ITEM 1. BUSINESS
Unless otherwise indicated, all references to "Notes" are to Notes to Consolidated Financial Statements contained in this report. Capitalized terms used herein, but not defined, have the same meanings as used in the Notes.
The registrant, JMB Income Properties, Ltd. - V (the "Partnership") is a limited partnership formed in 1976 and currently governed by the Revised Uniform Limited Partnership Act of the State of Illinois to invest in improved income-producing commercial and residential real property. The Partnership sold $38,500,000, in Limited Partnership Interests (the "Interests") to the public commencing on August 15, 1977 pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration No. 2-58026). A total of 38,500 Interests were sold to the public at $1,000 per Interest. The offering closed on September 30, 1977. No Limited Partner has made any additional capital contributions after such date. The Limited Partners of 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 has been engaged solely in the business of the acquisition, operation and sale and disposition of equity real estate investments. Such equity investments have been held by fee title, leasehold estates and/or through joint venture partnership interests. The Partnership's joint venture's real estate investment is located in North Carolina. A presentation of information about industry segments, geographic regions, raw materials or seasonality is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. Pursuant to the Partnership Agreement, the Partnership is required to terminate no later than December 31, 2026. The Partnership is self-liquidating in nature. At sale of a particular property, the net proceeds, if any, are generally distributed or reinvested in existing properties rather than invested in acquiring additional properties. As discussed further in Item 7, the Partnership currently expects to conduct an orderly liquidation of its remaining investment property and to wind up its affairs as quickly as practicable barring any unforeseen economic developments.
The Partnership has made the real property investments set forth in the following table:
The Partnership's real property investment, through a joint venture, is subject to competition from similar types of properties in the respective vicinity in which it is located. Such competition is generally for the retention of existing tenants. Additionally, the Partnership is in competition for new tenants in a market where significant vacancies are present. Reference is made to Item 7 below for a discussion of competitive conditions and capital improvement plans of the Partnership for its investment property. Approximate occupancy levels for the property are set forth in the table in Item 2
ITEM 2. PROPERTIES
The Partnership owns, through a joint venture partnership, the interest in the property referred to under Item 1 above to which reference is hereby made for a description of said property.
The following is a listing of principal business carried on in and approximate occupancy levels by quarter during fiscal years 2001 and 2000 for the Partnership's investment property owned during 2001:
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
On August 6, 2001, an action entitled STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE, FOR THE REGISTERED HOLDERS OF FDIC REMIC TRUST 1994- C1, COMMERCIAL MORTGAGE PASSTHROUGH CERTIFICATES, SERVICES 1994-C1 v. WACHOVIA BUILDING ASSOCIATES was initiated in the Superior Court Division of the General Court of Justice for the County of Forsyth, State of North Carolina. In the proceeding, State Street Bank and Trust Company ("State Street"), as the trustee for the owners of the beneficial interests in the entity (the "Noteholder") holding the mortgage note secured by the 301 North Main Street (formerly Wachovia Bank) and Phillips Buildings (collectively, the "Property") sought the appointment of a receiver to take possession, manage and collect the rents and income of the Property. The joint venture (the "Venture") that owns the Property had not made the scheduled debt service payments on the mortgage note since June 2001 due to the then current and anticipated vacancy at the Property.
On August 6, 2001, the Court entered an order appointing a temporary receiver for the Property. Subsequently, the Venture entered into negotiations with the receiver and State Street in order to avoid a contested final hearing. As a result of such negotiations, in consideration for, among other things, the right to petition for a hearing in April 2002 if the Noteholder fails to diligently pursue foreclosure and for a provision limiting the liability of the Venture in all contracts relating to the Property, the Venture decided not to contest the final hearing at which the order making the appointment of the receiver was made permanent, and such order was entered on November 13, 2001. As a result, the Venture no longer has possession or control of the Property. The receiver is marketing the Property for sale, but there is no assurance as to the timing of any such sale.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during fiscal years 2000 and 2001.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS
As of December 31, 2001, there were 2,626 record holders of Interests of the Partnership. There is no public market for Interests and it is not anticipated that a public market for Interests will develop. Upon request, the Managing General Partner may provide information relating to a prospective transfer of Interests to an investor desiring to transfer his Interests. The price to be paid for the Interests, as well as any other economic aspects of the transaction, will be subject to negotiation by the Investor. There are certain conditions and restrictions on the transfer of Interests, including, among other things, the requirement that the substitution of a transferee of Interests as a Limited Partner of the Partnership be subject to the written consent of the Managing General Partner, which may be granted or withheld in its sole and absolute discretion. The rights of a transferee of Interests who does not become a substituted Limited Partner will be limited to the rights to receive his share of profits or losses and cash distributions from the Partnership, and such transferee will not be entitled to vote such Interests or have other rights of a Limited Partner. No transfer will be effective until the first day of the next succeeding calendar quarter after the requisite transfer form satisfactory to the Managing General Partner has been received by the Managing General Partner. The transferee consequently will not be entitled to receive any cash distributions or any allocable share of profits or losses for tax purposes until such next succeeding calendar quarter. Profits or losses from operations of the Partnership for a calendar year in which a transfer occurs will be allocated between the transferor and the transferee based upon the number of quarterly periods in which each was recognized as the holder of the Interests, without regard to the results of the Partnership's operations during particular quarterly periods and without regard to whether cash distributions were made to the transferor or transferee. Profits or losses arising from the sale or other disposition of Partnership properties will be allocated to the recognized holder of the Interests as of the last day of the quarter in which the Partnership recognized such profits or losses. Cash distributions to a holder of Interests arising from the sale or other disposition of Partnership properties will be distributed to the recognized holder of the Interests as of the last day of the quarterly period with respect to which such distribution is made.
Reference is made to Item 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the public offering of Interests as described in Item 1, the Partnership had approximately $34,926,000 (after deducting selling expenses and other offering costs) with which to make investments in income-producing commercial and residential 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.
The board of directors of JMB Realty Corporation ("JMB") the managing general partner of the Partnership, has established a special committee (the "Special Committee") consisting of certain directors of JMB to deal with all matters relating to tender offers for Interests in the Partnership, including any and all responses to such tender offers.
