and sq.ft. improvements (through g.l.a. joint venture partnerships) 2. First Financial Plaza Office Building Encino (Los Angeles), California. . . . . 216,000 5/20/87 9/11/96 Fee ownership of land and sq.ft. improvements (through n.r.a. joint venture partnerships) (c)(e) 3. Miami International Mall Miami, Florida. . . 967,300 1/1/88 4/8/96 Fee ownership of land and sq.ft. improvements (through g.l.a. joint venture partnerships) (c)(e) 4. Rivertree Court Shopping Center Vernon Hills (Chicago), Illinois. . . . . . 297,000 10/20/88 7/17/97 Fee ownership of land and sq.ft. improvements (e) g.l.a. 5. Fountain Valley Industrial Park Industrial Buildings Fountain Valley (Los Angeles), California. . . . . 393,100 11/1/88 16% Fee ownership of land and sq.ft. improvements (b)(d)(f) b.a. SALE OR DISPOSITION DATE OR IF OWNED AT DECEMBER 31, 1997, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP - ---------------------- ---------- -------- ---------------------- --------------------- 6. Cerritos Industrial Park Industrial Buildings Cerritos (Los Angeles), California. . . . . 197,100 11/1/88 5/29/97 Fee ownership of land and sq.ft. improvements (e) b.a. 7. Adams/Wabash Self Park Chicago, Illinois . 671 spaces and 10/1/90 8/11/97 Fee ownership of land and 28,800 improvements (through sq.ft. joint venture partnership) g.l.a. (c)(e) - ----------------------- (a) The computation of this percentage for properties held at December 31, 1997 does not include amounts invested from sources other than the original net proceeds of the public offering as described above and in Item 7. (b) Reference is made to the Notes and to Schedule III filed with this annual report for the current outstanding principal balances and a description of the long-term mortgage indebtedness secured by the Partnership's real property investments. (c) Reference is made to the Notes filed with this annual report for a description of the joint venture partnerships through which the Partnership made this real property investment. (d) Reference is made to Item 8 - Schedule III filed with the annual report for further information concerning real estate taxes and depreciation. (e) The property has been sold. Reference is made to the Notes for a description of the sale of such real property investment. (f) Two buildings and their related land parcels have been sold. Reference is made to the Notes for a description of the sale of such real property investment.
The Partnership's remaining real property investment is subject to competition from similar types of properties (including properties owned by affiliates of the General Partners) in the vicinity in which it is located. Such competition is generally for the retention of existing tenants. Additionally, the Partnership is in competition for new tenants. Reference is made to Item 7 below for a discussion of competitive conditions, the future renovation and capital improvement plans of the Partnership at its investment property. Approximate occupancy levels for the properties owned during 1997 are set forth in Item 2 below to which reference is hereby made. The Partnership maintains the suitability and competitiveness of its property in its market primarily on the basis of effective rents, tenant allowances and service provided to tenants. In the opinion of the Managing General Partner of the Partnership, the investment property held at December 31, 1997 is adequately insured. Although there is earthquake insurance coverage for a portion of the value of the Partnership's investment property, the Managing General Partner does not believe that such coverage for the entire replacement cost of the investment property is available on economic terms. On May 29, 1997, the Partnership sold the land, building, related improvements and personal property of the Cerritos Industrial Park located in Cerritos, California and one of the land parcels that composes the Fountain Valley Industrial Park located in Fountain Valley, California as described further in the Notes. On July 17, 1997, the Partnership sold the land, building and related improvements of the Rivertree Court Shopping Center located in Vernon Hills, Illinois. Reference is made to the Notes for a further description of such transaction. On August 11, 1997, the Partnership, through the Adam/Wabash joint venture, sold the land, building and related improvements of the Adams/Wabash Self Park located in Chicago, Illinois. Reference is made to the Notes for a further description of such transaction. Reference is made to the Notes for a schedule of minimum lease payments to be received in each of the next five years, and in the aggregate thereafter, under leases in effect at the Partnership's consolidated property as of December 31, 1997. The Partnership has no employees other than personnel performing on- site duties at certain of the Partnership's properties, none of whom are officers or directors of the Managing General Partner of the Partnership. The terms of transactions between the Partnership, the General Partners and their affiliates are set forth in Item 11 below to which reference is hereby made for a description of such terms and transactions. Item 2. Properties The Partnership owns or owned directly or through joint venture partnerships the properties or interests in the properties referred to under Item 1 above to which reference is hereby made for a description of said properties. The following is a listing of principal businesses or occupations carried on in and approximate physical occupancy levels by quarter during fiscal years 1997 and 1996 for the Partnership's investment properties owned during 1997:
1996 1997 ------------------------------ ------------------------------ Principal At At At At At At At At Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 ------------- ---- ---- ---- ----- ---- ---- ----- ----- 1. Rivertree Court Shopping Center Vernon Hills (Chicago), Illinois. . . . . Retail 84% 83% 89% 90% 96% 96% N/A N/A 2. Fountain Valley Industrial Park Fountain Valley (Los Angeles), California (A). . Retail/ Electronics Repair/ Nuts and Bolts Distributor 93% 100% 94% 94% 94% 100% 100% 100% 3. Cerritos Industrial Park Cerritos (Los Angeles), California. . . . Aircraft Parts Manufacturer/ Tire Distributor 100% 100% 100% 100% 100% N/A N/A N/A 4. Adams/Wabash Self Park Chicago, Illinois. . . . . Parking Garage * * * * * * N/A N/A - -------------------- An asterisk indicates that the property is primarily a parking garage and occupancy information is not applicable. However, the approximate occupancy level for the retail portion of the structure as of June 30, 1997 was 39%. An "N/A" indicates that the property was not owned by the Partnership at the end of the quarter. Reference is made to Item 6, Item 7 and to the Notes for further information regarding property occupancy, competitive conditions and tenant leases at the Partnership's investment properties. (A) The occupancy percentages reflected in this table are computed based upon the remaining square footage of the complex owned as of the respective dates as portions of the complex were sold in December 1996 and May 1997.
ITEM 3. LEGAL PROCEEDINGS The Partnership is not subject to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of holders of Interests during fiscal years 1997 and 1996. PART II ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS As of December 31, 1997, there were 8,599 record holders of Interests of the Partnership. There is no public market for Interests, and it is not anticipated that a public market for Interests will develop. Upon request, the Managing General Partner may provide information relating to a prospective transfer of Interests to an investor desiring to transfer his Interests. The price to be paid for the Interests, as well as any other economic aspects of the transaction, will be subject to negotiation by the investor. There are certain conditions and restrictions on the transfer of Interests, including, among other things, the requirement that the substitution of a transferee of Interests as a Limited Partner of the Partnership be subject to the written consent of the Managing General Partner, which, may be granted or withheld in its sole and absolute discretion. The rights of a transferee of Interests who does not become a substituted Limited Partner will be limited to the rights to receive his share of profits or losses and cash distributions from the Partnership, and such transferee will not be entitled to vote such Interests or have other rights of a Limited Partner. No transfer will be effective until the first day of the next succeeding calendar quarter after the requisite transfer form satisfactory to the Managing General Partner has been received by the Managing General Partner. The transferee consequently will not be entitled to receive any cash distributions or any allocable share of profits or losses for tax purposes until such next succeeding calendar quarter. Profits or losses from operations of the Partnership for a calendar year in which a transfer occurs will be allocated between the transferor and the transferee based upon the number of quarterly periods in which each was recognized as the holder of the Interests, without regard to the results of the Partnership's operations during particular quarterly periods and without regard to whether cash distributions were made to the transferor or transferee. Profits or losses arising from the sale or other disposition of Partnership properties will be allocated to the recognized holder of the Interests as of the last day of the quarter in which the Partnership recognized such profits or losses. Cash distributions to a holder of Interests arising from the sale or other disposition of Partnership properties will be distributed to the recognized holder of the Interests as of the last day of the quarterly period with respect to which such distribution is made. Reference is made to Item 6 for a discussion of cash distributions made to the Limited Partners. Reference is made to Item 7 for a discussion of unsolicited tender offers received from unaffiliated third parties. ITEM 6. SELECTED FINANCIAL DATA JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE YEARS ENDED DECEMBER 31, 1997, 1996, 1995, 1994 AND 1993 (NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
1997 1996 1995 1994 1993 ------------- ---------- ---------- ----------- ----------- Total income. . . . . . . $ 8,483,213 11,973,382 12,545,834 11,984,676 12,292,002 ============ ========== ========== =========== =========== Earnings (loss) before gains on sales or disposition of investment properties. . . . . . . $ 1,524,818 3,785,085 (4,177,565) 959,484 3,021,663 Partnership's share of gains on sale of investment properties and gain on sale of investment property from unconsolidated venture . . . . . . . . 7,186,234 11,090,549 -- 298,917 346,208 ------------ ---------- ---------- ----------- ----------- Earnings (loss) before Partnership's share of extra- ordinary item from unconsolidated venture . . . . . . . . 8,711,052 14,875,634 (4,177,565) 1,258,401 3,367,871 Extraordinary items and Partnership's share of extraordinary items from sale of invest- ment property of unconsolidated venture. (89,545) -- -- (375,000) (521,183) ------------ ---------- ---------- ----------- ----------- Net earnings (loss) . . . $ 8,621,507 14,875,634 (4,177,565) 883,401 2,846,688 ============ ========== ========== =========== =========== 1997 1996 1995 1994 1993 ------------- ----------- ---------- ----------- ----------- Net earnings (loss) per Limited Partner Interest (b): Earnings (loss) before gains on sales or disposition of investment properties . . . . . . $ 11.58 28.74 (31.72) 7.29 22.95 Partnership's share of gains on sale of investment properties and share of gain on sale of investment property from unconsolidated venture . . . . . . . 56.28 86.85 -- 2.34 2.71 Extraordinary items and Partnership's share of extraordinary items from sale of investment property of unconsolidated venture . . . . . . . (.68) -- -- (2.85) (3.96) ------------ ---------- ---------- ----------- ----------- Net earnings (loss) per Limited Partner Interest. . $ 67.18 115.59 (31.72) 6.78 21.70 ============ ========== ========== =========== =========== Total assets. . . . . . . $ 22,059,131 80,097,683 99,483,214 109,171,952 113,581,933 Long-term debt. . . . . . $ 5,976,472 25,482,974 26,146,638 26,436,573 26,700,000 Cash distributions per Limited Partner Interest (c). . $ 355.00 261.00 44.00 41.00 40.00 ============ ========== ========== =========== =========== - ------------- (a) The above selected financial data should be read in conjunction with the financial statements and the related notes appearing elsewhere in this annual report. (b) The net earnings per Interest is based upon the Interests outstanding at the end of each period (126,414). (c) Cash distributions from the Partnership are generally not equal to Partnership income (loss) for financial reporting or Federal income tax purposes. Each partner's taxable income (loss) from the Partnership in each year is equal to his allocable share of the taxable income (loss) of the Partnership, without regard to the cash generated or distributed by the Partnership. Accordingly, cash distributions to the Limited Partners since the inception of the Partnership have not resulted in taxable income to such Limited Partners and have therefore represented a return of capital.
