ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial Statements contained in this report.
The registrant, JMB Income Properties, Ltd. - XII (the "Partnership"), is a limited partnership formed in 1984 and currently governed under the Revised Uniform Limited Partnership Act of the State of Illinois to invest in improved income-producing commercial and residential real property. On August 23, 1985, the Partnership commenced an offering to the public of $100,000,000 (subject to increase by up to $150,000,000) in Limited Partnership Interests (the "Interests") pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration No. 2-96716). A total of 189,679 Interests were sold to the public at $1,000 per Interest and were issued to Investors in fiscal 1986. The offering closed on January 17, 1986. No Investor has made any additional capital contribution after such date. The Investors in the Partnership share in their portion of the benefits of ownership of the Partnership's real property investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition, operation and sale and disposition of equity real estate investments. Such equity investments are held by fee title and/or through joint venture partnership interests. The Partnership's real estate investments are located throughout the nation and it has no real estate investments located outside of the United States. A presentation of information about industry segments, geographic regions, raw materials, or seasonality is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. Pursuant to the Partnership agreement, the Partnership is required to terminate on or before October 31, 2035. Accordingly, the Partnership intends to hold the real properties it acquires for investment purposes until such time as sale or other disposition appears to be advantageous. Unless otherwise described, the Partnership expects to hold its properties for long- term investment where, due to current market conditions, it is impossible to forecast the expected holding period. At sale of a particular property, the proceeds, if any, are generally distributed or reinvested in existing properties rather than invested in acquiring additional properties.
The Partnership has made the real property investments set forth in the following table:
The Partnership's real property investments are subject to competition from similar types of properties (including in certain areas properties owned or advised by affiliates of the General Partners) in the respective vicinities in which they are located. Such competition is generally for the retention of existing tenants. Additionally, the Partnership is in competition for new tenants in markets where significant vacancies are present. Reference is made to Item 7 below for a discussion of competitive conditions and future renovation and capital improvement plans of the Partnership and certain of its significant investment properties. Approximate occupancy levels for the properties are set forth in the table in Item 2
ITEM 2. PROPERTIES
The Partnership owns 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 occupancy levels by quarter during fiscal years 1993 and 1992 for the Partnership's investment properties owned during 1993:
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of holders of Interests during 1992 and 1993.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1993, there were 16,270 record holders of Interests of the Partnership. There is no public market for Interests and it is not anticipated that a public market for Interests will develop. Upon request, the Managing General Partner may provide information relating to a prospective transfer of Interests to an investor desiring to transfer his Interests. The price to be paid for the Interests, as well as any economic aspects of the transaction, will be subject to negotiation by the investor.
Reference is made to Item 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On August 23, 1985, the Partnership commenced an offering to the public of $100,000,000, subject to increase by up to $150,000,000, pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. On January 17, 1986, the initial and final closing of the offering was consummated with the dealer manager of the public offering (an affiliate of which is a limited partner of one of the Associate General Partners of the Partnership), and 189,679 Interests were issued by the Partnership, from which the Partnership received gross proceeds of $189,679,000.
After deducting selling expenses and other offering costs, the Partnership had approximately $171,306,000 with which to make investments in income-producing commercial real property, to pay legal fees and other costs (including acquisition fees) related to such investments and for working capital reserves. A portion of such proceeds was utilized to acquire the properties described in Item 1 above.
At December 31, 1993, the Partnership had cash and cash equivalents of approximately $1,471,000. Such funds and short-term investments of approximately $21,966,000 are available for working capital requirements including the funding of the Partnership's share of releasing costs and capital improvements at the San Jose, California, New York, New York and Encino, California real property investments. The Partnership and its consolidated ventures have currently budgeted in 1994 approximately $4,271,000 for tenant improvements and other capital expenditures, not including the improvements or additions related to the renovation of Topanga Plaza to be funded through the existing loan as discussed below and in Note 3(c). Such budgeted amounts also exclude the Partnership's share of the January 17, 1994 earthquake repair costs at Topanga Plaza which are estimated to be approximately $2,100,000 (as discussed below and in Note 10(b)). The Partnership's share of such items and its share of similar items for its unconsolidated ventures in 1994 is currently budgeted to be approximately $3,056,000. Actual amounts expended in 1994 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. Due to these commitments, the Partnership has reduced the operating distribution beginning with the first quarter 1993. Additionally, as more fully described in Notes 5 and 8, distributions to the General Partners have been deferred in accordance with the subordination requirements of the Partnership agreement. The source of capital for such items and for both short-term and long-term future liquidity and distributions is expected to be through cash generated by the Partnership's investment properties and through the sale of such investments. To the extent that a property does not produce adequate amounts of cash to meet its needs, the Partnership may withdraw funds from the working capital reserve which it maintains. The Partnership's and its ventures' mortgage obligations are all non-recourse. Therefore, the Partnership and its Ventures are not obligated to pay mortgage indebtedness unless the related property produces sufficient net cash flow from operations or sale.
On January 30, 1992, the Partnership through JMB/Mid Rivers Mall Associates, sold its interest in Mid Rivers Mall located in St. Peters, Missouri to an affiliate of an unaffiliated joint venture partner. The Partnership received, in connection with the sale, after all fees, expenses, and joint venture participation, net cash of $13,250,000. See Note 6 for a further description of the transaction.
Overall cash flow returns at Broad Street for the next few years are expected to be lower than originally projected because an additional 13% of the space currently leased and occupied expires during the next two years. In addition, a tenant, occupying approximately 37,000 square feet (approximately 15% of the building), did not renew its lease when it expired in September 1993. However, subtenants occupying approximately 21,000 square feet whose leases also expired in September 1993 have held over while Broad Street continues to negotiate leases with them. Furthermore, Broad Street has renewed and expanded another tenant, effective July 1, 1993, whose lease was scheduled to expire in December 1994. This tenant has expanded from approximately 18,000 square feet to approximately 35,000 square feet at a market effective rental rate which is lower than its previous lease. The Partnership will continue its aggressive leasing program; however, the downtown New York City market remains extremely competitive due to the significant amount of space available primarily resulting from the layoffs, cutbacks and consolidations by financial service companies and related businesses which dominated this market. In addition to competition for tenants in the downtown Manhattan market from other buildings in the area, there is increasing competition from less expensive alternatives to Manhattan.
In order to enhance the building's competitive position in the marketplace, the joint venture partners have recently completed certain modest upgrades to the building's main lobby and elevators. Rental rates in the downtown market are currently at depressed levels and this can be expected to continue for the foreseeable future while the current vacant space is gradually absorbed. Little, if any, new construction is planned for downtown over the next few years and it is expected that the building will continue to be adversely affected by the lower than originally projected effective rental rates now achieved upon releasing of existing leases which expire over the next few years. Therefore, the JMB/Broad Street joint venture recorded a provision for value impairment at December 31, 1991 to reduce the net book value of 40 Broad Street to $30,000,000 due to the uncertainty of JMB/Broad Street joint venture's ability to recover the net carrying value of the investment property through future operations or sale. An additional provision for value impairment was recorded at December 31, 1992 to further reduce the net book value of the property to the then estimated valuation of $7,800,000. Reference is made to Notes 1 and 3(d) for further discussion of the current status of this investment property. During 1991, the JMB/Broad Street joint venture was required to pay approximately $1,800,000 in transfer taxes (and related amounts) relating to the original acquisition of this investment property. See Note 3(d).
In January 1992, the Partnership advanced $575,000 to the JMB/San Jose joint venture for the payment of certain other operating expenses. These monies were paid back to the Partnership by the end of 1992. The venture partners notified the tenants in and invitees to the complex that some of the buildings, particularly the 100-130 Park Center Plaza Buildings and the garage below them, could pose a life safety hazard under certain unusually intense earthquake conditions. While the buildings and the garage were designed to comply with the applicable codes for the period in which they were constructed, and there is no legal requirement to upgrade the buildings for seismic purposes, the venture partners are working with consultants to analyze ways in which such a potential life safety hazard could be eliminated. However, since the costs of both re-leasing space and any seismic program could be substantial, the Partnership has commenced discussions with the appropriate lender for additional loan proceeds to pay for all or a portion of these costs.
The Partnership is also continuing to discuss terms for a possible loan extension with the mortgage lender on the 150 Almaden and 185 Park Avenue buildings and certain parking areas as the mortgage loan secured by this portion of the complex matured on October 1, 1993 and was extended to December 1, 1993. However, the Partnership and the lender have not been able to agree upon mutually acceptable terms for a loan extension and the lender has accelerated the loan. Should an agreement not be reached and as the Partnership does not have its share of the outstanding loan balance in its reserves in order to retire the loan, it is possible that the lender would exercise its remedies and seek to acquire title to this portion of the complex. Furthermore, should lender assistance be required to fund significant costs at the 100-130 Park Center Plaza buildings but not be obtained, the Partnership has decided not to commit any additional amounts to this portion of the complex since the likelihood of recovering such funds through increased capital appreciation is remote. The result would be that the Partnership would no longer have an ownership interest in this portion of the complex.