On March 2, 2000, the Partnership was notified that certain affiliates of MacKenzie Patterson, Inc. and certain other third parties had commenced an unsolicited offer to the Limited Partners to purchase up to 15,402 Interests in the Partnership (approximately 40% of the outstanding Interests) at a price of $80 per Interest. None of the offerors are affiliated with the Partnership or the General Partners. The offer, which was originally scheduled to expire on June 9, 2000, was amended on May 3, 2000 to increase the purchase price to $115 per Interest and extend the offer period through June 16, 2000. The Special Committee expressed no opinion and remained neutral with respect to the offer as initially made and as amended by such amendment for those Limited Partners who had no current or anticipated need for liquidity with respect to their Interests and who were willing to continue bearing the economic risk of retaining their Interests until the liquidation and termination of the Partnership. However, the Special Committee recommended that all other Limited Partners accept the initial offer and the amended offer and tender their Interests pursuant to such offer. The offer was amended a second time to decrease the offer price to $90 per Interest and extend the tender offer period to June 30, 2000. The Special Committee's recommendation did not change as a result of this second amendment to the tender offer. The tender offer, as amended, expired on June 30, 2000. The Partnership is aware that, in the aggregate, approximately 15.5% of the outstanding Interests were purchased by the parties making such tender offer or their affiliates, either pursuant to the tender offer or through negotiated purchases. Additionally, the Partnership is aware that, in the aggregate, approximately 28.82% of the outstanding Interests have been purchased by unaffiliated third parties either pursuant to all tender offers including the tender offer discussed above or through negotiated purchases. It is possible that other offers for Interests may be made by third parties in the future. However, there is no assurance that any other third party will commence an offer for Interests, the terms of any such offer or whether any such offer for Interests, if made, will be consummated, amended or withdrawn.
At December 31, 2001, the Partnership and its consolidated venture had cash and cash equivalents of approximately $3,741,000. Such funds are available for distributions to partners, payment of withholding for taxes upon disposal of the 301 North Main Building and Phillips Building, and working capital requirements. Due to the re-leasing issues at the 301 N. Main Building and Phillips Building the venture defaulted on its mortgage loan, and the properties will not be a significant source of future liquidity. In such regard, reference is made to the Partnership's property specific discussions below. The venture's mortgage obligation is a non- recourse loan secured by the investment property and therefore, the Partnership and its venture partner are not personally liable for the payment of the mortgage indebtedness.
The Partnership made a distribution of cash flow from operations of approximately $1,155,000 ($30 per interest) to the Limited Partners and approximately $64,000 to the General Partners in the first quarter of 2001.
In connection with this distribution, the General Partners also received an incentive management fee of approximately $64,000. The Partnership does not anticipate further distributions of cash to its partners until the Partnership winds up its affairs, in order to provide sufficient working capital to cover ongoing Partnership operating expenses and any contingencies that may arise.
The General Partners and their affiliates had deferred payment of certain management and leasing fees of approximately $1,679,000 (approxi- mately $43 per interest) pursuant to the venture agreement for the 301 North Main Building and Phillips Building. Such amounts were deferred until the sale or disposition of the property or upon termination of the property management agreement. As described more fully in the Notes, in August 2001, a receiver was appointed to take possession of and manage the property. Therefore, the Partnership stopped accruing the deferred fees as of that date. In addition, as this event resulted in the termination of the aforementioned management agreement, such deferred fees became payable to the General Partner, and the deferred management fees of approximately $1,679,000 were paid to the General Partners in December 2001 from Partnership cash.
The Partnership intends to wind up its affairs and terminate as soon as practicable after the sale or other disposition of the 301 North Main Building and Phillips Building. Though the Partnership anticipates that this will occur in 2002, it may occur even later depending upon how the lender exercises its remedies with respect to the sale or foreclosure of the property. There is no assurance that any such sale will occur or that the Partnership will be successful in requiring the lender to exercise its remedies promptly.
301 NORTH MAIN BUILDING AND PHILLIPS BUILDING
Occupancy at the 301 N. Main Building (formerly the Wachovia Bank Building) and Phillips Building remained at approximately 45% during the year. Prior to December 31, 1995, substantially all of the 301 North Main Building was leased to one tenant, the Wachovia Bank. Commencing in the third quarter of 1998 and continuing through mid-1999, the Wachovia Bank vacated substantially all of its space in the 301 North Main Building (approximately 200,000 square feet). The remaining space leased during 2001 to the Wachovia Bank (approximately 8,200 square feet) was leased pursuant to month-to-month leases, and on April 30, 2001 the Wachovia Bank vacated this space. Subsequent to the end of the year, the Wachovia Bank, which had leased the entire Phillips building, vacated its space upon the expiration of such leases (approximately 178,700 square feet in January 2002 and approximately 90,000 square feet in February 2002). The occupancy as of the date of this report is 12%.
The venture had been marketing space in the 301 North Main Building and the Phillips Building to prospective replacement tenants but was not successful in its efforts due to the lack of large space users in this market. Re-leasing the vacant space in the buildings would require major renovation to the buildings as well as significant tenant improvements which, in turn, would be contingent upon the Partnership obtaining financing for these tenant replacement costs. The Partnership therefore determined not to commit any additional funds to the property due to the low likelihood of achieving a return on such funds. As a result, the Partnership decided not to continue making debt service payments as of June 1, 2001. The mortgage loan is in default as of June 1, 2001 and matured in November 2001, and in accordance with default provisions of the mortgage loan agreement, the Partnership has recorded interest upon the loan balance at the default rate of 18% per annum commencing June 1, 2001. In early August 2001, the lender notified the Partnership that a receiver was appointed to take possession of and manage the property.
The Partnership is currently monitoring the efforts of the lender and the receiver to transfer title to the property to either the lender or a third party, and is taking such actions as it believes will accomplish this result at the earliest possible time while minimizing any liability for the Partnership. The Partnership would then proceed to liquidate its affairs. However, the lender is continuing to review its options. The lender is currently pursuing a sale of the property to an unaffiliated third party. If such sale is not consummated, the lender is also reviewing its options relative to a potential removal of asbestos-containing insulation at the property and has been delaying the consummation of a foreclosure until it completes such analysis. Therefore, because the Partnership has only modest ability to influence these determinations and the speed with which they occur, there can be no assurance as to the timing of these events.
The transfer of title to the property under the likely scenarios discussed above would result in a gain for financial reporting and Federal and state income tax purposes with no corresponding distributable proceeds.