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1997
Property - -------- Fountain Valley Industrial Park a) The building area ("BA") occupancy rate and average base rent per square foot as of December 31 for each of the last five years were as follows: BA Avg. Base Rent Per December 31, Occupancy Rate Square Foot (1) ------------ -------------- ------------------ 1993 . . . . . 85% 5.31 1994 . . . . . 100% 4.41 1995 . . . . . 88% 5.58 1996 . . . . . 94% 5.00 1997 . . . . . 100% 5.14 (1) Average base rent per square foot is based on BA 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) ------------------- ----------- --------- --------------- ----------------- Fry's Electronics 77,028 $434,438 7/2005 7/2010 (Retail) 7/2015
c) The following table sets forth certain information with respect to the expiration of leases for the next ten years at the Fountain Valley Industrial Park: Annualized Percent of Number of Approx. Total Base Rent Total 1997 Year Ending Expiring BA of Expiring of Expiring Base Rent December 31, Leases Leases Leases Expiring ------------ --------- --------------- ----------- ---------- 1998 2 45,026 248,556 13% 1999 2 38,580 199,224 10% 2000 - -- -- 0% 2001 1 26,240 113,352 6% 2002 6 134,246 716,244 36% 2003 - -- -- 0% 2004 2 49,770 270,132 14% 2005 1 77,028 434,436 22% 2006 - -- -- 0% 2007 - -- -- 0%
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES As a result of the public offering of Interests as described in Item 1, the Partnership had approximately $113,741,000 (after deducting selling expenses and other offering costs) with which to make investments (primarily in existing commercial real property), to pay legal fees and other costs (including acquisition fees) related to such investments and to satisfy working capital requirements. A portion of such proceeds was utilized to acquire the properties described in Item 1 above. During 1996 and early 1997, some of the Limited Partners in the Partnership received unsolicited tender offers to purchase up to 4.9% of the Interests in the Partnership from unaffiliated third parties with offers ranging between $270 and $350 per Interest. The Partnership recommended against acceptance of these offers on the basis that, among other things, the offer price was inadequate. The aforementioned offers have expired. In November 1996, an unaffiliated third party made an unsolicited tender offer for up to 4.9% of the Interests in the Partnership at $400 per Interest. The Partnership was neutral in its recommendation to accept or reject such offer. The offer expired in December 1996. In the last six months of 1997, additional unaffiliated third parties made unsolicited tender offers for up to 4.9% of the Interests in the Partnership with offers ranging between $245 and $350 per Interest. The Special Committee recommended against acceptance of these offers, all of which have expired. In early 1998, an unaffiliated third party made an unsolicited tender offer for up to 4% of the Interests in the Partnership for $60 per Interest. The special committee recommended against acceptance of this offer on the basis that, among other things, the offer price was inadequate. The offer is scheduled to expire in April 1998. As of the date of this report, the Partnership is aware that 4.27% of the Interests of the Partnership have been purchased by all such unaffiliated third parties either pursuant to such tender offers or through negotiated purchases. It is possible that other offers for Interests may be made by unaffiliated third parties in the future, although there is no assurance that any other third party will commence an offer for Interests, the terms of any such offer or whether any such offer, if made, will be consummated, amended or withdrawn. The board of directors of JMB Realty Corporation ("JMB") the managing general partner of the Partnership, has established a special committee (the "Special Committee") consisting of certain directors of JMB to deal with all matters relating to tender offers for Interests in the Partnership, including any and all responses to such tender offers. The Special Committee has retained independent counsel to advise it in connection with any potential tender offers for Interests and has retained Lehman Brothers Inc. as financial advisor to assist the Special Committee in evaluating and responding to any additional potential tender offers for Interests. At December 31, 1997, the Partnership had cash and cash equivalents of approximately $4,667,000. Such funds are available for future distri- butions to partners and working capital requirements. As more fully described in the Notes, distributions to the General Partners have been deferred in accordance with the subordination requirements of the Partnership Agreement. The Partnership has currently budgeted in 1998, approximately $87,000 for tenant improvements and other capital expenditures at its remaining investment property, the Fountain Valley Industrial Park. Actual amounts expended in 1998 may vary depending on a number of factors including actual leasing activity, results of property operations, liquidity considerations and other market conditions over the course of the year. The source of capital for such items and for both short-term and long-term future liquidity and distributions is expected to be through cash generated by the Partnership's remaining investment property and through the sale of such investment. In 1996, in an effort to reduce Partnership operating expenses, the Partnership elected to make semi-annual, rather than quarterly, distributions of operating cash flow in the months of May and November of each year. In May 1997, the Partnership made a semi-annual distribution of cash generated from operations of $16 per Interest ($8 per Interest for each of the first and second quarters of 1997). In August, 1997, the Partnership made a distribution of $35 per Interest of cash generated from sales of certain parcels at the Fountain Valley Industrial Park in 1996 and 1997 and the sale of the Cerritos Industrial Park in 1997. In late November 1997, the Partnership made a semi-annual distribution of cash generated from operations of $4 per Interest ($2 per Interest for each of the third and fourth quarters of 1997) and a distribution of cash generated from the sales of the Adams/Wabash Self Park and the Rivertree Court Shopping Center of $300 per Interest. The net reduction in distributions from prior distribution levels was necessary primarily due to reductions in operating cash flow resulting from the sale of the Partnership's interest in the above mentioned properties. JMB/MIAMI Effective March 31, 1996, JMB/Miami International Associates was voluntarily dissolved by an agreement of its partners and its 50% ownership interest in West Dade County Associates ("West Dade") and related assets were distributed to its partners based on their respective ownership percentages. Accordingly, the Partnership acquired a direct 25% ownership interest in West Dade. The Partnership then sold its entire 25% interest in West Dade for $13,436,731 (before selling costs). Reference is made to the Notes for a further description of such sale. FIRST FINANCIAL On September 11, 1996, the joint venture sold the First Financial office building for $37,900,000 (before selling costs). Reference is made to the Notes for a further description of such sale. CERRITOS INDUSTRIAL PARK On May 29, 1997, the Partnership sold the land and related improvements known as the Cerritos Industrial Park for $7,500,000. Reference is made to the Notes for a further description of such transaction. RIVERTREE COURT SHOPPING CENTER On July 17, 1997, the Partnership sold the land and related improvements known as the Rivertree Court Shopping Center for approximately $14,915,000. Reference is made to the Notes for a further description of such transaction. ADAMS/WABASH On August 11, 1997, the Adams/Wabash Limited Partnership sold the Adams/Wabash self-park for $25,000,000. Reference is made to the Notes for a further description of the transaction. FOUNTAIN VALLEY INDUSTRIAL PARK Fountain Valley is currently 100% leased and occupied. The Partnership in 1997, leased vacant space of 22,826 square feet, has renewed 57,490 square feet, re-leased 30,250 square feet and sold, in December 1996 and 1997, 22,202 square feet of the 154,968 square feet of space under tenant leases originally scheduled to expire in 1997 and 1998 (39% of the park's original square footage of 393,092 square feet). The strong Orange County (Los Angeles) industrial market continues to put upward pressure on tenant demand and consequently, market rents. As a result, the Partnership has been able to convert several buildings which had been previously leased to tenants on a temporary basis to permanent leases at significantly higher rents than the tenants were paying previously. Two tenant leases representing in total, approximately 45,000 square feet, are scheduled to expire in 1998. There can be no assurance that the tenants will renew their leases upon expiration. On May 1, 1997, the Partnership sold a 12,702 square foot building and related land parcel within the park to the current tenant for a sales price of $970,000. Reference is made to the Notes for a further description of such sale. During the first quarter of 1998, the Partnership entered into an agreement to sell the remainder of the property in 1998 to an unaffiliated third party. However, in March 1998, the sale agreement terminated without completion of the sale. An environmental issue was discovered in connection with the potential buyer's due diligence investigation of the property. Based on preliminary testing, there currently appears to be some contamination of the groundwater under the property. The Partnership has temporarily suspended the active marketing of the property for sale while it undertakes an assessment of the source, nature and extent of the contamination. Based upon its preliminary information the Partnership does not believe that the costs of assessing and, if necessary, remediating the contamination will be material, although there is no assurance that such will be the case. The Partnership expects to remarket the property after such testing permits it to estimate the cost, if any, to remediate such condition, and continues to expect to liquidate its remaining net assets no later than the end of 1999. GENERAL In accordance with the subordination requirements of the Partnership Agreement, the General Partners have deferred payment of certain of their distributions of net cash flow and sale proceeds from the Partnership. The cumulative amount of such deferred distributions is approximately $5,725,000 at December 31, 1997. All amounts deferred or currently payable do not bear interest. RESULTS OF OPERATIONS Significant variances between the periods reflected in the accompanying consolidated financial statements are the result of the sales of the Cerritos Industrial Park, Rivertree Court Shopping Center and Adams/Wabash Self-Park in 1997 and the sales of the two land parcels and related buildings at the Fountain Valley Industrial Park in December 1996 and May 1997. The decrease in rental income for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to the loss of the Palmer House parking contract at Adams/Wabash investment property. The increase in interest income for the twelve months ended December 31, 1997, as compared to the twelve months ended December 31, 1996 and 1995 is primarily due to the fluctuation of the Partnership's average invested balance due to the timing of receipts of cash generated from the various sales of the Partnership's investment properties in 1996 and 1997 and the timing of the Partnership's subsequent distribution of sales proceeds to the Holders of Interests. The