As a result, there is uncertainty about the ability to recover the net carrying value of the property through future operations and sale and accordingly, the JMB/San Jose joint venture has made a provision for value impairment on the 150 Almaden and 185 Park Avenue buildings and certain parking areas of $15,549,935. Such provision at December 31, 1993 is recorded to reduce the net carrying value of these buildings to the then outstanding balance of the related non-recourse financing. Due to the uncertainty of the JMB/San Jose joint venture's ability to recover the net carrying value of those buildings within the investment property through future operations or sale, the JMB/San Jose joint venture had recorded a provision for value impairment at December 31, 1991 of $21,175,127 to reduce the net book value of the 100-130 Park Center Plaza buildings and a certain parking area to an amount equal to the then outstanding balance of the related non-recourse financing. Additionally, at December 31, 1992, the JMB/San Jose joint venture recorded a provision for value impairment of $8,142,152 on certain other portions of the complex to amounts equal to the then outstanding balances of the related non-recourse financing. In the event the lender on any portion of the complex exercised its remedies as discussed above, the result would likely be that JMB/San Jose joint venture would no longer have an ownership interest in such portion. See Note 3(b) for further discussion of this investment property. Tenants occupying approximately 110,000 square feet (approximately 26% of the buildings) of the Park Center Plaza investment property have leases that expire in 1995, for which there can be no assurance of renewals.
On January 17, 1994, an earthquake occurred in Los Angeles, California. The epicenter was located in the town of Northridge which is approximately 6 miles from Topanga Plaza Shopping Center. Consequently, the entire mall, including the 4 major department stores who own their own buildings, suffered some casualty damage. The approximately 360,000 sq. ft. of mall shops owned by the Topanga Partnership did not suffer major structural damage. The estimated cost of the repairs at Topanga for which the joint venture is responsible is approximately $8.8 million. The majority of this cost will be subject to recovery under the joint venture's earthquake insurance policy after payment of the required deductible. The deductible on the building improvements, furniture and fixtures, and business interruption coverages due to loss of rents is approximately $2.1 million. The Partnership anticipates that it will pay for its share of insurance deductibles from its reserves without any material effect on its projected operations for 1994. As of the date of this report, 97 of the malls 114 shops have opened, and the remaining shops are expected to open during the upcoming weeks as tenants complete their repairs. Only one of the four major department stores has been able to open and it may take several weeks or months before the entire center is open and operating. The earthquake will result in some adverse effect on the operations of the center in the near term; the extent and length of which is not presently determinable.
The Partnership and its joint venture partner completed a renovation at the Topanga Plaza Shopping Center during 1992 of approximately $40,000,000. In conjunction with this renovation and remerchandising, the Partnership secured an extension of the operating covenant for the Nordstrom's department store to the year 2000 from an original expiration date in 1994. In addition, the Broadway store has also committed to operate in the center until the year 2000. The Partnership and its joint venture partner have refinanced the existing mortgage notes with replacement financing from the existing mortgage holder in the aggregate amount of approximately $59,000,000 which was funded in four stages. See Note 4(b) for further discussion of the refinancing of this loan.
The Plaza Hermosa Shopping Center was developed with proceeds raised through a municipal bond financing. This financing is secured by a letter of credit facility which is ultimately secured by a deed of trust on the property. The letter of credit facility expired December 31, 1993; however, the Partnership signed an agreement with the holder of the letter of credit to extend its expiration date to June 30, 1994. The Partnership is currently evaluating its alternatives, including seeking an extension of the existing letter of credit, replacing the bond financing with a conventional mortgage or retiring the debt with current cash reserves. The existing bond financing is due and payable upon the expiration of the letter of credit, and accordingly, has been classified as a current liability at December 31, 1993. There can be no assurance that any such replacement financing will be secured. This property did not sustain any significant damage in connection with the January 17, 1994 Los Angeles earthquake.
In 1995, the leases of tenants occupying approximately 33,000 square feet (approximately 35% of the property) at the Plaza Hermosa Shopping Center expire. Although the Partnership has received indications that some of these tenants will renew, there can be no assurance that such renewals will take place.
In July 1993, at the First Financial Plaza office building, a tenant, Mitsubishi vacated its approximate 8,100 square feet prior to its lease expiration of January 1997 and continues to pay rent pursuant to its lease obligation. In 1994, leases representing approximately 20% of the leasable square footage are scheduled to expire. Although renewal discussions with the majority of these tenants have been favorable, there can be no assurance that these tenants will review their leases upon expiration. The Los Angeles office market in general and the Encino submarket in particular have become extremely competitive resulting in higher rental concession granted to tenants and flat or decreasing market rental rates. Furthermore, due to the recession in southern California and to concern regarding tenants' ability to perform under current lease terms, the venture has granted rent deferrals and other forms of rent relief to several tents including First Financial Housing, an affiliate of the unaffiliated venture partner. The property incurred minimal damage as a result of the earthquake in southern California on January 17, 1994.
There are certain risks associated with the Partnership's investments made through joint ventures including the possibility that the Partnership's joint venture partners in an investment might become unable or unwilling to fulfill their financial or other obligations, or that such joint venture partners may have economic or business interests or goals that are inconsistent with those of the Partnership.
In response to the weakness of the economy and the limited amount of available real estate financing in particular, the Partnership is taking steps to preserve its working capital. Therefore, the Partnership is carefully scrutinizing the appropriateness of any discretionary expenditures, including the possible reduction of future distributions, particularly in relation to the amount of working capital it has available. By conserving working capital, the Partnership will be in a better position to meet future needs of its properties without having to rely on external financing sources.
RESULTS OF OPERATIONS
The increase in short-term investments, long-term debt and advances from affiliate and the decrease in construction costs payable and other long-term liabilities at December 31, 1993 as compared to December 31, 1992 is primarily due to the receipt of the funds advanced of approximately $735,000 by the joint venture partner at the Topanga Plaza and the receipt and use of the refinancing proceeds of the long-term debt related to the renovation at the Topanga Plaza as discussed above. The third funding of the refinancing of $18,400,000 was received on February 2, 1993, of which approximately $9,900,000 was used to payoff the other long-term liabilities and approximately $7,001,000 was used to paydown construction payables.
The increase in rents and other receivables at December 31, 1993 as compared to December 31, 1992 is primarily due to the timing of payment of certain tenant receivables of $292,000 at the Los Angeles, California investment property.
The increase in escrow deposits at December 31, 1993 as compared to December 31, 1992 is primarily due to the escrowing of funds for improvements as a result of a renewal and expansion of a certain tenant's space at 40 Broad Street. The increase in buildings and improvements at December 31, 1993 as compared to December 31, 1992 is primarily due to additions and expansion of a certain tenant's space of approximately $1,552,000 at 40 Broad Street, approximately $663,000 at the Topanga Plaza as a result of the renovation and re-merchandising of the property and approximately $430,000 at the First Financial Plaza.
The decrease in investment in unconsolidated ventures at December 31, 1993 as compared to December 31, 1992 and the decrease in the Partnership's share of operations of unconsolidated ventures for the twelve months ended December 31, 1993 as compared to the twelve months ended December 31, 1992 is primarily due to the JMB/San Jose joint venture recording at September 30, 1993 a provision for value impairment of $15,549,935 (of which the Partnership's share is $7,774,968) to reduce the net carrying value of the 150 Almaden and 185 Park Avenue buildings and certain parking areas to the then outstanding balance of the related non-recourse financing. The increase in the Partnership's share of operations of unconsolidated ventures for the twelve months ended December 31, 1992 as compared to the twelve months ended December 31, 1991 was primarily due to the Partnership's share of the provisions for value impairment recorded in 1991 at the San Jose, California investment property, partially offset in 1992 by the effect of an additional provision for value impairment recorded at December 31, 1992. See note 3(b).
The increase in accrued rents receivable at December 31, 1993 as compared to December 31, 1992 is primarily due to rents accrued ratably over the term of the lease rather than as paid at Topanga Plaza.
The increase in deferred expenses, and the corresponding increase of amortization of deferred expense for the twelve months ended and at December 31, 1993 as compared to December 31, 1992 is primarily due to the capitalization of certain expenses related to the renovation of Topanga Plaza.
The decrease in accrued interest at December 31, 1993 as compared to December 31, 1992 is primarily due to the new loan of $59,000,000 effective June 1, 1993 at the Topanga Plaza (see Note 3(c)).
The decrease in rental income for the twelve months ended December 31, 1993 as compared to the twelve months ended December 31, 1992 and 1991 is primarily due to decreased effective rents at the New York, New York investment property, lower occupancy at Plaza Hermosa and First Financial in 1993 and due to lower occupancy in 1992 at Topanga Plaza caused by the renovation as discussed in Note 3(c).
The decrease in interest income for the twelve months ended December 31, 1993 as compared to December 31, 1992 is primarily due to a decrease in the interest rates earned on U.S. Government obligations in 1993. Interest income increased for the twelve months ended December 31, 1992 as compared to the twelve months ended December 31, 1991 primarily due to the investment of the Mid Rivers sale proceeds in U.S. Government obligations in 1992.