Additionally, the Partnership will be required to remit to the state tax authorities withholding for income taxes due as a result of the sale of the properties or its surrender to the mortgage lender. This withholding amount is currently estimated to be approximately $650,000.
In 1986, the Partnership's venture partner had agreed to contribute $10,700,000, before applicable interest, to the venture pursuant to a payment schedule from the closing date through August 1, 1996, when it would owe the balance of its obligation (approximately $7,600,000). The venture partner has continued to make contributions (from its share of the property's cash flow) based on the old payment schedule rather than making the balloon payment in August 1996 as required. As a result, the venture partner is currently approximately $6,824,000 in arrears for such contributions as of the date of this report. The venture partner's obligation to make such payment is secured only by its interest in the venture. In the fourth quarter of 1996, the Partnership notified the venture partner of its default effective August 1996. As a result of such default, the venture partner's share of distributions of cash flow generated subsequent to 1996, except as provided below, was retained by the venture. In December 1999, the Partnership and the venture partner entered into an agreement (the "Option Agreement"), effective January 1, 1999, under which the Partnership was given the option to purchase the venture partner's interest on or before January 31, 2002 (which option must have been exercised on or before December 31, 2001). Such option has expired. If the Partnership had exercised its option, the purchase price for the interest would have been $230,000 and the Partnership would have released the venture partner from its obligation to make contributions as discussed above. As a result of the negotiations, and in consideration of the venture partner granting a full release to the Partnership and the venture, the Partnership and venture partner also concurrently entered into a forbearance agreement, under which the Partnership agreed to not pursue its legal remedies against the venture partner for its default related to such obligation until November 1, 2000, subject to further extension. Though the Partnership may now pursue such legal remedies, they are of little practical value at present because the venture partner's obligations permit recourse only to the venture partner's interest in the venture, and the venture partner's share of distributions are already being paid to the Partnership as discussed below. The Partnership continues to reserve all of its rights in this regard, and may determine at a later date to pursue such remedies.
In connection with completing the Option Agreement, the venture agreement was amended to: (1) convert the venture partner's minority general partnership interest in the venture to a limited partnership interest; (2) provide that no further distributions of cash flow will be made to the venture partner after December 1999 (other than deemed distributions of up to $830,263 per year, which are required to be paid directly to the Partnership to reduce the debt obligations of the venture
partner as described above), at which time $200,000, representing the venture partner's final distribution of cash flow from operations and reserves, was distributed to the venture partner; and (3) provide that the venture partner (assuming the option under the option agreement was not exercised) would receive 30% of any net sale proceeds (as defined) if the gross sale price of the property is $40,000,000 or greater. Under the Option Agreement, upon the closing of the purchase of such interest, the venture partner would also release the Partnership and the venture from any and all claims that the venture partner may have against the Partnership and the venture, including, without limitation, any amounts which may have accrued or been distributable prior to such closing date, and the Partnership and the venture would release the venture partner from any further liabilities under the venture agreement, including, without limitation, the aforementioned obligation to make additional capital contributions. Given current market conditions, it is not anticipated that a sale of the property will generate proceeds to the venture partner. The Partnership did not exercise its option prior to the expiration thereof.
As a result of the December 1999 amendment to the venture agreement referred to above, profits and losses are allocated based on the ratio of distributions (actual distributions plus any distributions deemed to have been made) to the partners, approximately 87% and 76% to the Partnership and 13% and 24% to the venture partner for the years ended December 31, 2001 and 2000, respectively. For financial reporting and Federal income tax purposes, the venture reported the payments of approximately $346,000 in 2001 (for the five monthly payments made before the discontinuing of debt service payments) and approximately $830,000 annually, prior to 2001, on the obligation referred to above as deemed to be made (and contributed for financial reporting purposes only) to the venture partner.
RESULTS OF OPERATIONS
The decrease in cash and cash equivalents at December 31, 2001 as compared to December 31, 2000 is primarily due to the December 2001 payment of deferred management fees by the Partnership and is also due to the distribution of cash flow from operations to the General Partners and Limited Partners in March of 2001.
The restricted cash at December 31, 2001 represents cash held in the possession of the receiver at the 301 North Main and Phillips Buildings.
The decrease in interest, rents and other receivables at December 31, 30, 2001 as compared to December 31, 2000 is primarily due to the Partnership no longer accruing certain deemed contributions from the Partnership's venture partner in the 301 North Main and Phillips Buildings.
Commencing with the appointment of a receiver to take possession of and manage the property in early August 2001, the Partnership does not expect to receive additional distributions from the property or additional deemed contributions from the Partnership's venture partner.
The increase in prepaid expenses at December 31, 2001 as compared to December 31, 2000 is due to an increase in insurance premiums and also due to the timing of payment of insurance premiums at the 301 North Main and Phillips buildings.
The increase in property held for sale or disposition at December 31, 2001 as compared to December 31, 2000 is due to the Partnership classifying the 301 North Main and Phillips Buildings as held for sale or disposition as of June 1, 2001.
The decrease in accounts payable at December 31, 2001 as compared to December 31, 2000 is primarily due to the payment by the Partnership of approximately $1,679,000 of deferred management fees for the 301 N. Main and Phillips Buildings, as described more fully in the Notes, in December of 2001.
The increase in accrued interest at December 31, 2001 as compared to December 31, 2000 and the corresponding increase in mortgage and other interest for the year ended December 31, 2001 as compared to the same periods in 2000 and 1999 is primarily due to the Partnership accruing interest at the default rate of 18% on the mortgage loan of the 301 North Main and Phillips Buildings as of June 1, 2001. Such increase in accrued interest is partially offset by approximately $1,027,000 of interest payments from cash flow from the properties made by the receiver to the lender in the third and fourth quarters of 2001.
The decrease in accrued real estate taxes at December 31, 2001 as compared to December 31, 2000 is primarily due to the timing of the payment of real estate taxes at the 301 North Main and Phillips Buildings.
The decrease in rental income for the year ended December 31, 2000 as compared to the year ended December 31, 1999 is primarily due to the sale of the Bristol Mall in February 1999 and the decrease in occupancy at the 301 North Main Building.