decrease in depreciation for the twelve months ended December 31, 1997 as compared to the twelve months ended December 31, 1996 and 1995 is primarily due to the timing of the classification of the investment properties as properties held for sale, and therefore, not being subject to continued depreciation. The $2,500,000 provision for value impairment reported for the twelve months ended December 31, 1997 was recorded as of June 30, 1997 based upon the expected sale price for the Rivertree Court Shopping Center investment property, which was sold July 17, 1997. The provision for value impairment for the year ended December 31, 1995 is due to the provisions for value impairment recorded at September 30, 1995 for both the Fountain Valley and Cerritos Industrial Park investment properties of $4,200,000 and $4,000,000, respectively. Such provisions were recorded to reduce the net carrying value of the investment properties to their then estimated recoverable values. The decrease in Partnership's share of operations from unconsolidated ventures for the twelve months ended December 31, 1997 as compared to the twelve months ended December 31, 1996 and the decrease in Partnership's share of operations from unconsolidated ventures and the increase in the Partnership's share of the gain on sale of investment property of unconsolidated venture for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is due to the sale of the Partnership's interest in the Miami International Mall in April 1996 and the sale of the First Financial Plaza office building in September 1996. The gain on sale of investment properties reported for the twelve months ended December 31, 1997 is due to the sale of the Cerritos Industrial Park investment property on May 29, 1997, the sale of the Adams/Wabash investment property on August 11, 1997 and the sale of the Rivertree Court Shopping Center investment property on July 17, 1997. In addition, the Partnership recognized a gain on sale due to the sale of a land parcel and related building at the Fountain Valley Industrial Park investment property on May 1, 1997. The extraordinary item reported for the twelve months ended December 31, 1997 represents the prepayment premiums on the early termination of debt in conjunction with the sales of certain of the Partnership's investment properties in 1997. INFLATION Due to the decrease in the level of inflation in recent years, inflation generally has not had a material effect on rental income or property operating expenses. Inflation is not expected to significantly impact future operations due to the expected liquidation of the Partnership by 1999. However, to the extent that inflation in future periods would have an adverse impact on property operating expenses, the effect would generally be offset by amounts recovered from tenants as many of the long-term leases at the Partnership's remaining investment property have escalation clauses covering increases in the cost of operating and maintaining the property as well as real estate taxes. Therefore, there should be little effect from inflation on operating earnings if the property remains substantially occupied. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE INDEX Independent Auditors' Report Consolidated Balance Sheets, December 31, 1997 and 1996 Consolidated Statements of Operations, years ended December 31, 1997, 1996 and 1995 Consolidated Statements of Partners' Capital Accounts (Deficits), years ended December 31, 1997, 1996 and 1995 Consolidated Statements of Cash Flows, years ended December 31, 1997, 1996 and 1995 Notes to Consolidated Financial Statements SCHEDULE -------- Consolidated Real Estate and Accumulated Depreciation III SCHEDULES NOT FILED: All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. INDEPENDENT AUDITORS' REPORT The Partners JMB INCOME PROPERTIES, LTD. - XIII: We have audited the consolidated financial statements of JMB Income Properties, Ltd. - XIII (a limited partnership) and consolidated venture 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. - XIII and consolidated venture at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997, 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, 1998 JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1996 ASSETS ------
1997 1996 ------------ ----------- Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 4,666,891 3,743,541 Interest, rents and other receivables . . . . . . . . . . . . . . . 1,093,810 1,232,970 Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 25,047 71,674 Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 69,470 144,050 ------------ ----------- Total current assets. . . . . . . . . . . . . . . . . . . . . 5,855,218 5,192,235 Properties held for sale or disposition - Schedule III. . . . . . . . 15,480,159 72,718,307 ------------ ----------- Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 371,870 732,036 Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . 351,884 1,455,105 ------------ ----------- $ 22,059,131 80,097,683 ============ =========== JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED BALANCE SHEETS - CONTINUED LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS) ---------------------------------------------------- 1997 1996 ------------ ----------- Current liabilities: Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 200,366 313,664 Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 140,099 300,262 Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 37,679 194,950 Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . -- 1,201,572 Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . 478,255 444,575 ------------ ----------- Total current liabilities . . . . . . . . . . . . . . . . . . 856,399 2,455,023 Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 160,403 314,124 Long-term debt, less current portion. . . . . . . . . . . . . . . . . 5,976,472 25,482,974 ------------ ----------- Commitments and contingencies Total liabilities . . . . . . . . . . . . . . . . . . . . . . 6,993,274 28,252,121 ------------ ----------- Partners' capital accounts (deficits): General partners: Capital contributions.. . . . . . . . . . . . . . . . . . . . 20,000 20,000 Cumulative net earnings . . . . . . . . . . . . . . . . . . . 853,929 721,969 Cumulative cash distributions . . . . . . . . . . . . . . . . (1,701,976) (1,631,037) ------------ ----------- (828,047) (889,068) ------------ ----------- Limited partners (126,414 interests): Capital contributions, net of offering costs. . . . . . . . . 113,741,315 113,741,315 Cumulative net earnings . . . . . . . . . . . . . . . . . . . 39,393,469 30,903,922 Cumulative cash distributions . . . . . . . . . . . . . . . . (137,240,880) (91,910,607) ------------ ----------- 15,893,904 52,734,630 ------------ ----------- Total partners' capital accounts. . . . . . . . . . . . . . . 15,065,857 51,845,562 ------------ ----------- $ 22,059,131 80,097,683 ============ =========== See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 ------------ ------------ ------------ Income: Rental income . . . . . . . . . . . . . . . . . . $ 7,583,750 11,279,441 11,715,228 Interest income . . . . . . . . . . . . . . . . . 899,463 693,941 830,606 ----------- ----------- ----------- 8,483,213 11,973,382 12,545,834 ----------- ----------- ----------- Expenses: Mortgage and other interest . . . . . . . . . . . 1,422,849 2,370,249 2,369,963 Depreciation. . . . . . . . . . . . . . . . . . . -- 1,721,808 2,468,066 Property operating expenses . . . . . . . . . . . 2,314,081 3,561,629 3,608,455 Professional services . . . . . . . . . . . . . . 216,694 271,487 206,307 Amortization of deferred expenses . . . . . . . . 131,498 191,354 234,401 General and administrative. . . . . . . . . . . . 373,273 330,407 397,120 Provision for value impairment. . . . . . . . . . 2,500,000 -- 8,200,000 ----------- ----------- ----------- 6,958,395 8,446,934 17,484,312 ----------- ----------- ----------- 1,524,818 3,526,448 (4,938,478) Partnership's share of operations of uncon- solidated ventures. . . . . . . . . . . . . . . . -- 258,637 760,913 ----------- ----------- ----------- Earnings (loss) before gains on sale of investment properties. . . . . 1,524,818 3,785,085 (4,177,565) Gains on sale of investment properties. . . . . . . 7,186,234 217,690 -- Partnership's share of gain on sale of investment property from unconsolidated venture . -- 10,872,859 -- ----------- ----------- ----------- Earnings (loss) before Partner- ship's share of extraordinary item from sale of investment property of unconsolidated venture. . . . 8,711,052 14,875,634 (4,177,565) Extraordinary items . . . . . . . . . . . . . . . . (89,545) -- -- ----------- ----------- ----------- Net earnings (loss) . . . . . . . . . . . . $ 8,621,507 14,875,634 (4,177,565) =========== =========== =========== JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED 1997 1996 1995 ------------ ------------ ------------ Net earnings (loss) per limited partnership interest: Earnings (loss) before gains on sales of investment properties. . . . . . . . . . . . $ 11.58 28.74 (31.72) Gains on sale of investment properties. . . . . . 56.28 1.70 -- Partnership's share of gain on sale of investment property from unconsolidated venture . . . . . . . . . . . . . . . . . . . . -- 85.15 -- Partnership's share of extra- ordinary items from sale of investment property of unconsolidated venture. . . . . . . . . . . . . (.68) -- -- ----------- ----------- ----------- Net earnings (loss) . . . . . . . . . . . . $ 67.18 115.59 (31.72) =========== =========== =========== See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
GENERAL PARTNERS LIMITED PARTNERS (126,414 INTERESTS) -------------------------------------------------- --------------------------------------------------- CONTRI- BUTIONS NET NET OF NET CONTRI- EARNINGS CASH OFFERING EARNINGS CASH BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL -------- ---------- ------------- -------- ----------- ---------- ------------- ---------- Balance (deficit) at Decem- ber 31, 1994 . . . . $20,000 626,763 (1,233,777) (587,014) 113,741,315 20,301,059 (52,964,880) 81,077,494 Net earnings (loss) . . . -- (167,103) -- (167,103) -- (4,010,462) -- (4,010,462) Cash distri- butions ($44.00 per Interest). . -- -- (156,067) (156,067) -- -- (5,618,400) (5,618,400) ------- -------- ---------- -------- ----------- ---------- ----------- ---------- Balance (deficit) at Decem- ber 31, 1995 . . . . 20,000 459,660 (1,389,844) (910,184) 113,741,315 16,290,597 (58,583,280) 71,448,632 Net earnings (loss) . . . -- 262,309 -- 262,309 -- 14,613,325 -- 14,613,325 Cash distri- butions ($261.00 per Interest). . -- -- (241,193) (241,193) -- -- (33,327,327)(33,327,327) ------- -------- ---------- -------- ----------- ---------- ----------- ---------- JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONTINUED GENERAL PARTNERS LIMITED PARTNERS (126,414 INTERESTS) -------------------------------------------------- --------------------------------------------------- CONTRI- BUTIONS NET NET OF NET CONTRI- EARNINGS CASH OFFERING EARNINGS CASH BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL -------- ---------- ------------- -------- ----------- ---------- ------------- ---------- Balance (deficit) at Decem- ber 31, 1996 . . . . 20,000 721,969 (1,631,037) (889,068) 113,741,315 30,903,922 (91,910,607) 52,734,630 Net earnings (loss) . . . -- 131,960 -- 131,960 -- 8,489,547 -- 8,489,547 Cash distri- butions ($355.00 per Interest). . -- -- (70,939) (70,939) -- -- (45,330,273)(45,330,273) ------- -------- ---------- -------- ----------- ---------- ----------- ---------- Balance (deficit) at Decem- ber 31, 1997 . . . . $20,000 853,929 (1,701,976) (828,047) 113,741,315 39,393,469 (137,240,880) 15,893,904 ======= ======== ========== ======== =========== ========== =========== ========== See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 ----------- ----------- ----------- Cash flows from operating activities: Net earnings (loss) . . . . . . . . . . . . . . . $ 8,621,507 14,875,634 (4,177,565) Items not requiring (providing) cash or cash equivalents: Depreciation. . . . . . . . . . . . . . . . . . -- 1,721,808 2,468,066 Amortization of deferred expenses . . . . . . . 