Mortgage and other interest expense increased for the twelve months ended December 31, 1993 as compared to 1992 primarily due to the fundings by the Topanga mortgage lender of $16,000,000 in December 1992, $18,400,000 in February 1993 and $14,000,000 in June 1993 as more fully described in Note 4(b).
Depreciation expense increased for the twelve months ended December 31, 1993 as compared to 1992 due to the increase in building and improvements at 40 Broad Street, Topanga Plaza and First Financial Plaza. Depreciation expense decreased for the twelve months ended December 31, 1992 as compared to December 31, 1991 primarily due to the lower basis of assets at the New York, New York investment property due to the $28,870,198 provision for value impairment recorded at December 31, 1991.
Venture partners' share of consolidated ventures' operations decreased for the twelve months ended December 31, 1993 as compared to the twelve months ended December 31, 1992 primarily due to decreased earnings at the Topanga Plaza as a result of the renovation and re-merchandising as discussed above.
Partnership's share of gain on sale of interest in investment property of $5,655,876 decreased for the twelve months ended December 31, 1993 as compared to the twelve months ended December 31, 1992 due to the sale of the Partnership's interest in Mid Rivers in January, 1992 (see Note 6).
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.
To the extent that inflation in future periods does have an adverse impact on property operating expenses, the effect will generally be offset by amounts recovered from tenants as many of the long-term leases at the Partnership's commercial properties have escalation clauses covering increases in the cost of operating and maintaining the properties as well as real estate taxes. Therefore, there should be little effect on operating earnings if the properties remain substantially occupied. In addition, substantially all of the leases at the Partnership's shopping center investments contain provisions which entitle the Partnership to participate in gross receipts of tenants above fixed minimum amounts.
Future inflation may also cause capital appreciation of the Partnership's investment properties over a period of time to the extent that rental rates and replacement costs of properties increase.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
INDEX
Independent Auditors' Report Consolidated Balance Sheets, December 31, 1993 and 1992 Consolidated Statements of Operations, years ended December 31, 1993, 1992 and 1991 Consolidated Statements of Partners' Capital Accounts, years ended December 31, 1993, 1992 and 1991 Consolidated Statements of Cash Flows, years ended December 31, 1993, 1992 and 1991 Notes to Consolidated Financial Statements
Schedule --------
Supplementary Income Statement Information X Consolidated Real Estate and Accumulated Depreciation XI
Schedules not filed:
All schedules other than those indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.
JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP)
INDEX
Independent Auditors' Report Balance Sheets, December 31, 1993 and 1992 Statements of Operations, years ended December 31, 1993, 1992 and 1991 Statements of Partners' Capital Accounts, years ended December 31, 1993, 1992 and 1991 Statements of Cash Flows, years ended December 31, 1993, 1992 and 1991 Notes to Financial Statements.
Schedule --------
Supplementary Income Statement Information X Real Estate and Accumulated Depreciation XI
Schedules not filed:
All schedules other than those indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners JMB INCOME PROPERTIES, LTD. - XII:
We have audited the consolidated financial statements of JMB Income Properties, Ltd. - XII (a limited partnership) and consolidated ventures as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules 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 schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of JMB Income Properties, Ltd. - XII and consolidated ventures at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK
Chicago, Illinois March 25, 1994
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the accounts of the Partnership and its ventures, Topanga Plaza Partnership ("Topanga"), JMB-40 Broad Street Associates ("Broad Street"), JMB First Financial Associates ("First Financial") and First Financial's venture, JMB Encino Partnership, ("Encino") (note 3). The effect of all transactions between the Partnership and its ventures have been eliminated in the consolidated financial statements. The equity method of accounting has been applied in the accompanying consolidated financial statements with respect to the Partnership's venture interests in JMB/San Jose Associates ("San Jose"), JMB/Mid Rivers Mall Associates ("JMB/Rivers") and JMB/Rivers' venture, Mid Rivers Mall Associates, L.P. ("Mid Rivers"). Accordingly, the accompanying consolidated financial statements do not include the accounts of San Jose, JMB/Rivers and Mid Rivers. The Partnership, through JMB/Rivers sold its interest in Mid Rivers mall in January 1992.
Certain amounts in the 1992 and 1991 consolidated financial statements have been reclassified to conform with the 1993 presentation.
The Partnership's records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying consolidated financial statements have been prepared from such records after making appropriate adjustments to present the Partnership's accounts in accordance with generally accepted accounting principles ("GAAP") and to consolidate the accounts of the ventures as described above. Such adjustments are not recorded on the records of the Partnership. The net effect of these items for the years ended December 31, 1993 and 1992 is summarized as follows:
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The net earnings (loss) per limited partnership interest is based upon the number of limited partnership interests outstanding at the end of each period (189,684).
Statement of Financial Accounting Standards No. 95 requires the Partnership to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. Partnership distributions from its unconsolidated ventures are considered cash flow from operating activities to the extent of the Partnership's cumulative share of net earnings. In addition, the Partnership records amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these financial statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($0 and $1,985,253 at December 31, 1993 and 1992, respectively) as cash equivalents with any remaining amounts reflected as short-term investments.
Deferred expenses consist primarily of commitment fees and loan related costs which are amortized over the term of the related mortgage loans, and lease commissions which are amortized over the term of the related leases, using the straight-line method. Also included in deferred expenses are certain other charges which are amortized over the expected recovery period.
Although certain leases of the Partnership provide for tenant occupancy during periods for which no rent is due and/or increases in the minimum lease payments over the term of the lease, rental income is accrued for the full period of occupancy on a straight-line basis.
Statement of Financial Accounting Standards No. 107 ("SFAS 107"), "Disclosures about Fair Value of Financial Instruments", requires entities with total assets exceeding $150 million at December 31, 1993 to disclose the SFAS 107 value of all financial assets and liabilities for which it is practicable to estimate. Value is defined in the Statement as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes the carrying amount of its financial instruments classified as current assets and liabilities (excluding current portion of long-term debt) approximates SFAS 107 value due to the relatively short maturity of these instruments. There is no quoted market value available for any of the Partnership's other instruments. The debt, with a carrying balance of $94,585,440, has been calculated to have an SFAS 107 value of $101,959,833 by discounting the scheduled loan payments to maturity. Due to restrictions on transferability and prepayment and the inability to obtain comparable financing due to current levels of debt, previously modified debt terms or other property specific competitive conditions, the Partnership would be unable to refinance these properties to obtain such calculated debt amounts reported. (See note 4.) The Partnership has no other significant financial instruments.
In response to the significant vacancy levels coupled with the depressed rental rates in the downtown New York market, the JMB/Broad Street joint venture, as a matter of prudent accounting practice, has recorded provisions for value impairment on 40 Broad Street Office Building of $28,870,198 and $22,908,606 at December 31, 1991 and 1992, respectively. Such provisions were recorded to reduce the net basis of the investment property to $7,800,000 at December 31, 1992. Reference is made to note 3(d) for further discussion of the current status of this investment property.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Additionally, in response to the uncertainties relating to the JMB/San Jose joint venture's ability to recover the net carrying value of certain buildings within the Park Center Plaza investment property through future operations or sale, the JMB/San Jose joint venture, as a matter of prudent accounting practice, has recorded a provision for value impairment on certain parcels within the complex of $21,175,127. Such provision, made as of December 31, 1991, was recorded to reduce the net basis of the 100 Park Center Plaza Buildings and a certain parking area to the then outstanding balance of the related non-recourse debt. Additionally, a provision for value impairment of $8,142,152 was recorded at December 31, 1992 on certain other portions of the complex to reduce the net basis of these portions to the outstanding balance of the related non-recourse debt at December 31, 1992. Furthermore, a provision for value impairment on the 150 Almaden and 185 Park Avenue buildings and certain parking areas of $15,549,935 was recorded at September 30, 1993 to reduce the net to the then outstanding balance of the related non-recourse debt. Reference is made to note 3(b) for further discussion of the current status of this investment property.
No provision for State or Federal income taxes has been made as the liability for such taxes is that of the investors rather than the Partnership.
However, in certain circumstances, the Partnership has been required under applicable law to remit directly to the tax authorities amounts representing withholding from distributions paid to partners.
(2) INVESTMENT PROPERTIES
(a) General
The Partnership has acquired, either directly or through joint ventures (note 3), three shopping centers, two office buildings and an office complex. The Partnership sold, through JMB/Rivers, its interest in Mid Rivers Mall in January 1992. All of the remaining properties were in operation at December 31, 1993. The cost of the investment properties represents the total cost to the Partnership or its consolidated ventures plus miscellaneous acquisition costs.
Depreciation on the properties has been provided over the estimated useful lives of the various components as follows:
YEARS -----
Building and improvements -- straight-line 30 Personal property -- straight-line . . . . 5 ==
Maintenance and repairs are generally charged to operations as incurred. Significant betterments and improvements are capitalized and depreciated over their estimated useful lives.