The decrease in interest income for the year ended December 31, 2001 as compared to the same period in 2000 is due to lower interest rates in 2001 and a lower average cash balance due to distributions of cash flow from operations to the General Partners and Limited Partners in August of 2000 and March of 2001. The decrease in interest income for the year ended December 31, 2000 as compared to the year ended December 31, 1999 is primarily due to the temporary investment of the proceeds from the sale of the Bristol Mall prior to the distribution of such proceeds to the General and Limited Partners in May 1999.
The decrease in depreciation for the year ended December 31, 2001 as compared to the same period in 2000 is primarily due to the 301 North Main and Phillips Building being classified as held for sale or disposition as of June 1, 2001, and therefore, no longer being depreciated as of that date. The decrease in depreciation for the year ended December 31, 2000 as compared to the year ended December 31, 1999 is due to the commencement of continued depreciation at the 301 North Main and Phillips Buildings as a result of the Partnership no longer classifying this property as held for sale or disposition as of July 1, 1999, and the Partnership making an adjustment in the third quarter of 1999 to record the depreciation expense as of June 30, 1999 that would have been recognized had the 301 North Main and Phillips Buildings not been considered to be held for sale or disposition.
The increase in professional services for the year ended December 31, 2001 as compared to the year ended December 31, 2000 is primarily due to increased legal and other professional fees related to the default issues on the debt secured by the 301 N. Main and Phillips Buildings. The increase in professional services for the year ended December 31, 2000 as compared to the year ended December 31, 1999 is primarily due to legal fees incurred in 2000 related to the Partnership's response to the unsolicited tender offer, discussed above, by certain unaffiliated third parties to purchase Interests in the Partnership.
The increase in management fees to Corporate General Partner for the year ended December 31, 2001 as compared to the same period in 2000 and for the year ended December 31, 2000 as compared to the same period in 1999 is a result of the distributions of cash flow from operations to the General Partners and the Limited Partners in March 2001 and August 2000. These management fees are based upon a percentage of the aggregate distribution of cash flow from operations.
The decrease in venture partner's share of venture's operations for the year ended December 31, 2001 as compared to the year ended December 31, 2000 is primarily due to the discontinuation of deemed distributions to the venture partner at the 301 N. Main and Phillips Buildings to the Partnership upon discontinuation of debt service payments and subsequent appointment of the receiver, as described more fully in the Notes. The increase in venture partner's share of venture's operations for the year ended December 31, 2000 as compared to the year ended December 31, 1999 is primarily due to the distribution of substantially all excess cash flow to the Partnership from the 301 N. Main and Phillips Buildings venture in February 1999. Per the amendment of the venture agreement, profits and losses are allocated to the Partnership and the venture partner based on their proportional share of distributions made or deemed to be made.
INFLATION
Due to the decrease in the level of inflation in recent years, inflation generally has not had a material effect on rental income or property operating expenses.
Inflation is not expected to significantly impact future operations due to the expected liquidation of the Partnership in the near future, and because, due to the receivership, all revenues from the property are paid to, and all operating expenses from the property are paid by, the lender, without recourse to the Partnership.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership has identified interest rate changes as a potential market risk. However, as the Partnership's long-term debt bears interest at a fixed rate and is non-recourse to the Partnership, the Partnership does not believe that it is exposed to market risk relating to interest rate changes.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB INCOME PROPERTIES, LTD. - V (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE
INDEX
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 2001 and 2000
Consolidated Statements of Operations, years ended December 31, 2001, 2000 and 1999
Consolidated Statements of Partners' Capital Accounts (Deficits), years ended December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows, years ended December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
Schedule --------
Consolidated Real Estate and Accumulated Depreciation III
Schedules not filed:
All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners JMB INCOME PROPERTIES, LTD. - V:
We have audited the consolidated financial statements of JMB Income Properties, Ltd. - V (a limited partnership) and consolidated venture as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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. - V and consolidated venture at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Chicago, Illinois March 25, 2002
JMB INCOME PROPERTIES, LTD. - V (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership holds (through a joint venture) one real estate investment. Business activities consist of rentals to a small number of commercial companies, and the ultimate sale or disposition of such real estate. The Partnership currently expects to dispose of its remaining investment property and to wind up its affairs as soon as practicable, depending upon how the lender exercises its remedies with respect to the sale or foreclosure of the 301 N. Main and Phillips Buildings.
The accompanying consolidated financial statements include the accounts of the Partnership and its majority-owned venture, Wachovia Building Associates ("Wachovia"). The effect of all transactions between the Partnership and the consolidated venture has been eliminated.
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 accounting principles generally accepted in the United States of America ("GAAP") and to consolidate the accounts of the venture as described above. Such GAAP and consolidation adjustments are not recorded on the records of the Partnership. The net effect of these items for the years ended December 31, 2001 and 2000 is summarized as follows:
2001 2000 ------------------------------------------------ TAX BASIS TAX BASIS GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED) ----------- ---------- ----------- ----------
Total assets. . . . . $ 9,998,56916,532,039 12,858,839 19,306,824
Partners' capital accounts (deficits): General partners. . (1,676,012) (961,784) (1,589,380) (876,588) Limited partners. .(20,564,620) (5,803,370)(18,683,355)(2,433,664)
Net earnings (loss): General partners. . (22,457) (21,021) 3,429 20,013 Limited partners. . (726,115) (2,214,556) 110,876 718,249
Net earnings (loss) per limited part- nership interest . . (18.86) (57.51) 2.88 18.65 =========== =========== =========== ==========
The net earnings (loss) per limited partnership interest is based upon the number of limited partnership interests outstanding at the end of each period (38,505). Deficit capital accounts will result, through the duration of the Partnership, in a net gain for financial reporting and Federal income tax purposes.
The preparation of financial statements in accordance with GAAP requires the Partnership to make estimates and assumptions that affect the reported or disclosed amount of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Statement of Financial Accounting Standards No. 95 requires the Partnership to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. The Partnership records amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($3,741,117 and $6,430,847 at December 31, 2001 and 2000, respectively) as cash equivalents, which includes investments in an institutional mutual fund which holds U.S. Government obligations, with any remaining amounts (generally with original maturities of one year or less) reflected as short-term investments being held to maturity.
Deferred expenses consist primarily of refinancing, leasing and commitment fees. Such fees are generally amortized over the terms of the related notes using the straight-line method.
Although certain leases of the Partnership provided for tenant occupancy during periods for which no rent is due, the Partnership accrued rental income for the full period of occupancy on a straight-line basis. Such amounts are reflected in accrued rents receivable in the accompanying balance sheets.