131,498 191,354 234,401 Partnership's share of operations of unconsolidated ventures, net of distributions. . . . . . . . . . . . . -- 318,805 (760,913) Partnership's gain on sale of investment property. . . . . . . . . . . . . . . . . . . (7,186,234) (217,690) -- Partnership's share of gain on sale of investment property from unconsolidated venture . . . . . . . . . . . . . . . . . . . -- (10,872,859) -- Extraordinary items . . . . . . . . . . . . . . 89,545 -- -- Provision for value impairment. . . . . . . . . 2,500,000 -- 8,200,000 Changes in: Interest, rents and other receivables . . . . . 145,445 (111,700) (290,577) Prepaid expenses. . . . . . . . . . . . . . . . 46,627 (2,773) (2,973) Escrow deposits . . . . . . . . . . . . . . . . 74,580 (41,370) (2,803) Accrued rents receivable. . . . . . . . . . . . 42,194 211,577 (228,961) Accounts payable . . . . . . . . . . . . . . . (160,129) 102,497 65,817 Accrued interest. . . . . . . . . . . . . . . . (157,271) (1,779) (1,653) Accrued real estate taxes . . . . . . . . . . . (1,201,572) 30,231 (59,886) Unearned rents. . . . . . . . . . . . . . . . . 33,680 (167,507) 541,674 Tenant security deposits. . . . . . . . . . . . (133,806) (14,498) (11,591) ----------- ----------- ----------- Net cash provided by (used in) operating activities. . . . . . . . . . . 2,846,064 6,021,730 5,973,036 ----------- ----------- ----------- JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1997 1996 1995 ----------- ----------- ----------- Cash flows from investing activities: Net sales and maturities (purchases) of short-term investments . . . . . . . . . . . -- -- 9,214,950 Additions to investment properties. . . . . . . . (127,500) (678,815) (280,626) Partnership's distributions from unconsolidated ventures and cash proceeds from sale of investment property, net of selling expenses . . . . . . . 43,972,567 18,908,480 1,346,250 Partnership's contributions to uncon- solidated ventures. . . . . . . . . . . . . . . -- (64,710) (1,539,075) Payment of deferred expenses. . . . . . . . . . . (84,769) (182,206) (80,931) ----------- ----------- ----------- Net cash provided by (used in) investing activities. . . . . . . . . . . 43,760,298 17,982,749 8,660,568 ----------- ----------- ----------- Cash flows from financing activities: Principal payments on long-term debt. . . . . . . (281,800) (291,589) (271,067) Distributions to limited partners . . . . . . . . (45,330,273) (33,327,327) (5,618,400) Distributions to general partners . . . . . . . . (70,939) (241,193) (156,067) ----------- ----------- ----------- Net cash provided by (used in) financing activities. . . . . . . . . . . (45,683,012) (33,860,109) (6,045,534) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents . . . . . . . . 923,350 (9,855,630) 8,588,070 Cash and cash equivalents, beginning of year . . . . . . . . . . . . 3,743,541 13,599,171 5,011,101 ----------- ----------- ----------- Cash and cash equivalents, end of year . . . . . . . . . . . . . . . $ 4,666,891 3,743,541 13,599,171 =========== =========== =========== JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1997 1996 1995 ----------- ----------- ----------- Supplemental disclosure of cash flow information: Cash paid for mortgage and other interest . . . . $ 1,580,120 2,372,028 2,371,616 =========== =========== =========== Non-cash investing and financing activities: Total sales proceeds from sale of investment property: Total sales proceeds, net of selling expenses. . . . . . . . . . . . . . $63,400,112 -- -- Prepayment premium. . . . . . . . . . . . . . (89,545) -- -- Payoff of mortgage loans. . . . . . . . . . . (19,338,000) -- -- ----------- ----------- ----------- Cash proceeds from sale of investment properties . . . . . . . . . $43,972,567 -- -- =========== =========== =========== See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 OPERATIONS AND BASIS OF ACCOUNTING GENERAL The Partnership holds an equity investment in an industrial park in Fountain Valley, California. Business activities consist of rentals to a variety of commercial and retail companies, and the ultimate sale or disposition of such real estate. Subject to the sale of its last property, 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, barring unforeseen economic circumstances. The accompanying consolidated financial statements include the accounts of the Partnership and its majority-owned venture, Adams/Wabash Limited Partnership ("Adams/Wabash") (prior to its sale in August 1997). The effect of all transactions between the Partnership and Adams/Wabash have been eliminated in the consolidated financial statements. The equity method of accounting has been applied in the accompanying financial statements with respect to the Partnership's interests in JMB First Financial Associates ("First Financial") (prior to its sale in September 1996) and JMB/Miami International Associates ("JMB/Miami") (prior to the Partnership's sale of its Partnership interest therein in April 1996). Accordingly, the accompanying financial statements do not include the accounts of First Financial and JMB/Miami. The Partnership's records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying financial statements have been prepared from such records after making appropriate adjustments where applicable to reflect the Partnership's accounts in accordance with generally accepted accounting principles ("GAAP") (and to consolidate the accounts of its majority owned venture in 1996). Such GAAP and consolidation adjustments are not recorded on the records of the Partnership. The net effect of these items is summarized as follows for the years ended December 31, 1997 and 1996:
1997 1996 ------------------------------ ------------------------------ TAX BASIS TAX BASIS GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED) ------------ ----------- ------------ ----------- Total assets. . . . . . . . . . . . $22,059,131 38,163,238 80,097,683 98,913,009 Partners' capital accounts (deficits): General partners. . . . . . . . . (828,047) 235,083 (889,068) 180,325 Limited partners. . . . . . . . . 15,893,904 30,716,105 52,734,630 71,153,760 Net earnings (loss): General partners. . . . . . . . . 131,960 125,696 262,309 1,103,238 Limited partners. . . . . . . . . 8,489,547 4,892,617 14,613,325 13,511,562 Net earnings (loss) per Interest. . . . . . . . . . . 67.18 38.70 115.59 106.88 =========== =========== =========== ============
The net earnings (loss) per limited partnership interest is based upon the limited partnership interests outstanding at the end of the period (126,414). Deficit capital accounts will result, through the duration of the Partnership, in net gain for financial reporting and income tax purposes. 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 only to the extent of the Partnership's cumulative share of net earnings. The Partnership records amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($4,380,270 and $2,576,773 at December 31, 1997 and 1996, respectively) as cash equivalents, which includes investments in an institutional mutual fund which holds United States 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 deferred lease commissions and loan fees which are amortized over their respective terms 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 minimum lease payments over the term of the lease, the Partnership accrues rental income for the full period of occupancy on a straight-line basis. 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 instances, the Partnership has been required under applicable law to remit directly to the tax authorities amounts representing withholding from distributions paid to Partners. The Partnership has acquired, either directly or through joint ventures, three shopping centers, two multi-tenant industrial buildings, an office complex and a parking/retail structure. In January 1992, the Partnership's interest in the Mid Rivers Mall was sold. In 1996, the Partnership's interest in the First Financial office building and the Miami International Mall were sold. In 1997, the Partnership's interest in the Cerritos Industrial Park, Rivertree Court Shopping Center, one of the land parcels that compose the Fountain Valley Industrial Park located in Fountain Valley, California, and the Adams/Wabash Self-Park were sold. The remaining property owned at December 31, 1997 is in operation. The cost of the investment properties represents the total cost to the Partnership 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 to be 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 the remaining property would ultimately be realized by the Partnership in any future sale or disposition transaction. The remaining property was classified as held for sale as of December 31, 1996, and therefore, has not been subject to continued depreciation. The results of operations for consolidated properties classified as held for sale or disposition as of December 31, 1997 or sold or disposed of during the past three years were $1,254,195, $3,468,110 and ($5,149,790), respectively, for the years ended December 31, 1997, 1996 and 1995. In addition, the accompanying consolidated financial statements include $0, $258,637 and $760,913, respectively, of the Partnership's share of total property operations of $0, $1,016,511 and $3,519,977 of unconsolidated properties held for sale or disposition as of December 31, 1997 or sold or disposed of in the past three years. During the second quarter of 1997, Statements of Financial Accounting Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of Information about Capital Structure") were issued. These standards became effective for reporting periods after December 15, 1997. As the Partnership's capital structure only has general and limited partnership interests, the Partnership will not experience any significant impact on its consolidated financial statements. The remaining investment property is pledged as security for the long- term debt, for which there is no recourse to the Partnership. INVESTMENT PROPERTIES CERRITOS INDUSTRIAL PARK On May 29, 1997, the Partnership sold the land and related improvements known as the Cerritos Industrial Park to an unaffiliated third-party for $7,500,000. The Partnership realized net sale proceeds of approximately $4,074,000 after repayment of the mortgage loan securing the property in the amount of $3,168,000, the payment of the prepayment premium and reconveyance fee on such loan of approximately $78,700 (which was included as an extraordinary item in the Partnership's 1997 consolidated financial statements) and the payment of selling expenses of approximately $180,000. The sale of the property resulted in an approximate $1,474,000 gain on sale to the Partnership in 1997 for financial reporting purposes. The Partnership recognized a loss of approximately $2,228,000 for Federal income tax purposes in 1997. In addition, in connection with the sale of this property and as is customary in such transactions, the Partnership agreed to certain representations and warranties, with a stipulated survival period which expired December 15, 1997 with no liability to the Partnership. The property was 100% occupied at the date of sale. The Partnership made a cash distribution of $35 per Interest from the sale proceeds in August 1997. The Cerritos Industrial Park investment property was classified as held for sale or