Certain investment properties are pledged as security for the long-term debt, for which there is no recourse to the Partnership, as described in note 4. JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(b) Plaza Hermosa Shopping Center
During September 1986, the Partnership acquired a multi-building neighborhood shopping center in Hermosa Beach, California. The Partnership's purchase price for the shopping center was $18,290,000, of which $11,890,000 was paid in cash at closing. The balance of the purchase price is represented by bond financing in the amount of $6,400,000 (note 4). This financing is secured by a letter of credit facility which is ultimately secured by a deed of trust on the property. The letter of credit facility expired December 31, 1993; however, the Partnership signed an agreement with the issuer of the letter of credit to extend its expiration date to June 30, 1994. The Partnership is currently evaluating its alternatives, including seeking an extension of the existing letter of credit, replacing the bond financing with a conventional mortgage or retiring the debt with current cash reserves. The existing bond financing is due and payable upon the expiration of the letter of credit, and accordingly, has been classified as a current liability at December 31, 1993. There can be no assurance that any such replacement financing will be secured.
The property is managed by an affiliate of the General Partners of the Partnership for a fee calculated as 4% of gross receipts of the property.
(3) VENTURE AGREEMENTS
(a) General
The Partnership at December 31, 1993 is a party to four operating venture agreements (the Partnership, through JMB/Rivers, sold its interest in Mid Rivers Mall in January 1992) and has made capital contributions to the respective ventures as discussed below. Under certain circumstances, either pursuant to the venture agreements or due to the Partnership's obligations as a General Partner, the Partnership may be required to make additional cash contributions to the ventures.
There are certain risks associated with the Partnership's investments made through joint ventures including the possibility that the Partnership's joint venture partners in an investment might become unable or unwilling to fulfill their financial or other obligations, or that such joint venture partners may have economic or business interests or goals that are inconsistent with those of the Partnership.
(b) San Jose
The Partnership has acquired, through San Jose, an interest in an existing office building complex in San Jose, California (Park Center Financial Plaza). San Jose acquired nine office buildings and two parking garage structures in June 1985 for a purchase price of approximately $32,472,000 subject to long-term indebtedness of approximately $6,347,000. All of the properties were in operation when acquired.
In addition, in May 1986, San Jose purchased an additional office building (150 Almaden) and a parking and retail building (185 Park Avenue) in the Park Center Financial Plaza complex for a total purchase price of approximately $47,476,000. In conjunction with the acquisitions, San Jose reserved approximately $31,590,000 to fund debt service, leasing commissions, and capital and tenant improvements.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In September 1986, San Jose obtained a mortgage loan in the amount of $25,000,000 secured by the 150 Almaden and 185 Park Avenue buildings and certain parking areas. The outstanding principal balance, which is non-amortizing, bears interest at the rate of 9.5% per annum and had a scheduled maturity in October 1993 and was extended to December 1, 1993.
The property is managed by an affiliate of the General Partners of the Partnership for a fee calculated as 3% of gross receipts.
The partners of San Jose are the Partnership and JMB Income Properties, Ltd.-XI, another partnership sponsored by the Managing General Partner of the Partnership ("JMB-XI"). The terms of San Jose's partnership agreement generally provide that contributions, distributions, cash flow, sale or refinancing proceeds and profits and losses will be distributed or allocated to the Partnership in their respective 50% ownership percentages.
In 1991, all remaining amounts originally set aside by the Partnership to fund debt service, leasing commissions and capital and tenant improvement costs at Park Center Financial Plaza were utilized. In January 1992, the Partnership advanced $575,000 to the JMB/San Jose joint venture for the payment of certain operating expenses. These monies were paid back to the Partnership by the end of 1992. However, since the costs of both re-leasing space and any seismic program could be substantial, the Partnership has commenced discussions with the appropriate lender for additional loan proceeds to pay for all or a portion of these costs. The venture is also continuing to discuss terms for a possible loan extension with the mortgage lender on the 150 Almaden and 185 Park Avenue buildings and certain parking areas as the mortgage loan secured by this portion of the complex matured in October 1993 and was extended to December 1, 1993. However, the Partnership and the lender have not been able to agree upon mutually acceptable terms for a loan extension and the lender has accelerated the loan. Should an agreement not be reached and as the venture does not have its share of the outstanding loan balance in its reserves in order to retire the loan, it is possible that the lender would exercise its remedies and seek to acquire title to this portion of the complex. Furthermore, should lender assistance be required to fund significant costs at the 100-130 Park Center Plaza buildings but not be obtained, the venture has decided not to commit any additional amounts to this portion of the complex since the likelihood of recovering such funds through increased capital appreciation is remote. The result would be that the Partnership would no longer have an ownership interest in this portion of the complex.
As a result, there is uncertainty about the ability to recover the net carrying value of the property through future operations and sale and accordingly, the JMB/San Jose joint venture has made a provision for value impairment on the 150 Almaden and 185 Park Avenue buildings and certain parking areas of $15,549,935. Such provision at September 30, 1993 was recorded to reduce the net carrying value of these buildings to the then outstanding balance of the related non-recourse financing. Due to the uncertainty of the JMB/San Jose joint venture's ability to recover the net carrying value of those buildings within the investment property through future operations or sale, the JMB/San Jose joint venture recorded a provision for value impairment at December 31, 1991 of $21,175,127 to reduce the net book value of the 100-130 Park Center Plaza buildings and a certain parking area to an amount equal to the then outstanding balance of the related non- recourse financing. Additionally, at December 31, 1992, the JMB/San Jose joint venture recorded a provision for value impairment of $8,142,152 on certain other portions of the complex to amounts equal to the then outstanding balances of the related non-recourse financing. In the event the lender on any portion of the complex exercised its remedies as discussed above, the result would likely be that JMB/San Jose joint venture would no longer have an ownership interest in such portion.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(c) Topanga
In December 1985, the Partnership acquired, through a joint venture partnership with an affiliate of the developer, a 58% interest in an existing two-level enclosed mall regional shopping center known as Topanga Plaza in the Woodland Hills area of Los Angeles, California. The aggregate purchase price for the Partnership's interest in the venture was approximately $25,263,000, which was paid in cash at closing. Under the terms of the joint venture agreement, the Partnership generally will be allocated or distributed 58% of profits and losses, cash flow from operations and sale or refinancing proceeds.
The shopping center is subject to a long-term management agreement with an affiliate of the joint venture partner. Under the terms of the management agreement, the manager is entitled to receive a management fee based on a formula which relates to direct and general overhead costs and expenses incurred in the operation of the property.
In 1990, the Topanga joint venture reached an agreement with an existing major department store to lease approximately 24,600 square feet of the department store owned retail space for a minimum term of ten years. Subleases have been executed with retail tenants for all of the leasable area within this space. Topanga paid approximately $1,600,000 (all of which was funded by December 31, 1991) for tenant improvements, leasing costs and other expenditures related to the sublease space. Topanga has funded these costs through advances by an affiliate of the venture partner which bore interest at approximately 9% as of December 31, 1991. In 1991, $272,367 of this interest was capitalized as construction period interest. Such advances were repaid in connection with the initial funding of the new mortgage, see note 4(b) for further discussion.
The Partnership and its joint venture partner completed a renovation of the Topanga Plaza Shopping Center during 1992. In conjunction with this renovation, the Partnership secured an extension of the operating covenant for the Nordstrom's department store to the year 2000 from an original expiration date in 1994. In addition, the Broadway store has also committed to operate in the center until the year 2000. The Partnership and its joint venture partner have refinanced the existing mortgage notes with replacement financing from the existing mortgage holder in the amount of approximately $59,000,000 which was funded in four stages. See Note 4(b) for a discussion of such refinancing. The joint venture partner has agreed to advance the joint venture funds for expenses incurred for certain redevelopment costs related to the expansion of Topanga Plaza. The balance of these advances was $735,000 at December 31, 1993. Such advances will be repaid to the joint venture partner as funds are made available from operations. Construction period interest of approximately $130,620 and $1,035,000, has been capitalized for the years ended December 31, 1993 and 1992, respectively.
The shopping center is subject to fire, life and safety code and ordinance requirements, which have changed since the property's original construction. Accordingly, the Partnership intends to comply with such revised regulations and fund such retrofit costs. In conjunction with the renovation, a substantial portion of such retrofit costs have been completed. The Partnership will fund any remaining costs from operations over the next several years, as tenant leases expire, until the entire building conforms to such requirements.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(d) Broad Street
During December 1985, the Partnership acquired, through Broad Street, a joint venture with JMB Income Properties, Ltd.-X, a partnership sponsored by an affiliate of the Managing General Partner, a 68.56% interest in an existing 24-story office building located at 40 Broad Street in New York, New York. Broad Street's purchase price for the building, which was paid in cash at closing, was approximately $65,100,000 of which the Partnership provided approximately $44,630,000.
The Partnership will be allocated or distributed profits and losses, cash flow from operations and sale or refinancing proceeds in the ratio of its capital contributions to Broad Street which is 68.56%.