No provision for State or Federal income taxes has been made as the liability for such taxes is that of the partners rather than the Partnership. However, in certain instances, the Partnership has been required under applicable law, and may be required in the future, to remit directly to the tax authorities amounts representing withholding from distributions paid to partners.
The Partnership acquired, either directly or through joint ventures, two office building complexes and nine shopping centers. Ten properties have been sold or disposed of by the Partnership through December 31, 2001.
The remaining property, an office building complex, is operating in receivership. The cost of the investment property represents the total cost to the Partnership and its venture plus miscellaneous acquisition costs.
Depreciation on the property has been provided over the estimated useful lives of the various components as follows:
YEARS -----
Buildings and improvements--150% declining-balance or straight-line . . . . . . . . . . . . . . 5-40 ====
The investment property is pledged as security for the long-term debt, for which there is no recourse to the Partnership or its venture. The investment property was placed in receivership in August 2001.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated over their estimated useful lives.
The Partnership adopted Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed of" ("SFAS 121") as required in the first quarter of 1996. The Partnership's policy is to consider a property to be held for sale or disposition when the Partnership has committed to a plan to sell such property and active marketing activity has commenced or is expected to commence in the near term or the Partnership has concluded that it may dispose of the property by no longer funding operating deficits or debt service requirements thus allowing the lender to realize upon its security. In accordance with SFAS 121, any properties identified as "held for sale or disposition" are no longer depreciated. The Partnership's commitment to a plan for sale or disposal of the 301 North Main and Phillips Buildings had not resulted in a sale or disposition. As a result, the Partnership's sole remaining property was not so identified. However, in accordance with the Partnership's plan to dispose of the property, debt service payments were suspended as of June 1, 2001. As of that date, the property was again identified as held for sale or disposition and accordingly, the property is no longer being depreciated as of that date. The results of operations, net of venture partner's share, for the years ended December 31, 2001, 2000 and 1999 for this property were $2,039,680, $1,703,117 and $1,459,037, respectively. The results of operations for the property that was sold was ($156,699) for the year ended December 31, 1999.
The Partnership has adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Partnership defines each of its property investments as an individual operating segment and has determined such property investments exhibit substantially identical economic characteristics and meet the other criteria specified by SFAS No. 131 which permits the property investments to be aggregated into one reportable segment. The Partnership assesses and measures operating results based on net operating income (rental income less property operating expenses). With the exception of interest income, professional services and general and administrative expenses, substantially all other components of net earnings (loss) of the Partnership relate to property investments. With the exception of cash and cash equivalents, substantially all other assets of the Partnership relate to property investments.
In October 2001, the FASB issued Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 develops one accounting model (based on the model in SFAS 121) for long- lived assets (including discontinued operations) that are to be held or disposed of by sale, as well as addresses certain discontinued operations issues. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. As the Partnership does not generally hold its properties for sale and has historically not had significant operations that have been accounted for as "discontinued operations", the Partnership does not anticipate that SFAS 144 will have a significant impact on its current or future operations or financial results.
VENTURE AGREEMENT - GENERAL
The Partnership at December 31, 2001 is a party to one operating joint venture agreement. Under certain circumstances, either pursuant to the venture agreement or due to the Partnership's obligations as general partner, the Partnership may be required to make additional cash contributions to the venture.
There are certain risks associated with the Partnership's investment made through a joint venture including the possibility that the Partnership's joint venture partner in an investment might become unable or unwilling to fulfill their financial or other obligations, or that such joint venture partner may have economic or business interests or goals that are inconsistent with those of the Partnership.
INVESTMENT PROPERTIES
301 N. MAIN BUILDING AND PHILLIPS BUILDING
In July 1986, the Partnership contributed its 100% ownership interest in the 301 N. Main Building and Phillips Building to Wachovia, a newly formed joint venture partnership.
In 1986, the Partnership's venture partner had agreed to contribute $10,700,000, before applicable interest, to the venture pursuant to a payment schedule from the closing date through August 1, 1996, when it would owe the balance of its obligation (approximately $7,600,000). The venture partner has continued to make contributions (from its share of the property's cash flow) based on the old payment schedule rather than making the balloon payment in August 1996 as required. As a result, the venture partner is currently approximately $6,824,000 in arrears for such contributions as of the date of this report. The venture partner's obligation to make such payment is secured only by its interest in the venture. In the fourth quarter of 1996, the Partnership notified the venture partner of its default effective August 1996. As a result of such default, the venture partner's share of distributions of cash flow generated subsequent to 1996, except as provided below, was retained by the venture. In December 1999, the Partnership and the venture partner entered into an agreement (the "Option Agreement"), effective January 1, 1999, under which the Partnership was given the option to purchase the venture partner's interest on or before January 31, 2002 (which option must have been exercised on or before December 31, 2001). If the Partnership had exercised its option, the purchase price for the interest would have been $230,000 and the Partnership would have released the venture partner from its obligation to make contributions as discussed above. As a result of the negotiations, and in consideration of the venture partner granting a full release to the Partnership and the venture, the Partnership and venture partner also concurrently entered into a forbearance agreement, under which the Partnership agreed to not pursue its legal remedies against the venture partner for its default related to such obligation until November 1, 2000, subject to further extension. Though the Partnership may now pursue such legal remedies, they are of little practical value at present because the venture partner's obligations permit recourse only to the venture partner's interest in the venture. The Partnership continues to reserve all of its rights in this regard, and may determine at a later date to pursue such remedies. Additionally, in connection with completing the option agreement, the venture agreement was amended to: (1) convert the venture partner's minority general partnership interest in the venture to a limited partnership interest; (2) provide that no further distributions of cash flow will be made to the venture partner after December 1999, at which time $200,000, representing the venture partner's final distribution of cash flow from operations and reserves, was distributed to the venture partner; and (3) provide that the venture partner (assuming the option under the option agreement was not exercised) would receive 30% of any net sale proceeds (as defined) if the gross sale price of the property is $40,000,000 or greater. Under the Option Agreement, upon the closing of the purchase of such interest, the venture partner would also release the Partnership and the venture from any and all claims that the venture partner may have against the Partnership and the venture, including, without limitation, any amounts which may have accrued or been distributable prior to such closing date, and the Partnership and the venture would release the venture partner from any further liabilities under the venture agreement, including, without limitation, the aforementioned obligation to make additional capital contributions. Given current market conditions, a sale of the property will not generate proceeds to the venture partner. The Partnership did not exercise its option prior to the expiration thereof.