disposition at October 1, 1996, and therefore, has not been subject to continued depreciation since that date. As of September 30, 1995, due to the uncertainty at such time of the Partnership's ability to recover the net carrying value of the Cerritos Industrial Park investment property through future operations and sale, given the expected holding period not being in excess of December 31, 1999, the Partnership recorded, as a matter of prudent accounting practice, a provision for value impairment of such investment of $4,000,000. Such provision was recorded 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. FOUNTAIN VALLEY INDUSTRIAL PARK On December 31, 1996, the Partnership sold one of the buildings and related land parcel at the Fountain Valley Industrial Park to the unaffiliated tenant that had been leasing the building. The sale price was $665,000 and the net sale proceeds, after paying down $350,000 of the outstanding mortgage as required by the Lender and closing costs, were $255,723. The sale resulted in approximately $218,000 and $121,000 of gain for financial reporting and Federal income tax purposes, respectively, in 1996. On May 1, 1997, the Partnership sold a 12,702 square foot building and related land parcel within the park to the current tenant for a sales price of $970,000. As a result of this sale, the lender required a $470,000 prepayment of the outstanding mortgage and a prepayment premium of approximately $11,000 (which was included as an extraordinary item in the Partnership's 1997 consolidated financial statements). The net sale proceeds to the Partnership were approximately $436,000 after payment of closing costs and the prepayment premium to the lender. The sale of the building and related land parcel resulted in an approximate $375,000 gain on sale to the Partnership for financial reporting purposes and approximately $253,000 for Federal income tax purposes in 1997. During the first quarter of 1998, the Partnership entered into an agreement to sell the remainder of the property in 1998 to an unaffiliated third party. However, in March 1998, the sale agreement terminated without completion of the sale. An environmental issue was discovered in connection with the potential buyer's due diligence investigation of the property. Based on preliminary testing, there currently appears to be some contamination of the groundwater under the property. The Partnership has temporarily suspended the active marketing of the property for sale while it undertakes an assessment of the source, nature and extent of the contamination. Based upon preliminary information, the Partnership does not believe that the costs of assessing and, if necessary, remediating the contamination will be material, although there is no assurance that such will be the case. The Partnership expects to remarket the property after such testing permits it to estimate the cost, if any, to remediate such condition, and continues to expect to liquidate its remaining net assets no later than the end of 1999. Effective June 1, 1997, the Partnership's 7.32% mortgage note, originally secured by both the Fountain Valley Industrial Park and the Cerritos Industrial Park investment properties, was modified due to the sales of the Cerritos Industrial Park in 1997 and sales of the outparcels at the Fountain Valley Industrial Park in 1996 and 1997. In conjunction with the property sales described above, the Partnership was required to repay principal of approximately $3,988,000 on the outstanding mortgage note. Accordingly, the $88,998 monthly loan installments of principal and interest were recast downward to $53,823. The loan is currently solely collateralized by the remainder of the Fountain Valley Industrial Park owned by the Partnership. The Fountain Valley Industrial Park investment property has been classified as held for sale or disposition at December 31, 1996, and therefore, will not be subject to continued depreciation after that date. New and renewal leases at the Fountain Valley Industrial Park may continue to require expenditures for lease commissions and tenant improvements prior to tenant occupancy. The costs incurred upon releasing may result in a decrease in cash flow from operations over the near term. As of September 30, 1995, due to the uncertainty at such time of the Partnership's ability to recover the net carrying value of the Fountain Valley Industrial Park investment property through future operations and sale, given the expected holding period not being in excess of December 31, 1999, the Partnership recorded, as a matter of prudent accounting practice, a provision for value impairment of $4,200,000. Such provision was recorded 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. There can be no assurance that the then estimated fair value of the property would ultimately be realized by the Partnership in any future sale or disposition transaction. RIVERTREE COURT SHOPPING CENTER The property was classified as held for sale or disposition at July 1, 1996, and therefore, has not been subject to continued depreciation since that date. On July 17, 1997, the Partnership sold the land and related improvements known as the Rivertree Court Shopping Center to an unaffiliated third-party for $31,175,000. The Partnership received approximately $14,915,000 of net sales proceeds at closing (which reflected the assumption by the buyer of the mortgage loan which had a current balance of approximately $15,700,000 and the payment of selling expenses and closing costs of approximately $560,000). Based upon the proposed sale price, the Partnership recognized a provision for value impairment of $2,500,000 on June 30, 1997. The sale resulted in a nominal gain for financial reporting purposes and the Partnership recognized an approximate loss of $965,000 for Federal income tax purposes in 1997. In addition, in connection with the sale of this property and as is customary in such transactions, the Partnership agreed to certain representations and warranties, with a stipulated survival period which expired on December 1, 1997 with no liability to the Partnership. VENTURE AGREEMENTS FIRST FINANCIAL On May 20, 1987, the Partnership, through First Financial, a joint venture with JMB-XII, 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 $7,500,000. The first mortgage loan on the property matured November 1, 1995. Effective November 1, 1995, Encino and the existing lender amended and restated the existing mortgage loan. The new principal balance of the amended note at November 1, 1995 was $24,970,148. This amount was comprised of the then outstanding principal portion of $28,970,148 on the original $30,000,000 note less a required $4,000,000 principal paydown by Encino, all of which was advanced by First Financial at closing of which the Partnership's share of such paydown was $1,500,000. 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 $1.5 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 $2,428,000. 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 the property's discounted estimated future cash flows over the projected holding period. 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 $309,750). 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 $1,268,000 and $28,000 of gain was allocated to the Partnership, respectively. 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 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 $400,000; 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 37.5% 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. JMB/MIAMI On January 26, 1988, the Partnership, through JMB/Miami International Associates ("JMB/Miami"), a general partnership with JMB/Miami Investors L.P., a partnership sponsored by an affiliate of the General Partners of the Partnership, acquired an interest in an existing partnership, West Dade County Associates ("West Dade") in which JMB/Miami was a general partner, with an affiliate of the developer (the "Venture Partner"), which owned an enclosed regional shopping center in Miami, Florida known as the Miami International Mall. During February 1989, IDS/JMB Balanced Income Growth, Ltd. ("IDS/JMB"), a partnership sponsored by an affiliate of the General Partners of the Partnership made a capital contribution to JMB/Miami to acquire an interest therein. During October 1993, JMB/Miami Investors L.P. transferred its interest in JMB/Miami to Urban Shopping Centers, L.P. ("Urban"), a partnership controlled by Urban Shopping Centers, Inc. (a public corporation organized by an affiliate of the General Partners of the Partnership). The Partnership's cash investment in JMB/Miami was $10,402,500. The terms of JMB/Miami 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 50% share of capital contributions. JMB/Miami invested $17,678,694 for a 50% interest in West Dade and $1,126,306 as a contribution for initial working capital requirements of West Dade. The West Dade venture agreement provided that JMB/Miami and the Venture Partner generally were each entitled to receive 50% of profits and losses, net cash flow and net sale or refinancing proceeds of West Dade and were each obligated to advance 50% of any additional funds required under the terms of the West Dade venture agreement. West Dade sold a 4 acre outparcel of land at the Miami International Mall in December 1994 for a net sales price of approximately $1,466,000 after certain selling costs, of which the Partnership's share was approximately $367,000. For financial reporting purposes, West Dade has recognized a gain in 1994 of approximately $1,195,000, of which the Partnership's share is approximately $299,000. For income tax purposes, West Dade has recognized a gain in 1994 of approximately $985,000, of which the Partnership's share is a gain of approximately $274,000. On April 8, 1996, effective March 31, 1996, JMB/Miami was voluntarily dissolved by agreement of its partners and its 50% ownership interest in West Dade and related assets were distributed to its partners based on their respective ownership percentages. Accordingly, the Partnership acquired a direct 25% ownership interest in West Dade. The Partnership then sold its entire 25% interest in West Dade as described below. On April 8, 1996, the Venture Partner purchased 29.812% (i.e., a 7.453% interest) of the Partnership's interest in West Dade for $4,005,624 (paid in cash at closing), subject to proration. The Venture Partner also assumed a proportionate share of the Partnership's obligations and liabilities of West Dade from and after March 31, 1996, the effective date of the transaction. The Venture Partner is not affiliated with the Partnership or its General Partners, and the terms of the sale were determined by arm's-length negotiations. Concurrently, Urban exercised its right of first refusal and purchased the other 70.188% of the Partnership's interest (i.e., a 17.547% interest) in West Dade for $9,431,107 (paid in cash at closing), subject to proration. Urban also assumed a proportionate share of the Partnership's share of obligations and liabilities of West Dade from and after the effective date of the transaction. The price of the interest sold to Urban was in proportion to that sold to the Venture Partner, and the other terms of the sale with Urban were based on those applicable to the sale with the Venture Partner. In addition, West Dade agreed to indemnify the Partnership generally from and against claims and liabilities incurred by the Partnership in connection with West Dade or its property after the effective date of the transaction. The Partnership recognized an approximate $9,604,000 gain for financial reporting purposes and recognized a gain of approximately $11,475,000 for Federal income tax purposes in 1996. The shopping center was managed by an affiliate of the Venture