During 1991, Broad Street was required to pay $1,797,827 for an assessed transfer tax related to the original acquisition of the investment property. Of this amount, the Partnership funded $1,232,560. A portion of the amount, $990,000, was capitalized in 1991. The remaining amount, $807,827, was reflected in the results of operations as penalty and interest.
The downtown New York City market remains extremely competitive due to the significant amount of space available primarily resulting from the layoffs, cutbacks and consolidations by financial service companies and related businesses which dominated this market. Rental rates in the downtown market are currently at depressed levels and this can be expected to continue for the foreseeable future while the current vacant space is gradually absorbed. Little, if any, new construction is planned for downtown over the next few years and it is expected that the building will continue to be adversely affected by the lower than originally projected effective rental rates now achieved upon releasing of existing leases which expire over the next few years. Therefore, the JMB/Broad Street joint venture recorded a provision for value impairment at December 31, 1991 to reduce the net book value of 40 Broad Street to $30,000,000 due to the uncertainty of JMB/Broad Street joint venture's ability to recover the net carrying value of the investment property through future operations or sale. An additional provision for value impairment was recorded at December 31, 1992 to further reduce the net book value of the property to the then estimated valuation of $7,800,000.
The property is managed by an affiliate of the General Partners of the Partnership for a fee calculated as 2% of gross receipts of the property.
(e) JMB/Rivers
In December 1986, the Partnership and JMB Income Properties, Ltd.-XIII (a partnership sponsored by an affiliate of the Managing General Partner, "JMB- XIII") formed JMB/Rivers, which entered into a joint venture ("Mid Rivers") with an affiliate of the developer ("Venture Partner") and acquired an interest in an enclosed regional shopping center then under construction in St. Peters, Missouri, known as Mid Rivers Mall. Under the terms of the venture agreement, JMB/Rivers contributed approximately $39,400,000, of which the Partnership's share was approximately $19,700,000. During January 1992, JMB/Rivers sold its interest in Mid Rivers Mall (see note 6).
The ultimate ownership percentages for JMB/Rivers and Venture Partner were established as 80% and 20%, respectively. Operating profits and losses were generally allocated in proportion to and to the extent of distributions as described above and, to the extent profits and losses exceeded such distributions, to the Partners in accordance with their respective ownership percentages. The terms of the JMB/Rivers agreement generally provided that
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
the Partnership was allocated or distributed, as the case may be, profits and losses, cash flow from operations and sale or refinancing proceeds in the ratio of its respective capital contributions to JMB/Rivers.
The shopping center was managed by an affiliate of the Venture Partner for a fee calculated as 4% of gross receipts of the property through the date of sale.
(f) First Financial
On May 20, 1987, the Partnership, through First Financial, a joint venture with JMB-XIII, acquired an interest in a general partnership ("Encino") with an affiliate of the developer ("Venture Partner") which owns an office building in Encino (Los Angeles), California. First Financial is obligated to make an initial investment in the aggregate amount of $49,850,000 of which approximately $49,812,000 of such contributions have been made to Encino. The Partnership's share of the remaining amounts, approximately $24,000, will be contributed when the Venture Partner complies with certain requirements.
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 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, is approximately $20,000,000, of which the Partnership's share is approximately $12,500,000. The outstanding principal balance of the third party first mortgage loan as of December 31, 1993 is $29,394,848.
The Encino partnership agreement generally provides that First Financial is 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 contributions. Any remaining cash flow is to be split equally between First Financial and the Venture Partner. Pepperdine University, under its tenant lease, is 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 have been allocated to First Financial in 1993, 1992 and 1991.
The Encino partnership agreement also generally provides that net sale proceeds and net refinancing proceeds (as defined), after any amounts due to Pepperdine University pursuant to its tenant lease, are to be distributed: first, to First Financial in an amount equal to its 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 Venture Partner in an amount equal to $600,000; any remaining proceeds are to be split equally between First Financial and the Venture Partner.
The terms of the First Financial partnership agreement provide that annual cash flow, net sale or refinancing proceeds, and tax items will be distributed or allocated, as the case may be, to the Partnership in proportion to its 62.5% share of capital contributions.
The office building is managed by an affiliate of the Venture Partner for a fee based upon a percentage of rental receipts (as defined) of the property.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(b) Debt Refinancing
In January 1992, the Partnership and its joint venture partner finalized the refinancing of the existing mortgage notes at Topanga Plaza with replacement financing from the existing mortgage holder in the aggregate amount of $59,000,000 which was funded in four stages. Included in the initial funding was the $1,600,000 repayment of advances by an affiliate of the venture partner, the $1,500,000 refinancing of a portion of the existing mortgage and $2,300,000 representing a return to the Partnership of prior contributions used to fund previous costs incurred relating to fire, life and safety regulations and certain releasing costs. The second funding occurred on December 2, 1992 in the amount of $16,000,000, which was used to paydown interim lines of credit used for certain renovation costs and operational capital expenditures as described below. The third funding of $18,400,000 occurred on February 1, 1993, a portion of which was used to paydown interim lines of credit used for certain renovation costs and the remainder to fund additional renovation costs. The fourth stage refinanced the remaining portion of the existing mortgage of $14,000,000 upon its maturity in June 1993. The loan, aggregating $59,000,000, represents the new loan of $43,500,000 and the refinancing of the existing loans of $15,500,000. The term of the new loan began June 1, 1993 with monthly principal and interest payments and matures January 31, 2002. It carries an interest rate of 10.125%.
The Topanga joint venture has funded certain renovation costs through a line of credit bearing interest at 10.125% with various maturity dates. The line of credit had a balance of $9,650,000 at December 31, 1992 and was paid by the additional loan funding discussed above.
Five year maturities of long-term debt are summarized as follows:
1994 . . . . . . . . . $ 6,972,571 1995 . . . . . . . . . 29,535,960 1996 . . . . . . . . . 414,577 1997 . . . . . . . . . 458,557 1998 . . . . . . . . . 507,202 ===========
(5) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or losses of the Partnership from operations are allocated 96% to the Limited Partners and 4% to the General Partners. Profits from the sale or refinancing of investment properties will be allocated to the General Partners: (i) in an amount equal to the greater of 1% of such profits or the amount of cash distributable to the General Partners from any such sale or refinancing (as described below); and (ii) in order to reduce deficits, if any, in the General Partners' capital accounts to a level consistent with the gain anticipated to be realized from the sale of properties. Losses from the sale or refinancing of investment properties will be allocated 1% to the General Partners. The remaining sale or refinancing profits and losses will be allocated to the Limited Partners.
The General Partners are not required to make any capital contributions except under certain limited circumstances upon termination of the Partnership. In general, distributions of cash from operations will be made 90% to the Limited Partners and 10% to the General Partners. However, a portion of such distributions to the General Partners is subordinated to the Limited Partners' receipt of a stipulated return on capital.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership Agreement provides that the General Partners shall receive as a distribution from the sale of a real property by the Partnership amounts equal to the cumulative deferrals of any portion of their 10% cash distribution and 2-1/2% of the selling price, and that the remaining proceeds (net after expenses and retained working capital) be distributed 85% to the Limited Partners and 15% to the General Partners. However, the Limited Partners shall receive 100% of such net sale proceeds until the Limited Partners (i) have received cash distributions of sale or refinancing proceeds in an amount equal to the Limited Partners' aggregate initial capital investment in the Partnership, (ii) have received cumulative cash distributions from the Partnership's operations which, when combined with sale or refinancing proceeds previously distributed, equal a 6% annual return on the Limited Partners' average capital investment for each year (their initial capital investment as reduced by sale or refinancing proceeds previously distributed) commencing with the second fiscal quarter of 1986 and (iii) have received cash distributions of sale and refinancing proceeds and of the Partnership's operations, in an amount equal to the Limited Partners' initial capital investment in the Partnership plus a 10% annual return on the Limited Partners' average capital investment. Accordingly, approximately $773,000 of sale proceeds from the sale of the Partnership's interest in Mid Rivers Mall has been deferred by the General Partners (note 6).
(6) SALE OF INTEREST IN INVESTMENT PROPERTY
On January 30, 1992, the Partnership through JMB/Rivers sold its interest in Mid Rivers Mall located in St. Peters, Missouri to an affiliate of an unaffiliated joint venture partner. The sale price of the interest was $26,500,000 (before closing costs and prorations) plus the outstanding balance of the mortgages of which JMB/Rivers share was $35,318,171 as of the date of closing. The Partnership received, in connection with the sale, after all fees, expenses, and joint venture partner's participation, net cash of $13,250,000. For financial reporting purposes, JMB/Rivers has recognized a gain of approximately $12,022,000 in 1992, of which, the Partnership's share was approximately $5,656,000.