The venture agreement had been previously amended effective for fiscal year 1998 and, as a result of the December 1999 amendment referred to above, again for all subsequent years. Per the amendments, profits and losses are allocated based on the ratio of distributions (actual distributions plus any distributions deemed to have been made) to the partners, approximately 87% and 76% to the Partnership and 13% and 24% to the venture partner for 2001 and 2000, respectively. For financial reporting and Federal income tax purposes, the venture reported the payments of approximately $346,000 in 2001 (for the five monthly payments made before the discontinuing of debt service payments) and $830,000 annually, prior to 2001, on the obligation referred to above as deemed to be made (and contributed for financial reporting purposes only) to the venture partner.
The venture had been marketing space in the 301 North Main Building and the Phillips Building to prospective replacement tenants but was not successful in its efforts due to the lack of large space users in this market. Re-leasing the vacant space in the buildings would require major renovation to the buildings as well as significant tenant improvements which, in turn, would be contingent upon the Partnership obtaining financing for these tenant replacement costs. The Partnership therefore determined not to commit any additional funds to the property due to the low likelihood of achieving a return on such funds. As a result, the Partnership decided not to continue making debt service payments as of June 1, 2001. The mortgage loan is in default as of June 1, 2001 and matured in November 2001, and in accordance with default provisions of the mortgage loan agreement, the Partnership has recorded interest upon the loan balance at the default rate of 18% per annum commencing June 1, 2001. In early August 2001, the lender notified the Partnership that a receiver was appointed to take possession of and manage the property.
The Partnership is currently monitoring the efforts of the lender and the receiver to transfer title to the property to either the lender or a third party, and is taking such actions as it believes will accomplish this result at the earliest possible time while minimizing any liability for the Partnership. The Partnership would then proceed to liquidate its affairs. However, the lender is continuing to review its options. The lender is currently pursuing a sale of the property to an unaffiliated third party. If such sale is not consummated, the lender is also reviewing its options relative to a potential removal of asbestos-containing insulation at the property and has been delaying the consummation of a foreclosure until it completes such analysis. Therefore, because the Partnership has only modest ability to influence these determinations and the speed with which they occur, there can be no assurance as to the timing of these events.
The transfer of title to the property under the likely scenarios discussed above would result in a gain for financial reporting and Federal and state income tax purposes with no corresponding distributable proceeds.
Additionally, the Partnership will be required to remit to the state tax authorities withholding for income taxes due as a result of the sale of the properties or its surrender to the mortgage lender. This withholding amount is currently estimated to be approximately $650,000.
The property was managed for a management fee calculated at 3-1/2% of the gross receipts of the property and a leasing fee of $50,000 per year. Payment of 1-1/2% of the 3-1/2% management fee was being deferred by the venture until the sale of the property or upon termination of the property management agreement. Such deferred management fees of approximately $1,679,000 were paid to the General Partner in December 2001.
In November 2001, the joint venture contributed the property to a single-member limited liability company in an attempt to protect the Partnership against any liabilities that may arise during the course of the receivership.
BRISTOL MALL
On February 17, 1999, the Partnership sold the Bristol Mall to an unaffiliated third party. The purchase price of the Property was $24,577,000. Upon closing, the Partnership received cash of approximately $17,400,000 (net of closing costs but before prorations). The cash received by the Partnership was also net of the repayment of the mortgage loan secured by the Property of approximately $4,100,000 and repayment of the construction loan of approximately $2,800,000. The Partnership recognized a gain of approximately $6,000,000 and $7,600,000 for financial reporting and Federal income tax purposes in 1999, respectively. In addition, in connection with the sale of the Property and as is customary in such transactions, the Partnership agreed to certain representations, warranties and covenants with stipulated survival periods which expired on November 17, 1999 with no liability to the Partnership. The property was classified as held for sale as of September 30, 1997 and therefore was not subject to continued depreciation from such date for financial reporting purposes.
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 2001 and 2000: 2001 2000 ----------- ----------- 9-1/4% mortgage note secured by two office buildings in Winston-Salem, North Carolina; payable in monthly installments of principal and interest (at 9.55% per annum) of $181,718 until November 1, 2001 when the remaining principal balance was due; such note is in default after discontinuation of mortgage payments as of June 1, 2001 with interest accrued at the default rate (18%) as of that date; receiver was appointed in early August 2001 to take possession of and manage property . . . . . . . $18,229,266 18,408,189 ----------- -----------
Total debt . . . . . . . . . . . 18,229,266 18,408,189 Less current portion of long-term debt. . . . . . . . . (18,229,266) (18,408,189) ----------- ----------- Total long-term debt . . . . . . $ -- -- =========== ===========
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or losses of the Partnership from operations are allocated 97% to the Limited Partners and 3% to the General Partners. Profits from the sale or refinancing of investment properties are to be allocated to the General Partners in an amount equal to the greater of (a) any cash distributions to the General Partners from the proceeds of any sale or refinancing (as described below) or (b) 1% of the profits from the sale or refinancing. Losses from the sale or refinancing of investment properties are to be allocated 1% to the General Partners. The remaining sale or refinancing profits and losses will be allocated to the Limited Partners.
The Partnership Agreement also generally provides that notwithstanding any allocation contained in the Agreement, if at any time profits are realized by the Partnership, any current or anticipated event would cause the deficit balance in absolute amount in the Capital Account of the General Partners to be greater than their share of the Partnership's indebtedness (as defined) after such event, then the allocation of Profits to the General Partners shall be increased to the extent necessary to cause the deficit balance in the Capital Account of the General Partners to be no less than their respective shares of the Partnership's indebtedness after such event. In general, the effect of this provision is to allow the deferral of the recognition of taxable gain to the Limited Partners.
The General Partners are not required to make any additional capital contributions except under certain limited circumstances upon termination of the Partnership.