Partner. The manager is paid an annual fee equal to 4-1/2% of the net operating income of the shopping center. ADAMS/WABASH On April 19, 1988, an affiliate of the Partnership entered into a forward commitment on behalf of the Partnership to make a cash investment in the Adams/Wabash Limited Partnership ("Adams/Wabash"), which constructed a parking garage and retail space structure (the "Project") in Chicago, Illinois. The Project contained 671 parking spaces and approximately 28,800 square feet of rentable retail area. The Partnership funded approximately $24,994,000 in full satisfaction of its total cash commitment. Upon acquisition, the Partnership was admitted to Adams/Wabash with a 49.9% ownership interest, which increased to 74.9% effective October 1, 1993, pursuant to the terms of the Adams/Wabash Partnership Agreement. The Managing General Partner of the Partnership had a .1% interest with the remaining 25% held by the developers. The Partnership was entitled to a cumulative annual preferred return, payable from operating cash flow, of 10% of its capital contributions to the existing partnership. Any distributable cash flow in excess of the Partnership's preferred return would have been distributed in accordance with the ownership interests of Adams/Wabash. The Partnership also had a preferred position with respect to distributions of sales and financing proceeds. Items of profit and loss were, in general, allocated in accordance with distributions of cash flow. Accordingly, for financial reporting purposes, for the years ended December 31, 1996 and 1995, the Partnership was allocated 100% of the operating profits of Adams/Wabash. Although the Partnership received its preferred returns for 1994 and 1995, as of December 31, 1997, the Partnership had a cumulative deficiency in its annual preferred return of approximately $1,000,000. Effective November 1, 1996, an affiliate of the General Partners assumed the management of the retail portion of the property for an annual fee equal to 5% of the gross revenue of the retail portion of the property, the same terms as the previous unaffiliated manager. The property was classified as held for sale or disposition at December 31, 1996, and therefore, was not subject to continued depreciation after that time. On August 11, 1997, the Adams/Wabash joint venture sold the Adams/Wabash Self-Park to an unaffiliated third party. The sale price of the land and improvements, determined by arm's-length negotiations, was $25,000,000. Net cash proceeds from the sale, net of closing costs and selling expenses of approximately $454,000, were approximately $24,546,000. The retail portion of the Property was 39% occupied at the date of sale. The Adams/Wabash joint venture reported a gain on sale of approximately $5,146,000, all of which is allocable to the Partnership for financial reporting purposes, in 1997. The Adams/Wabash joint venture recognized a gain of approximately $5,442,000 for Federal income tax reporting purposes, substantially all of which is allocable to the Partnership, in 1997. In addition, in connection with the sale of this property and as is customary in such transactions, the Adams/Wabash joint venture agreed to certain representations and warranties, with a stipulated survival period which expired on December 15, 1997 with no liability to the Partnership. In November 1997, the Partnership made a cash distribution of proceeds from the sales of the Adams/Wabash Self Park and the Rivertree Court Shopping Center totaling $300 per Interest. The Partnership was entitled to a cumulative annual preferred return, payable from operating cash flow, of 10% of its capital contributions to Adams/Wabash. Any distributable cash flow in excess of the Partnership's preferred return would have been distributed in accordance with the ownership interests of Adams/Wabash. The Adams/Wabash partnership agreement stipulated that sale or financing proceeds would be distributed such that the Partnership shall first receive any deficit in its cumulative annual preferred return followed by the return of the Partnership's original capital investment in Adams/Wabash of approximately $24,994,000. Since there was a deficit in the Partnership's cumulative preferred annual return and net sale proceeds were below the Partnership's original capital investment, all distributable sale proceeds were distributed to the Partnership. LONG-TERM DEBT Long-term debt consisted of the following at December 31, 1997 and 1996: 1997 1996 ----------- ----------- 10.03% mortgage note; secured by the Rivertree Court Shopping Center located in Vernon Hills (Chicago), Illinois; payable monthly, interest only; originally due January 1, 1999 but assumed by the buyer at sale of the property in July 1997. . . . . . . . . . . . $ -- 15,700,000 7.32% mortgage note; secured by the Fountain Valley Industrial Park located in Fountain Valley California; payable in monthly installments of principal and interest of $53,823, remaining principal balance of approximately $5,489,000 plus accrued interest due on March 1, 2001 partially repaid in 1997 as described below. . . . . . . . . . . . . . 6,176,838 10,096,638 ----------- ---------- Total debt. . . . . . . . . . 6,176,838 25,796,638 Less current portion of long-term debt . . . . . . . 200,366 313,664 ----------- ---------- Total long-term debt. . . . . $ 5,976,472 25,482,974 =========== ========== Five year maturities of long-term debt are summarized as follows: 1998 . . . . . . . . $ 200,366 1999 . . . . . . . . 215,535 2000 . . . . . . . . 231,853 2001 . . . . . . . . 5,529,084 2002 . . . . . . . . -- =========== FOUNTAIN VALLEY INDUSTRIAL PARK AND CERRITOS INDUSTRIAL PARK In December 1996, the Partnership sold one of the parcels and related building that compose the Fountain Valley Industrial Park investment property for a sale price of $665,000. The lender required a principal paydown of the loan in the amount of $350,000 which reduces the balloon payment due on March 1, 2001. Reference is made to the Fountain Valley footnote above for a further discussion of the sale. Effective June 1, 1997, the Partnership's 7.32% mortgage note, originally secured by both the Fountain Valley Industrial Park and the Cerritos Industrial Park investment properties, was modified due to the sales of the Cerritos Industrial Park in 1997 and sales of the outparcels at the Fountain Valley Industrial Park in 1996 and 1997. In conjunction with the property sales described above, the Partnership was required to repay principal of approximately $3,988,000 on the outstanding mortgage note. Accordingly, the $88,998 monthly loan installments of principal and interest were recast downward to $53,823. The loan is currently solely collateralized by the remainder of the Fountain Valley Industrial Park owned by the Partnership. PARTNERSHIP AGREEMENT Pursuant to the terms of the Partnership Agreement, net profits or losses of the Partnership from operations generally are allocated 96% to the Limited Partners and 4% to the General Partners. Profits or losses for Federal income tax purposes from the sale or refinancing of properties generally will be allocated 99% to the Limited Partners and 1% to the General Partners. However, net profits from the sale of properties will be additionally allocated to the General Partners (i) to the extent that cash distributions to the General Partners of sale proceeds from such sale exceed the aforesaid 1% of such profits 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 additional properties. The General Partners have made capital contributions to the Partnership aggregating $20,000. The General Partners are not required to make any additional capital contributions except under certain limited circumstances upon dissolution and termination of the Partnership. Disbursable cash from operations, as defined in the Partnership Agreement, will be distributed 90% to the Limited Partners and 10% to the General Partners, subject to certain limitations. Sale or refinancing proceeds will be distributed 100% to the Limited Partners until the Limited Partners have received their contributed capital plus a stipulated return thereon. The General Partners will then receive 100% of the sale or refinancing proceeds until they receive amounts equal to (i) the cumulative deferral of their 10% distribution of disbursable cash and (ii) 2% of the selling prices of all properties which have been sold, subject to certain limitations. Any remaining sale or refinancing proceeds will then be distributed 85% to the Limited Partners and 15% to the General Partners. The cumulative amount of such deferred distributions are approximately $5,725,000 at December 31, 1997. All amounts deferred or currently payable do not bear interest. The Partnership does not expect that the subordination requirements of the Partnership agreement will be satisfied over the expected remaining term of the Partnership to permit payment of the majority of these amounts. Accordingly, the General Partners waived their right to receive the allocation of sale proceeds, which otherwise would have been deferred per above, from the sale of the Partnership's interest in the Miami International Mall and the First Financial Plaza in 1996 and the sale of the Cerritos Industrial Park, Adams/Wabash Parking Garage, Rivertree Court Shopping Center and the Fountain Valley Industrial Park outparcels in 1996 and 1997. LEASES - AS PROPERTY LESSOR The Partnership's principal asset is one multi-tenant industrial building complex. The Partnership 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 properties, excluding the cost of the land, is depreciated over their estimated useful lives. Leases with tenants range in term from one to fifteen years and provide for fixed minimum rent and partial reimbursement of operating costs. Cost and accumulated depreciation of the leased assets are summarized as follows at December 31, 1997: Industrial Building Complex: Cost . . . . . . . . . . . . . . . . . . . . $20,202,265 Accumulated depreciation . . . . . . . . . . 4,722,106 ----------- $15,480,159 =========== 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: 1998 . . . . . . . . . . . . . . . . . . . . . $ 1,922,837 1999 . . . . . . . . . . . . . . . . . . . . . 1,663,618 2000 . . . . . . . . . . . . . . . . . . . . . 1,552,206 2001 . . . . . . . . . . . . . . . . . . . . . 1,484,507 2002 . . . . . . . . . . . . . . . . . . . . . 1,039,017 Thereafter . . . . . . . . . . . . . . . . . . 1,565,701 ----------- Total . . . . . . . . . . . . . . . . . . $ 9,227,886 =========== TRANSACTIONS WITH AFFILIATES 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. In December 1994, one of the affiliated property managers sold substantially all of its assets and assigned its interest in its management contracts to an unaffiliated third party. In addition, certain of the management personnel of the property manager became management personnel of the purchaser and its affiliates. The successor to such affiliated property manager's assets is acting as the property manager of the Fountain Valley and Cerritos Industrial Parks after the assignment on the same terms that existed prior to the assignment. Effective November 1, 1996, an affiliate of the General Partners assumed the management of the retail portion of the Adams/Wabash Self Park for an annual fee equal to 5% of the gross revenue of the retail portion of the property, the same terms as the previous unaffiliated manager. 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, 1997, 1996 and 1995 are as follows: UNPAID AT DECEMBER 31, 1997 1996 1995 1997 -------- ------- ------- ------------ Property management and leasing fees . . . . $104,495 97,773 103,838 -- Insurance commissions . . 6,382 10,028 9,986 -- Reimbursement (at cost) for accounting services . . . . . . . . 