(7) LEASES
At December 31, 1993, the Partnership and its consolidated ventures' principal assets are two shopping centers and two office buildings. The Partnership has determined that all leases relating to these properties are properly classified as operating leases; therefore, rental income is reported when earned and the cost of the properties, excluding the cost of the land, is depreciated over the estimated useful lives. Leases with tenants range in term from month-to-month to twenty-five years and provide for fixed minimum rent and partial reimbursement of operating costs. In addition, leases with shopping center tenants provide for additional rent based upon percentages of tenants' sales volumes. With respect to the Partnership's shopping center investments, a substantial portion of the ability of retail tenants to honor their leases is dependent on the retail economic sector.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Cost and accumulated depreciation of the leased assets are summarized as follows at December 31, 1993:
Office Buildings: Cost . . . . . . . . . . . . . . . $ 69,607,308 Accumulated depreciation . . . . . (21,553,857) ------------
48,053,451 ------------ Shopping Centers: Cost . . . . . . . . . . . . . . . 129,886,662 Accumulated depreciation . . . . . (20,170,896) ------------
109,715,766 ------------
$157,769,217 ============
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:
1994 . . . . . . . . . . . . . . . . $ 19,229,112 1995 . . . . . . . . . . . . . . . . 18,680,561 1996 . . . . . . . . . . . . . . . . 17,610,704 1997 . . . . . . . . . . . . . . . . 14,586,577 1998 . . . . . . . . . . . . . . . . 13,216,074 Thereafter . . . . . . . . . . . . . 65,231,296 ------------
Total. . . . . . . . . . . . . . $148,554,324 ============
Contingent rent (based on sales by property tenants) included in rental income was as follows:
1991 . . . . . . . . . . . . . . . . $450,316 1992 . . . . . . . . . . . . . . . . 309,934 1993 . . . . . . . . . . . . . . . . 427,809 ========
(8) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partner- ship to the General Partners and their affiliates as of December 31, 1993 and for the years ended December 31, 1993, 1992 and 1991 are as follows:
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In accordance with the subordination requirements of the Partnership Agreement, the General Partners have deferred receipt of their distributions (see note 5) of net cash flow from the Partnership. The cumulative amount of such deferred distributions aggregated $7,254,766 at December 31, 1993. These amounts or amounts currently payable do not bear interest and may be paid in future periods.
The Topanga venture has incurred approximately $130,620 and $1,035,000 of interest costs relating to affiliated venture partner advances (note 3(c)) in 1993 and 1992, respectively, all of which was paid to an affiliate of the venture partner as of December 31, 1993.
(9) INVESTMENT IN UNCONSOLIDATED VENTURES
Summary of combined financial information for San Jose and JMB/Rivers (sold January 30, 1992) as of and for the years ended December 31, 1993 and 1992 is as follows:
1993 1992 ------------ ------------
Current assets . . . . . . . . . . $ 1,094,449 2,789,789 Current liabilities. . . . . . . . (25,841,373) (25,782,960) ------------ ------------ Working capital (deficit). . (24,746,924) (22,993,171) Investment property, net . . . . . 33,218,816 49,511,546 Other assets, net. . . . . . . . . 3,180,985 731,574 Long-term debt . . . . . . . . . . (3,784,508) (4,157,064) Other liabilities. . . . . . . . . (70,297) (74,275) Venture partners' equity . . . . . (4,077,776) (11,688,045) ------------ ------------ Partnership's capital. . . . $ 3,720,296 11,330,565 ============ ============ Represented by: Invested capital . . . . . . . . $ 45,976,774 45,976,774 Cumulative distributions . . . . (20,652,500) (19,652,500) Cumulative loss. . . . . . . . . (21,603,978) (14,993,709) ------------ ------------ $ 3,720,296 11,330,565 ============ ============ Total income . . . . . . . . . . . $ 10,369,335 11,573,574 ============ ============ Expenses applicable to operating loss . . . . . . . . . . . . . . $ 23,589,873 17,846,170 ============ ============ Operating loss . . . . . . . . . . $ 13,220,538 6,272,596 ============ ============ Gain on sale of investment property $ -- 12,022,449 ============ ============ Net earnings (loss). . . . . . . . $(13,220,538) 5,749,853 ============ ============
Reference is made to note 3(b) regarding the provision for value impairments of $15,549,935 and $8,142,152 which were recorded in 1993 and 1992, respectively, by the JMB/San Jose joint venture.
Total income, expenses related to operating earnings and net loss for the above-mentioned ventures for the year ended December 31, 1991 were $18,717,268, $39,749,915 and $21,032,647, respectively.
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(10) SUBSEQUENT EVENTS
(a) Distribution to Partners
In February 1994, the Partnership paid a distribution of $476,581 ($2.50 per Interest) to the Limited Partners.
(b) Topanga
On January 17, 1994, an earthquake occurred in Los Angeles, California. The epicenter was located in the town of Northridge which is approximately 6 miles from Topanga Plaza Shopping Center. Consequently, the entire mall, including the 4 major department stores who own their own buildings, suffered some casualty damage. The approximately 360,000 sq. ft. of mall shops owned by the Topanga Partnership did not suffer major structural damage. The estimated cost of the repairs at Topanga for which the joint venture is responsible is approximately $8.8 million. The majority of this cost will be subject to recovery under the joint venture's earthquake insurance policy after payment of the required deductible. The deductible on the building improvements, furniture and fixtures, and business interruption coverages due to loss of rents is approximately $2.1 million. The Partnership anticipates that it will pay for its share of insurance deductibles from its reserves without any material effect on its projected operations for 1994. As of the date of this report, 97 of the malls 114 shops have opened, and the remaining shops are expected to open during the upcoming weeks as tenants complete their repairs. Only one of the four major department stores has been able to open and it may take several weeks or months before the entire center is open and operating. The earthquake will result in some adverse effect on the operations of the center in the near term; the extent and length of which is not presently determinable.
SCHEDULE X
JMB INCOME PROPERTIES, LTD. - XII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
CHARGED TO COSTS AND EXPENSES ---------------------------------------------- 1993 1992 1991 ------------ ------------ ------------
Maintenance and repairs. $3,055,489 3,108,903 3,139,142
Depreciation . . . . . . 5,739,255 4,811,235 5,684,994
Amortization of deferred expenses . . . . . . . 787,304 456,673 499,231
Real estate taxes. . . . 3,643,702 3,896,555 3,985,659 ========== ========= =========
INDEPENDENT AUDITORS' REPORT
The Partners JMB/SAN JOSE ASSOCIATES:
We have audited the financial statements of JMB/San Jose Associates (a general partnership) as listed in the accompanying index. In connection with our audits of the financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These financial statements are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of JMB/San Jose Associates at December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As discussed in note 3(b) of Notes to Consolidated Financial Statements of JMB Income Properties, LTD - XII, the mortgage loan secured by the 150 Almaden and 185 Park Avenue buildings and certain related parking improvements matured December 1, 1993. Should an agreement not be reached to extend the loan, it is possible that the lender would exercise its remedies and seek to acquire title to these properties. Also, the Venture has commenced discussions with the lender on the 100-130 Park Center Plaza properties for additional loan proceeds to cover re-leasing and seismic program costs. Should the lender assistance required to fund these costs not be obtained, the Partnership has decided not to commit additional funds to these properties. The result would be that the Partnership would no longer have an ownership interest in these properties. The Venture has recorded provisions for value impairment to reduce the net book value of such properties to the outstanding balance of the related non-recourse financing.
KPMG PEAT MARWICK
Chicago, Illinois March 25, 1994
JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(1) BASIS OF ACCOUNTING
The accompanying financial statements have been prepared for the purpose of complying with Rule 3.09 of Regulation S-X of the Securities and Exchange Commission. They include the accounts of the unconsolidated joint venture, JMB/San Jose joint venture ("Venture"), in which JMB Income Properties, Ltd.- XII ("JMB Income-XII") and JMB Income Properties, Ltd.-XI are the partners.
The Venture'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 to present the Venture's accounts in accordance with generally accepted accounting principles ("GAAP"). Such adjustments are not recorded on the records of the Venture. The net effect of these items for the years ended December 31, 1993 and 1992 is summarized as follows:
JMB/SAN JOSE ASSOCIATES (a general partnership)
Notes to Financial Statements - Continued
Statement of Financial Accounting Standards No. 95 requires the Venture 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. In addition, the Venture records amounts held in U.S. Government obligations at cost, which approximates market. For purposes of these statements, the Venture's policy is to consider all such amounts held with original maturities of three months or less cash equivalents with any remaining amounts reflected as short-term investments. None of the Partnership's investments in U.S. Government obligations were classified as cash equivalents at December 31, 1993 and December 31, 1992.
Certain amounts in the 1992 and 1991 financial statements have been reclassified to conform to the 1993 presentation.
Depreciation on buildings and improvements has been provided over the estimated useful lives of the assets (5 to 30 years) using the straight-line method.
Deferred expenses consist primarily of loan fees and lease commissions which are amortized over the terms stipulated in the related loan agreements or over the terms of the related leases using the straight-line method.
Although certain leases of the Venture provide for tenant occupancy during periods for which no rent is due and/or increases in the minimum lease payments over the term of the lease, rental income is accrued for the full period of occupancy on a straight-line basis.
Maintenance and repair expenses are charged to operations as incurred. Significant betterments and improvements are capitalized and depreciated over their estimated useful lives.