Distributions of "cash flow" of the Partnership are allocated 90% to the Limited Partners and 10% to the General Partners (of which 5% constitutes a management fee to the Managing General Partner for services in managing the Partnership). However, such management fees and a portion of such distributions to the General Partners are subordinated to the Limited Partners' receipt of a stipulated return on capital. The Limited Partners have received cash distributions that satisfy the required stipulated return on capital
The Partnership Agreement provides that the General Partners shall receive as a distribution from the sale of a real property by the Partnership an amount up to 3/4 of 1% 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 were to receive 100% of all net sale proceeds until the Limited Partners (i) had received cash distributions of sale or refinancing proceeds in an amount equal to the Limited Partners' aggregate initial capital investment in the Partnership and (ii) had received cumulative cash distributions from the Partnership's operations which, when combined with sale or refinancing proceeds previously distributed, equaled a 7% 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 fourth fiscal quarter of 1977. The Limited Partners have received cash distributions that satisfy the requirements in (i) and (ii) above.
MANAGEMENT AGREEMENTS
The Partnership entered into agreements for the operation and management of the investment properties. Such agreements are summarized as follows:
Bristol Mall shopping center was managed by an affiliate of the General Partners until its sale in February 1999. The 301 N. Main Building and Phillips Building were managed by an unaffiliated third party property manager until the appointment of a receiver in August 2001, as described more fully in the Notes.
LEASES - AS PROPERTY LESSOR
At December 31, 2001, the Partnership and its consolidated venture's principal asset is one office building complex. The Partnership has determined that all leases relating to this property are properly classified as operating leases; therefore, rental income is reported when earned and the cost of the property, excluding cost of land, is depreciated over the estimated useful life. Generally, leases with tenants have ranged in term from one to thirty years and provide for fixed minimum rent and partial reimbursement of operating costs.
Costs and accumulated depreciation of the leased assets are summarized as follows at December 31, 2001:
Office Building: Cost . . . . . . . . . . . . . . . . . $13,360,876 Accumulated depreciation . . . . . . . (7,488,914) -----------
$ 5,871,962 ===========
Minimum lease payments including amounts representing executory costs (e.g. taxes, maintenance, insurance), and any related profit in excess of specific reimbursements, to be received in the future under the above operating lease agreements, are as follows:
2002 . . . . . . . . . . . . . . . $438,384 2003 . . . . . . . . . . . . . . . 131,252 2004 . . . . . . . . . . . . . . . 53,555 2005 . . . . . . . . . . . . . . . 24,104 2006 . . . . . . . . . . . . . . . 24,104 Thereafter . . . . . . . . . . . . 68,295 -------- Total . . . . . . . . . . . . . $739,694 ========
Contingent rent (based on sales of property tenants) included in consolidated rental income was as follows for the years ended December 31, 2001, 2000 and 1999:
1999 . . . . . . . . . . . . . . . $144,512 2000 . . . . . . . . . . . . . . . 10,559 2001 . . . . . . . . . . . . . . . 2,830 ========
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partnership to the General Partners and their affiliates as of December 31, 2001 and for the years ended December 31, 2001, 2000 and 1999 are as follows: UNPAID AT DECEMBER 31, 2001 2000 1999 2001 -------- -------- ------- ------------ Property management and leasing fees . . . . . . . . $ 48,760 73,873 112,178 -- Management fees to Corporate General Partner. . . . . . . 64,175 21,392 -- -- Insurance commissions . . . . 10,065 14,281 8,801 -- Reimbursement (at cost) for out-of-pocket expenses . . . -- 244 38 -- Reimbursement (at cost) for out-of-pocket salary and salary related expenses related to on-site and other costs for the Partnership and its investment properties. . . . -- -- 20,786 -- -------- ------- ------- --------- $123,000 109,790 141,803 -- ======== ======= ======= =========
Any amounts deferred or payable to the General Partners and their affiliates do not bear interest. The General Partners and their affiliates had been deferring receipt of management and leasing fees pursuant to the venture agreement for the 301 North Main Building and Phillips Building. Prior to 1995, an affiliate of the Managing General Partner provided management and leasing services. In December 1994, the affiliate sold all of its assets and assigned its interest in the management contracts, including the one for the 301 North Main Building and Phillips Building to an unaffiliated third party. In connection with such sale, an affiliate of the General Partners guaranteed payment to the unaffiliated third party of the portion of the fees deferred due to a provision in the venture agreement for the 301 N. Main and Phillips Building. Any such guaranteed amounts were paid to such unaffiliated third party when earned and the General Partners and its affiliates were entitled to receive such deferred fees. The General Partners and their affiliates had deferred receipt of approximately $1,679,000 (approximately $43 per interest) of such management and leasing fees. Such amounts were deferred until the sale or disposition of the property or upon termination of the property management agreement. In August 2001, a receiver was appointed to take possession of and manage the property. Therefore, the Partnership stopped accruing the deferred fees as of that date. In addition, as this event resulted in the termination of the aforementioned management agreement, such deferred fees became payable to the General Partner, and the deferred management fees of approximately $1,679,000 were paid to the General Partners in December 2001 from Partnership cash.
SUPPLEMENTARY QUARTERLY DATA (UNAUDITED)
---------------------------------------------- 3/31 6/30 9/30 12/31 ---------- ---------- ---------- ----------
Total income. . . . . . $1,296,390 1,252,715 1,258,919 1,217,857 ========== ========== ========== ==========
Net earnings (loss) . . $ (101,254) (104,290) (272,446) (270,582) ========== ========== ========== ========== Net earnings (loss) per limited partner interest: Net earnings (loss). . . . . . $ (2.55) (2.63) (6.86) (6.82) ========== ========== ========== ==========
---------------------------------------------- 3/31 6/30 9/30 12/31 ---------- ---------- ---------- ----------
Total income. . . . . . $1,317,812 1,395,117 1,356,822 1,314,521 ========== ========== ========== ==========
Net earnings (loss) . . $ 14,116 47,600 6,869 45,720 ========== ========== ========== ========== Net earnings (loss) per limited partner interest: Net earnings (loss) . . . . . $ .36 1.19 .17 1.16 ========== ========== ========== ==========
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes or disagreements with accountants during fiscal years 2001 and 2000.
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, substantially all of the outstanding stock of which is owned directly or indirectly, by certain of its officers, directors, and members of their families and their affiliates. JMB has responsibility for all aspects of the Partnership's operations, subject to the requirement that sales of real property must be approved by Messrs. Neil G. Bluhm and Judd D. Malkin as the individual general partners of the Partnership.