5,823 4,416 76,545 1,444 Reimbursement (at cost) for portfolio manage- ment services. . . . . . 25,588 39,269 69,714 5,493 Reimbursement (at cost) for legal services . . . 6,473 7,578 1,762 2,171 Reimbursement (at cost) for administrative charges and other out-of-pocket expenses . -- 1,099 137,851 -- -------- ------- ------- ------ $148,761 160,163 399,696 9,108 ======== ======= ======= ====== In accordance with the subordination requirements of the Partnership Agreement, the General Partners have deferred payment of certain of their distributions of net cash flow and sale proceeds from the Partnership. All amounts deferred or currently payable do not bear interest. During 1994, certain officers and directors of the Managing General Partner acquired interests in a company which provides certain property management services to certain of the properties owned by the Partnership. The fees earned by such company from the Partnership's consolidated venture for the twelve months ended December 31, 1997 and 1996 were approximately $71,000 and $133,000, respectively, all of which was paid at December 31, 1997 and 1996. Effective November 1, 1996, and through its date of sale on August 11, 1997, an affiliate of the General Partners assumed the management of the retail portion of the Adams/Wabash Self Park for an annual fee equal to 5% of the gross revenue of the retail portion of the property, the same terms as the previous unaffiliated manager. INVESTMENT IN UNCONSOLIDATED VENTURES The Partnership sold its interests in First Financial and JMB/Miami during 1996. Summary combined financial information for First Financial and JMB/Miami for the years ended December 31, 1996 and 1995 are as follows: 1996 1995 ----------- ---------- Total income. . . . . . . . . . . . . . $ 7,227,991 19,328,590 =========== ========== Operating expenses. . . . . . . . . . . $ 6,209,999 15,808,613 =========== ========== Operating earnings. . . . . . . . . . . $ 1,017,992 3,519,977 =========== ========== Gain on sale of land and property . . . $ 2,882,573 -- =========== ========== Net income. . . . . . . . . . . . . . . $ 3,900,565 3,519,977 =========== ========== SCHEDULE III JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997
COSTS CAPITALIZED INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED PARTNERSHIP (A) ACQUISITION (C) AT CLOSE OF PERIOD (B) ----------------------- ------------------------------------------------------------- BUILDINGS BUILDINGS BUILDINGS ENCUM- AND AND AND BRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL (D) ------ -------- ----------------------- ------------ -------- ------------ ---------- Industrial Complex: Fountain Valley Industrial Park . . . . . $6,176,838 6,751,729 16,589,910 (1,477,613) (1,661,761) 5,274,116 14,928,149 20,202,265 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total . . . $6,176,838 6,751,729 16,589,910 (1,477,613) (1,661,761) 5,274,116 14,928,149 20,202,265 ========== ========== ========== ========== ========== ========== ========== ==========
SCHEDULE III - CONTINUED JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
LIFE ON WHICH DEPRECIATION IN LATEST STATEMENT OF 1997 ACCUMULATED DATE OF DATE OPERATIONS REAL ESTATE DEPRECIATION(E) CONSTRUCTION ACQUIRED IS COMPUTED TAXES ---------------- ------------ ---------- --------------- ----------- Industrial Complex: Fountain Valley Industrial Park. . . . . . . . . . $4,722,106 1967-1970 11/1/88 5-30 years 222,437 ---------- -------- Total . . . . . . . . . . . . . $4,722,106 222,437 ========== ======== - ------------------ (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, 1997 for Federal income tax purposes was $23,823,220. (C) The Partnership recorded a provision for value impairment of $4,200,000 in 1995 which was recorded as a reduction to land and building and improvements.
SCHEDULE III - CONTINUED JMB INCOME PROPERTIES, LTD. - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED (D) Reconciliation of real estate owned:
1997 1996 1995 ------------ ------------ ----------- Balance at beginning of period . . . . . . . . . $91,023,463 90,740,661 98,660,035 Additions during period. . . . . . . . . . . . . 127,500 678,815 280,626 Reductions during period . . . . . . . . . . . . (68,448,698) (396,013) -- Provision for value impairment . . . . . . . . . (2,500,000) -- (8,200,000) ----------- ----------- ----------- Balance at end of period . . . . . . . . . . . . $20,202,265 91,023,463 90,740,661 =========== =========== =========== (E) Reconciliation of accumulated depreciation: Balance at beginning of period . . . . . . . . . $18,305,156 16,583,348 14,115,282 Depreciation expense . . . . . . . . . . . . . . -- 1,721,808 2,468,066 Reductions during period . . . . . . . . . . . . (13,583,050) -- -- ----------- ----------- ----------- Balance at end of period . . . . . . . . . . . . $ 4,722,106 18,305,156 16,583,348 =========== =========== ===========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no changes of, or disagreements with, accountants during fiscal years 1997 and 1996. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP The Managing General Partner of the Partnership is JMB Realty Corporation ("JMB"), a Delaware Corporation, substantially all of the outstanding stock of which is owned, directly or indirectly, by certain of its officers, directors, members of their families and their affiliates. JMB has responsibility for all aspects of the Partnership's operations. AGPP Associates, L.P., an Illinois limited partnership, with JMB as its sole general partner, is an Associate General Partner of the Partnership. The limited partners of AGPP Associates, L.P. are generally officers, directors and affiliates of JMB or its affiliates. AGPP Associates, L.P. is also the sole general partner of Income Partners-XIII, an Illinois limited partnership that is the other Associate General Partner of the Partnership. The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that the General Partners and their affiliates are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership or its investment properties by affiliates of the General Partners, including insurance brokerage services. In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership under certain circumstances, including, in certain geographical markets, for tenants and/or for the sale of property. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell a property, the establishment and maintenance of reasonable reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations. The names, positions held and length of service therein of each director and the executive and certain other officers of the Managing General Partner of the Partnership are as follows: SERVED IN NAME OFFICE OFFICE SINCE - ---- ------ ------------ Judd D. Malkin Chairman 5/03/71 Director 5/03/71 Chief Financial Officer 2/22/96 Neil G. Bluhm President 5/03/71 Director 5/03/71 Burton E. Glazov Director 7/01/71 Stuart C. Nathan Executive Vice President 5/08/79 Director 3/14/73 A. Lee Sacks Director 5/09/88 John G. Schreiber Director 3/14/73 H. Rigel Barber Chief Executive Officer 8/01/93 Executive Vice President 1/02/87 Glenn E. Emig Executive Vice President 1/01/93 Chief Operating Officer 1/01/95 Gary Nickele Executive Vice President 1/01/92 General Counsel 2/27/84 Gailen J. Hull Senior Vice President 6/01/88 Howard Kogen Senior Vice President 1/02/86 Treasurer 1/01/91 There is no family relationship among any of the foregoing directors or officers. The foregoing directors have been elected to serve a one-year term until the annual meeting of the Managing General Partner to be held on June 3, 1998. All of the foregoing officers have been elected to serve one-year terms until the first meeting of the Board of Directors held after the annual meeting of the Managing General Partner to be held on June 3, 1998. There are no arrangements or understandings between or among any of said directors or officers and any other person pursuant to which any director or officer was elected as such. JMB is the corporate general partner of Carlyle Real Estate Limited Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle- - -XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and the managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI") and JMB Income Properties, Ltd.-XII ("JMB Income-XII"). JMB is also the sole general partner of the associate general partner of most of the foregoing partnerships. Most of the foregoing directors and officers are also officers and/or directors of various affiliated companies of JMB including Arvida/JMB Managers, Inc. (the general partner of Arvida/JMB Partners, L.P. ("Arvida")) and Income Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")). Most of such directors and officers are also partners, directly or indirectly, of certain partnerships which are associate general partners in the following real estate limited partnerships: the Partnership, Carlyle-VII, Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB Income-VII, JMB Income-X, JMB Income-XI, JMB Income-XII, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG. The business experience during the past five years of each such director and officer of the Managing General Partner of the Partnership in addition to that described above is as follows: Judd D. Malkin (age 60) is an individual general partner of JMB Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since October, 1969. Mr. Malkin is also a director of Urban Shopping Centers, Inc. ("USC, Inc."), an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. He is a Certified Public Accountant. Neil G. Bluhm (age 60) is an individual general partner of JMB Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since August, 1970. Mr. Bluhm is also a principal of Walton Street Real Estate Fund I, L.P. and a director of USC, Inc. He is a member of the Bar of the State of Illinois and a Certified Public Accountant. Burton E. Glazov (age 59) has been associated with JMB since June, 1971 and served as an Executive Vice President of JMB until December of 1990. He is a member of the Bar of the State of Illinois and a Certified Public Accountant. Stuart C. Nathan (age 56) has been associated with JMB since July, 1972. He is a member of the Bar of the State of Illinois. A. Lee Sacks (age 64) has been associated with JMB since December, 1972. He is also President and a director of JMB Insurance Agency, Inc. John G. Schreiber (age 51) has been associated with JMB since December, 1970 and served as an Executive Vice President of JMB until December 1990. Mr. Schreiber is President of Schreiber Investments, Inc., a company which is engaged in the real estate investing business. He is also a senior advisor and partner of Blackstone Real Estate Advisors L.P., an affiliate of the Blackstone Group, L.P. Mr. Schreiber is also a director of USC, Inc., a trustee of Amli Residential Property Trust and a director of a number of investment companies advised or managed by T. Rowe Price Associates and its affiliates. He holds a Masters degree in Business Administration from Harvard University Graduate School of Business. H. Rigel Barber (age 48) has been associated with JMB since March, 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois. Glenn E. Emig (age 50) has been associated with JMB since December, 1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig was Executive Vice President and Treasurer of JMB Institutional Realty Corporation. He holds a Masters Degree in Business Administration from the Harvard University Graduate School of Business and is a Certified Public Accountant. Gary Nickele (age 45) has been associated with JMB since February, 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois. Gailen J. Hull (age 49) has been associated with JMB since March, 