The Venture recorded in 1993, as a matter of prudent accounting practice, a provision for value impairment of $15,549,935 on the 150 Almaden and 185 Park Avenue building and certain parking areas. In 1992, the Venture recorded a provision for value impairment of $8,142,152 on certain portions of the complex. In 1991, the Venture recorded a provision for value impairment of $21,175,127 to reduce the net basis of the 100 Park Center Plaza Buildings and a certain parking area to the then outstanding balance of the related non- recourse debt.
No provision for State or Federal income taxes has been made as the liability for such taxes is that of the venture partners rather than the Venture.
(2) VENTURE AGREEMENT
A description of the acquisition of the property is contained in Note 3(b) of JMB Income - XII. Such note is incorporated herein by reference.
JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(3) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1993 and 1992:
1993 1992 ---------- ---------- 7.75% mortgage note; secured by the 100 Park Center Plaza Buildings, and certain related parking improvements in San Jose, California; principal and interest payments of $34,023 are due monthly through September 2000; additional interest payments of 2% per annum of gross income (total interest not to exceed 9.875%), which amounted to $55,034 in 1993 and $53,936 in 1992. $ 2,377,511 2,592,398
10% mortgage note; secured by the 100 Park Center Plaza Buildings, and certain related parking improvements in San Jose, California; principal and interest payments of $10,353 are due monthly through September 2000. . . 608,178 667,948
7.85% mortgage note; secured by the 170 Almaden Building in San Jose, California; principal and interest payments of $13,537 are due monthly through June 2003 . . . . . . . . . . . 1,170,903 1,239,278
9.5% mortgage note; secured by the 150 Almaden and 185 Park Avenue buildings, and certain related parking improvements in San Jose, California; interest only payments of $197,917 are due monthly through December 1993 when the entire principal was due (currently in default (1)). . . . . . . . . . . . . . 25,000,000 25,000,000 ----------- ----------
Total debt . . . . . . . . . . . 29,156,592 29,499,624 Less current portion of long-term debt. . . . . . . . . 25,372,084 25,342,560 ----------- ----------
Total long-term debt . . . . . . $ 3,784,508 4,157,064 ============ ==========
Five year maturities of long-term debt are as follows:
1994 . . . . . . . . . $25,372,084 1995 . . . . . . . . . 403,174 1996 . . . . . . . . . 437,407 1997 . . . . . . . . . 474,656 1998 . . . . . . . . . 515,062 ===========
(1) A description of the discussions between JMB/San Jose and the mortgage lender on the 150 Almaden and 185 Park Avenue buildings is contained in Note 3(b) of Notes to Consolidated Financial Statements of JMB Income - XII. Such note is hereby incorporated herein by reference.
JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(4) LEASES
As Property Lessor
At December 31, 1993, the Venture's principal asset is an office building complex. The Venture has determined that all leases relating to this property are properly classified as operating leases; therefore, rental income is reported when earned and the cost of the property, excluding the cost of the land, is depreciated over the estimated useful life. Leases with tenants range in term from one to twenty-five years and provide for fixed minimum rent and partial reimbursement of operating costs.
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:
1994. . . . . . . . . . . . . $ 7,563,161 1995. . . . . . . . . . . . . 6,626,946 1996. . . . . . . . . . . . . 5,573,226 1997. . . . . . . . . . . . . 4,508,323 1998. . . . . . . . . . . . . 4,187,855 Thereafter. . . . . . . . . . 15,736,333 -----------
$44,195,844 ===========
(5) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Venture to the General Partners and their affiliates as of December 31, 1993 and for the years ended December 31, 1993, 1992 and 1991 were as follows:
SCHEDULE X
JMB/SAN JOSE ASSOCIATES (A GENERAL PARTNERSHIP)
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
CHARGED TO COSTS AND EXPENSES ---------------------------------------------- 1993 1992 1991 ------------ ------------ ------------
Maintenance and repairs. $ 973,276 1,029,913 965,927
Depreciation . . . . . . 1,063,616 1,898,286 2,369,699
Amortization of deferred expenses. . . . . . . . 243,694 243,229 193,526
Taxes:
Real estate. . . . . . 991,781 755,041 724,758
Other. . . . . . . . . 4,792 5,375 5,410
Advertising. . . . . . . 17,484 -- 57,048 ========== ========= =========
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with accountants during 1992 and 1993.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Managing General Partner of the Partnership is JMB Realty Corporation ("JMB"), a Delaware corporation. JMB has responsibility for all aspects of the Partnership's operations, subject to the requirement that sales of real property must be approved by the Associate General Partner of the Partnership, Income Associates-XII, L.P., an Illinois limited partnership with JMB as the sole general partner. The Associate General Partner shall be directed by a majority in interest of its limited partners (who are generally officers, directors and affiliates of JMB or its affiliates) as to whether to provide its approval of any sale of real property (or any interest therein) of the Partnership. Various relationships of the Partnership to the Managing General Partner and its affiliates are described under the caption "Conflicts of Interest" at pages 12-17 of the Prospectus, which description is hereby incorporated herein by reference.
The names, positions held and length of service therein of each director and executive officer and certain 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 Neil G. Bluhm President 5/03/71 Director 5/03/71 Jerome J. Claeys III Director 5/09/88 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 Jeffrey R. Rosenthal Chief Financial Officer 8/01/93 Gary Nickele Executive Vice President 1/01/92 General Counsel 2/27/84 Ira J. Schulman Executive Vice President 6/01/88 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 one-year terms until the annual meeting of the Managing General Partner to be held on June 7, 1994. All of the foregoing officers have been elected to serve one-year terms until the first meeting of the Board of Directors held after the annual meeting of the Managing General Partner to be held on June 7, 1994. There are no arrangements or understandings between or among any of said directors or officers and any other person pursuant to which any director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX ("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"), 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. ("Mortgage Partners"), JMB Mortgage Partners, Ltd.-II ("Mortgage Partners-II") and JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II"), and the managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI ("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-VIII ("JMB Income-VIII"), JMB Income Properties, Ltd.-IX ("JMB Income-IX"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI") and JMB Income Properties, Ltd.-XIII ("JMB Income-XIII"). Most of the foregoing directors and officers are also officer and/or directors of various affiliated companies of Arvida/JMB Managers, Inc. (the general partner Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB Managers-II, Inc. (the general partner Arvida/JMB Partners, L.P.-II ("Arvida-II")) and Income Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")). Most of such directors and officers are also partners of certain partnerships which are associate general partners in the following real estate limited partnerships: Carlyle-VII, Carlyle-IX, Carlyle-X, Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB Income-VII, JMB Income-VIII, JMB Income-IX, JMB Income-X, JMB Income-XI, JMB Income-XIII, Mortgage Partners, Mortgage Partners-II, 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 56) is an individual general partner of JMB Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since October, 1969. He is a Certified Public Accountant.
Neil G. Bluhm (age 56) is an individual general partner of JMB Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since August, 1970. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Jerome J. Claeys III (age 51) (Chairman and Director of JMB Institutional Realty Corporation) has been associated with JMB since September, 1977. He holds a Masters degree in Business Administration from the University of Notre Dame.
Burton E. Glazov (age 55) has been associated with JMB since June, 1971 and served as an Executive Vice President of JMB until December 1990. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Stuart C. Nathan (age 52) has been associated with JMB since July, 1972. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 60) (President and Director of JMB Insurance Agency, Inc.) has been associated with JMB since December, 1972.
John G. Schreiber (age 47) has been associated with JMB since December, 1970 and served as an Executive Vice President of JMB until December 1990. He holds a Masters degree in Business Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 44) 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.
Jeffrey R. Rosenthal (age 42) has been associated with JMB since December, 1987. He is a Certified Public Accountant.
Gary Nickele (age 41) 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.
Ira J. Schulman (age 42) has been associated with JMB since February, 1983. He holds a Masters degree in Business Administration from the University of Pittsburgh.
Gailen J. Hull (age 45) 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 58) has been associated with JMB since March, 1973. He is a Certified Public Accountant. ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The General Partners of the Partnership are entitled to receive a share of cash distributions, when and as cash distributions are made to the Investors, and a share of profits or losses as described under the caption "Compensation and Fees" at pages 8-12, "Cash Distributions" at pages 61-63, "Allocation of Profits or Losses for Tax Purposes" at pages 63 and 64 and "Cash Distributions; Allocations of Profits and Losses" at pages A-8 to A-12 of the Partnership Agreement included as an exhibit to the Prospectus, which descriptions are hereby incorporated herein by reference. Reference is also made to Notes 5 and 8 for a description of such transactions, distributions and allocations. No such cash distributions were paid to the General Partners in 1993, 1992 and 1991.
An affiliate of the Managing General Partner provided property management services to the Partnership for 1993 for the Plaza Hermosa Shopping Center in Hermosa Beach, California at a fee calculated at 4% of the gross receipts of the property and to the 40 Broad Street office building in New York, New York at a fee calculated at 2% of the gross receipts of the property. In 1993, such affiliate earned property management and leasing fees amounting to $221,843 all of which were paid at December 31, 1993. As set forth in the Prospectus of the Partnership, the Managing General Partner must negotiate such agreements on terms no less favorable to the Partnership than those customarily charged for similar services in the relevant geographical area and such agreements must be terminable by either party thereto, without penalty, upon 60 days' notice.
The General Partners of the Partnership may be reimbursed for their direct expenses relating to the administration of the Partnership and the operation of the Partnership's real property investments. In 1993, the Managing General Partner received reimbursement for such expenses and salaries in the amount of $92,243 of which $72,561 was unpaid at December 31, 1993. The Managing General Partner received no disbursement agent and data processing fees in 1993.
JMB Insurance Agency, Inc., an affiliate of the Managing General Partner of the Partnership, earned and received insurance brokerage commissions in 1993 aggregating $84,976 in connection with the providing of insurance coverage for the real property investments of the Partnership. Such commissions are at rates set by insurance companies for the classes of coverage involved.
The Partnership is permitted to engage in various transactions involving affiliates of the Managing General Partner of the Partnership, as described under the captions "Compensation and Fees" at pages 8-12, "Conflicts of Interest" at pages 12-17 and "Rights, Powers and Duties of General Partners" at pages A-12 to A-22 of the Partnership Agreement, included as an exhibit to the Prospectus, which descriptions are hereby incorporated herein by reference. The relationship of the Managing General Partner (and its directors and officers) to its affiliates is set forth above in Item 10 above and Exhibit 21 hereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Managing General Partner, affiliates or their management other than those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements (See Index to Financial Statements filed with this annual report).
2. Exhibits.
3-A. The Prospectus of the Partnership dated August 23, 1985 as supplemented December 9, 1985 and January 10, pursuant to Rules 424 (b) and 424 (c), as filed with the Commission is hereby incorporated herein by reference. Copies of pages 8-12, 61-64 and A-8 to A-12 are hereby incorporated herein by reference to Exhibit 3-A to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993.
3-B. Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which agreement is hereby incorporated herein by reference to Exhibit 3-B to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993.
4-A. Mortgage loan agreement between Topanga and Connecticut General Life Insurance Company dated January 31, 1992 relating to Topanga Plaza in Los Angeles, California is hereby incorporated herein by reference to Exhibit 4-A to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993.
4-B. Mortgage loan agreement between First Financial and The Prudential Insurance Company of America dated November 2, 1987 relating to First Financial Plaza in Encino, California is hereby incorporated herein by reference to Exhibit 4-B to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993.
4-C. Mortgage loan modification agreement between Topanga and Connecticut General Life Insurance dated January 31, 1993 relating to Topanga Plaza in Los Angeles, California is hereby incorporated herein by reference to Exhibit 4 of the Partnership's Report on Form 10-Q (File No. 0- 16108) dated November 11, 1993.
10-A.Acquisition documents including the venture agreement relating to the purchase by the Partnership of Topanga Plaza in Los Angeles, California, are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated December 31, 1985.
10-B.Acquisition documents including the venture agreement relating to the purchase by the Partnership of First Financial Plaza in Encino, California are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated June 3, 1987.
10-C.Acquisition documents including the venture agreement relating to the purchase by the Partnership of 40 Broad Street in New York, New York, are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated December 31, 1985.
10-D.Sale documents and exhibits thereto relating to the sale of the Partnership's interest in Mid Rivers Mall in St. Peters (St. Louis), Missouri are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated February 18, 1992.
21. List of Subsidiaries
24. Powers of Attorney
- ----------------
Although certain additional long-term debt instruments of the Registrant have been excluded from Exhibit 4 above, pursuant to Rule 601(b)(4)(iii), the Registrant commits to provide copies of such agreements to the Securities and Exchange Commissions upon request.
(b) No Reports on Form 8-K were required or filed since the beginning of the last quarter of the period covered by this report.
No annual report or proxy material for 1993 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - XII
By: JMB Realty Corporation Managing General Partner
GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date:March 25, 1994
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 Director Date:March 25, 1994
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date:March 25, 1994
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date:March 25, 1994
JEFFREY R. ROSENTHAL* By: Jeffrey R. Rosenthal, Chief Financial Officer Principal Financial Officer Date:March 25, 1994
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date:March 25, 1994
A. LEE SACKS* By: A. Lee Sacks, Director Date:March 25, 1994
By: STUART C. NATHAN*
Stuart C. Nathan, Executive Vice President and Director Date:March 25, 1994
*By:GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date:March 25, 1994
JMB INCOME PROPERTIES, LTD. - XII
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------- ----
3-A. Pages 8-12, 61-64 and A-8 to A-12 of the Prospectus of the Partnership dated August 23, 1985, as supple- mented on December 9, 1985 and January 10, 1986 Yes
3-B. Amended and Restated Agreement of Limited Partnership Yes
4-A. Mortgage loan agreement related to Topanga Plaza Yes
4-B. Mortgage loan agreement related to First Financial Plaza Yes
4-C. Mortgage loan modification agreement related to Topanga Plaza Yes
10-A. Acquisition documents related to Topanga Plaza Yes
10-B. Acquisition documents related to First Financial Plaza Yes
10-C. Acquisition documents related to 40 Broad Street Yes
10-D. Sale documents related to Mid Rivers Mall Yes
21. List of Subsidiaries No
24. Powers of Attorney No
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.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements (See Index to Financial Statements filed with this annual report).
2. Exhibits.
3-A. The Prospectus of the Partnership dated August 23, 1985 as supplemented December 9, 1985 and January 10, pursuant to Rules 424 (b) and 424 (c), as filed with the Commission is hereby incorporated herein by reference. Copies of pages 8-12, 61-64 and A-8 to A-12 are hereby incorporated herein by reference to Exhibit 3-A to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993.
3-B. Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which agreement is hereby incorporated herein by reference to Exhibit 3-B to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993.
4-A. Mortgage loan agreement between Topanga and Connecticut General Life Insurance Company dated January 31, 1992 relating to Topanga Plaza in Los Angeles, California is hereby incorporated herein by reference to Exhibit 4-A to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993.
4-B. Mortgage loan agreement between First Financial and The Prudential Insurance Company of America dated November 2, 1987 relating to First Financial Plaza in Encino, California is hereby incorporated herein by reference to Exhibit 4-B to the Partnership's Report on Form 10-K for December 31, 1992 (File No. 0-16108) dated March 19, 1993.
4-C. Mortgage loan modification agreement between Topanga and Connecticut General Life Insurance dated January 31, 1993 relating to Topanga Plaza in Los Angeles, California is hereby incorporated herein by reference to Exhibit 4 of the Partnership's Report on Form 10-Q (File No. 0- 16108) dated November 11, 1993.
10-A.Acquisition documents including the venture agreement relating to the purchase by the Partnership of Topanga Plaza in Los Angeles, California, are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated December 31, 1985.
10-B.Acquisition documents including the venture agreement relating to the purchase by the Partnership of First Financial Plaza in Encino, California are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated June 3, 1987.
10-C.Acquisition documents including the venture agreement relating to the purchase by the Partnership of 40 Broad Street in New York, New York, are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated December 31, 1985.
10-D.Sale documents and exhibits thereto relating to the sale of the Partnership's interest in Mid Rivers Mall in St. Peters (St. Louis), Missouri are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-16108) dated February 18, 1992.
21. List of Subsidiaries
24. Powers of Attorney
- ----------------
Although certain additional long-term debt instruments of the Registrant have been excluded from Exhibit 4 above, pursuant to Rule 601(b)(4)(iii), the Registrant commits to provide copies of such agreements to the Securities and Exchange Commissions upon request.
(b) No Reports on Form 8-K were required or filed since the beginning of the last quarter of the period covered by this report.
No annual report or proxy material for 1993 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - XII
By: JMB Realty Corporation Managing General Partner
GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date:March 25, 1994
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 Director Date:March 25, 1994
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date:March 25, 1994
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date:March 25, 1994
JEFFREY R. ROSENTHAL* By: Jeffrey R. Rosenthal, Chief Financial Officer Principal Financial Officer Date:March 25, 1994
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date:March 25, 1994
A. LEE SACKS* By: A. Lee Sacks, Director Date:March 25, 1994
By: STUART C. NATHAN*
Stuart C. Nathan, Executive Vice President and Director Date:March 25, 1994
*By:GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date:March 25, 1994
JMB INCOME PROPERTIES, LTD. - XII
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------- ----
3-A. Pages 8-12, 61-64 and A-8 to A-12 of the Prospectus of the Partnership dated August 23, 1985, as supple- mented on December 9, 1985 and January 10, 1986 Yes
3-B. Amended and Restated Agreement of Limited Partnership Yes
4-A. Mortgage loan agreement related to Topanga Plaza Yes
4-B. Mortgage loan agreement related to First Financial Plaza Yes
4-C. Mortgage loan modification agreement related to Topanga Plaza Yes
10-A. Acquisition documents related to Topanga Plaza Yes
10-B. Acquisition documents related to First Financial Plaza Yes
10-C. Acquisition documents related to 40 Broad Street Yes
10-D. Sale documents related to Mid Rivers Mall Yes
21. List of Subsidiaries No
24. Powers of Attorney No