1982. He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant. Howard Kogen (age 62) has been associated with JMB since March, 1973. He is a Certified Public Accountant. ITEM 11. EXECUTIVE COMPENSATION The officers and director of the Managing General Partner receive no current or proposed direct remuneration in such capacities. Pursuant to the Partnership Agreement, the General Partners of the Partnership are entitled to receive a share of cash distributions, when and as cash distributions are made to the Investors, and a share of profits or losses. Reference is also made to the Notes for a description of such transactions, distributions and allocations. In 1997, 1996 and 1995, the General Partners received cash distributions in the amount of $70,939, $241,193 and $156,067, respectively. As of December 31, 1997, the General Partners have deferred payment of distributions in the aggregate amount of approximately $5,725,000. The General Partners of the Partnership may be reimbursed for their direct expenses relating to the offering, the administration of the Partnership and the operation of the Partnership's real property investments. The General Partners may be reimbursed for salaries and salary-related direct expenses of officers and employees of the Managing General Partner and its affiliates while directly engaged in the administration of the Partnership and the operation of the Partnership's real property investments. In 1997, the Managing General Partner was due reimbursement for such expenses in the amount of $37,884 of which $9,108 was unpaid as of December 31, 1997. Affiliates of the General Partners have provided property management services for the Rivertree Court Shopping Center and the retail portion of the Adams/Wabash Self Park during 1997. In 1997, such affiliates earned aggregate property management fees amounting to $104,495, all of which was paid as of December 31, 1997. Certain directors and officers of the General Partners have an equity interest in a company that provided property management services for the Adams/Wabash Self Park during 1997. In 1997, such company earned aggregate property management fees amounting to $93,684, all of which was paid at December 31, 1997. JMB Insurance Agency, Inc., an affiliate of the Managing General Partner of the Partnership, earned and received insurance brokerage commissions in 1997 aggregating $6,382 in connection with the providing of insurance coverage for certain of the real property investments of the Partnership. Such commissions are at rates set by insurance companies for the classes of coverage provided. The Partnership is permitted to engage in various transactions involving affiliates of the Managing General Partner of the Partnership. The relationship of the Managing General Partner (and its directors and officers) to its affiliates is set forth in Item 10 above and Exhibit 21 hereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding Interests of the Partnership. (b) The Managing General Partner, its officers and directors and the Associate General Partners own the following Interests of the Partnership: NAME OF AMOUNT AND NATURE BENEFICIAL OF BENEFICIAL PERCENT TITLE OF CLASS OWNER OWNERSHIP OF CLASS - -------------- ---------- ----------------- -------- Limited Partnership Interests and Assignee Interests Therein JMB Realty Corporation 5 Interests (1) Less than 1% indirectly Limited Partnership Interests Managing General Partner, 5 Interests (1) Less than 1% its officers and indirectly directors and the Associate General Partners as a group (1) Includes 5 Interests owned by the Initial Limited Partner of the Partnership for which JMB Realty Corporation, as its indirect majority shareholder, is deemed to have sole investment and voting power. All of the outstanding shares of the Managing General Partner of the Partnership are owned by an affiliate of its officers and directors as set forth above in Item 10. Reference is made to Item 10 for information concerning ownership of the Managing General Partner. (c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date result in a change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There were no significant transactions or business relationships with the Managing General Partner, affiliates or their management other than those described in Items 10 and 11 above. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: (1) Financial Statements (See Index to Financial Statements filed with this annual report). (2) Exhibits. 3-A. The Prospectus of the Partnership dated August 20, 1986 as supplemented October 31, 1986 and January 26, 1987 as filed with the Commission pursuant to Rules 424(b) and 424(c) is hereby incorporated herein by reference to Exhibit 3-A to the Partnership's Form 10-K dated March 18, 1993. 3-B. Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which is hereby incorporated by reference to Exhibit 3-B to the Partnership's From 10-K dated March 18, 1993. 3-C. Acknowledgement of rights and duties of the General Partners of the Partnership between AGPP Associates, L.P. (a successor Associated General Partner of the Partnership) and JMB Realty Corporation as of December 31, 1995 is hereby incorporated herein by reference to the Partnership's report for June 30, 1996 on Form 10-Q (File No. 000-19496) dated August 9, 1996. 10-A. Acquisition documents relating to the purchase by the Partnership of Fountain Valley Industrial Buildings in Fountain Valley, California and Cerritos Industrial Buildings in Cerritos, California, are hereby incorporated by reference to Exhibits 1 and 2 to the Partnership's Form 8-K dated November 15, 1988. 10-B. Option Agreement to sell Adams/Wabash Self Park, dated June 27, 1997, is hereby incorporated by reference to Exhibit 10.1 to the Partnership's Report for August 11, 1997 on Form 8-K (File No. 000-19496). 10-C. Agreement to purchase Rivertree Court Shopping Center, dated June 11, 1997, and exhibits thereto are hereby incorporated herein by reference to Exhibit 10.1 to the Partnership's Report for July 17, 1997 on Form 8-K (File No. 000-19496). 21. List of Subsidiaries. 24. Powers of Attorney 27. Financial Data Schedule Although certain long-term debt instruments of the Registrant have been excluded from Exhibit 4 above, pursuant to Rule (b)(4)(iii), the Registrants commits to provide copies of such agreements to the Securities and Exchange Commission upon request. (b) No reports on Form 8-K were required to be filed during the last quarter of the period covered by this annual report. No annual report or proxy material for the fiscal year 1997 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JMB INCOME PROPERTIES, LTD. - XIII By: JMB Realty Corporation Managing General Partner GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date: March 25, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: JMB Realty Corporation Managing General Partner JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 25, 1998 NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 25, 1998 H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 25, 1998 GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 25, 1998 GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 25, 1998 A. LEE SACKS* By: A. Lee Sacks, Director Date: March 25, 1998 STUART C. NATHAN* By: Stuart C. Nathan, Executive Vice President and Director Date: March 25, 1998 *By: GAILEN J. HULL, Pursuant to a Power of Attorney GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 25, 1998 JMB INCOME PROPERTIES, LTD. - XIII EXHIBIT INDEX DOCUMENT INCORPORATED BY REFERENCE PAGE ------------ ---- 3-A. Pages 8-19, 64-70, A-7 to A-16, A-34 to A-35 of the Prospectus of the Partnership dated August 20, 1986, as supplemented on October 31, 1986, and January 26, 1987 Yes -- 3-B. Amended and Restated Agreement of Limited Partnership Yes -- 3-C. Acknowledgement of rights and duties of the General Partners of the Partnership Yes -- 10-A. Acquisition documents relating to the Fountain Valley Industrial Buildings and Cerritos Industrial Buildings Yes -- 10-B. Option Agreement to sell Adams/Wabash Self Park, dated June 27, 1997 Yes -- 10-C. Agreement to purchase Rivertree Court Shopping Center, dated June 11, 1997 Yes -- 21. List of Subsidiaries No 24. Powers of Attorney No 27. Financial Data Schedule No EX-21 2 EXHIBIT 21 LIST OF SUBSIDIARIES The Partnership was a limited partner in Adams/Wabash Limited Partnership, an Illinois limited partnership. Adams/Wabash Limited Partnership held title to the Adams/Wabash Self Park. Reference is made to the Notes to Financial Statements filed with this annual report for a summary description of the terms of such partnership agreement. The Partnership's interest in the foregoing joint venture partnership and the results of its operations are included in the Consolidated Financial Statements of the Partnership filed with this annual report. EX-24 3 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB Realty Corporation, the managing general partner of JMB INCOME PROPERTIES, LTD. - XIII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the undersigned with full power of authority to sign in the name and on behalf of the undersigned officers a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1997, and any and all amendments thereto, hereby ratifying and confirming all that said attorneys and agents and any of them may do by virtue hereof. IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney the 30th day of January, 1998. H. RIGEL BARBER - ----------------------- H. Rigel Barber Chief Executive Officer GLENN E. EMIG - ----------------------- Glenn E. Emig Chief Operating Officer The undersigned hereby acknowledge and accept such power of authority to sign, in the name and on behalf of the above named officers, a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1997, and any and all amendments thereto, the 30th day of January, 1998. GARY NICKELE ----------------------- Gary Nickele GAILEN J. HULL ----------------------- Gailen J. Hull DENNIS M. QUINN ----------------------- Dennis M. Quinn EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB Realty Corporation, the managing general partner of JMB INCOME PROPERTIES, LTD. - XIII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the undersigned with full power of authority to sign in the name and on behalf of the undersigned officers a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1997, and any and all amendments thereto, hereby ratifying and confirming all that said attorneys and agents and any of them may do by virtue hereof. IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney the 30th day of January, 1998. NEIL G. BLUHM - ----------------------- President and Director Neil G. Bluhm JUDD D. MALKIN - ----------------------- Chairman and Chief Financial Officer Judd D. Malkin A. LEE SACKS - ----------------------- Director of General Partner A. Lee Sacks STUART C. NATHAN - ----------------------- Executive Vice President Stuart C. Nathan Director of General Partner The undersigned hereby acknowledge and accept such power of authority to sign, in the name and on behalf of the above named officers, a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1997, and any and all amendments thereto, the 30th day of January, 1998. GARY NICKELE ----------------------- Gary Nickele GAILEN J. HULL ----------------------- Gailen J. Hull DENNIS M. QUINN ----------------------- Dennis M. Quinn EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT. 12-MOS DEC-31-1997 DEC-31-1997 4,666,891 0 1,188,327 0 0 5,855,218 15,480,159 0 22,059,131 856,399 5,976,472 0 0 0 15,065,857 22,059,131 7,583,750 8,483,213 0 2,445,579 3,089,967 0 1,422,849 1,524,818 0 1,524,818 7,186,234 (89,545) 0 8,621,507 67.18 67.18
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