The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that the General Partners and their affiliates are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership or its investment property by affiliates of the General Partners, including insurance brokerage services.
In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership or its investment property under certain circumstances, including for tenants and/or for the sale of property. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell a property, the establishment and maintenance of reasonable reserves and the determination of the sources (i.e., offering proceeds, cash generated from operations or sale proceeds) and uses or distribution of such reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations.
The names, positions held and length of service therein of each director and the executive officers of the Managing General Partner are as follows:
SERVED IN NAME OFFICE OFFICE SINCE - ---- ------ ------------
Judd D. Malkin Chairman 5/03/71 Director 5/03/71 Chief Financial Officer 2/22/96 Neil G. Bluhm President 5/03/71 Director 5/03/71 Burton E. Glazov Director 7/01/71 Stuart C. Nathan Director 3/14/73 A. Lee Sacks Director 5/09/88
SERVED IN NAME OFFICE OFFICE SINCE - ---- ------ ------------
John G. Schreiber Director 3/14/73 H. Rigel Barber Executive Vice President 1/02/87 Chief Executive Officer 8/01/93 Gary Nickele Executive Vice President 1/01/92 General Counsel 2/27/84 Gailen J. Hull Senior Vice President 6/01/88
Effective May 31, 1996, the Board of Directors of JMB established a special committee, consisting of Messrs. Malkin, Glazov, Nathan, Sacks and Schreiber, to deal with all matters relating to tender offers for Interests.
There is no family relationship among any of the foregoing directors or officers. The foregoing directors have been elected to serve a one-year term until the annual meeting of the Managing General Partner to be held on June 5, 2002. 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 5, 2002. 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-XIII ("Carlyle-XIII") and Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"). JMB is also the sole general partner of the associate general partner Carlyle-XIII and Carlyle-XIV. Some of the foregoing directors and officers are also officers and/or directors of various affiliated companies of JMB. Most of such directors and officers are also partners, directly or indirectly, of the partnership that is associate general partner in Carlyle-XIII and Carlyle-XIV.
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 includes the following:
Judd D. Malkin (age 64) has been associated with JMB since October, 1969. He is also a director of Chisox Corporation, which is the general partner of a limited partnership that owns the Chicago White Sox, a Major League Baseball team, and a director of CBLS, Inc., which is the general partner of the general partner of a limited partnership that owns the Chicago Bulls, a National Basketball Association team. Mr. Malkin was also Co-Chairman of the Board of Directors of Urban Shopping Centers, Inc. from its inception in 1993 until November 2000.
Neil G. Bluhm (age 64) has been associated with JMB since August, 1970. Mr. Bluhm is also a principal of Walton Street Capital, L.L.C., which sponsors real estate investment funds. He was also Co-Chairman of the Board of Directors of Urban Shopping Centers, Inc. from its inception in 1993 until November 2000. He is a member of the Bar of the State of Illinois.
Burton E. Glazov (age 63) has been associated with JMB since June, 1971 and served as an Executive Vice President of JMB until December of 1990. Mr. Glazov is currently retired. He is a member of the Bar of the State of Illinois.
Stuart C. Nathan (age 60) has been associated with JMB since July, 1972. Until August 2001, Mr. Nathan was an Executive Vice President of JMB and, until December 2000, an officer and/or director of certain JMB affiliates. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 68) has been associated with JMB since December, 1972. He is also President and a director of JMB Insurance Agency, Inc.
John G. Schreiber (age 55) has been associated with JMB since December, 1970. Mr. Schreiber is President of Centaur Capital Partners, Inc., a family investment firm. He is also a senior advisor and partner of Blackstone Real Estate Advisors, L.P., which manages large private equity funds. Mr. Schreiber is a trustee of AMLI Residential Properties Trust and a director of Host Marriott Corporation and of The Rouse Company, as well as a director of a number of mutual funds advised by T. Rowe Price Associates, Inc. From February 1995 until November 2000 Mr. Schreiber was a director of Urban Shopping Centers, Inc. Prior to his retirement as an officer of JMB in 1990, Mr. Schreiber was Chairman of JMB/Urban Development Co. from its inception in 1988 until 1990 and an Executive Vice President of JMB from 1979 to 1990. He received an M.B.A. from Harvard University Graduate School of Business in 1970.
H. Rigel Barber (age 53) 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.
Gary Nickele (age 49) has been associated with JMB since February, 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 53) 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.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The Partnership is required to pay a management fee to the Managing General Partner and the General Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of profits or losses. Reference is made to the Notes for a description of such transactions, distributions and allocations. In 2001, 2000 and 1999 cash distributions of $64,175, $21,916 and $2,739,656 were paid, respectively, to the General Partners. In connection with the distribution of cash flow from operations in 2001, the General Partners received an incentive management fee of $64,175, as per the Partnership agreement.
JMB Properties Company, an affiliate of the Managing General Partner, provided property management services to the Partnership for the 301 N. Main Building and Phillips Building in Winston-Salem, North Carolina through the date of its sale in December, 1994 at fees calculated at 3-1/2% of gross income. JMB Retail Properties Company (renamed Urban Retail Properties Company as of March 15, 1995), then an affiliate of the Managing General Partner, provided property management services to the Partnership for the Bristol Mall in Bristol, Virginia, prior to its sale, at fees calculated at 5% of gross income from the property. In 2001, such affiliates earned property management and leasing fees amounting to $48,760. Upon appointment of a receiver to take possession of and manage the 301 N. Main Building and Phillips Building properties in August of 2001, the management agreement was terminated and $1,678,573, the entire amount of deferred management fees through such date, was paid by the Partnership in December of 2001. 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 (but in no event for a fee greater than 5% of the gross income from a property), and such agreements must be terminable by either party thereto, without penalty, upon 60 days' notice.
JMB Insurance Agency, Inc., an affiliate of the Managing General Partner, earned and received insurance brokerage commissions in 2001 aggregating $10,065 in connection with the provision of insurance coverage for certain of the real property investments of the Partnership. Such commissions are at rates set by insurance companies for the classes of coverage involved.
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 2001, the Managing General Partner earned no reimbursements for such out-of-pocket expenses.
The Partnership is permitted to engage in various transactions involving affiliates of the Managing General Partner. The relationship of the Managing General Partner (and its officers and directors) to its affiliates is set forth in Item 10 above.
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 15, 1977, as supplemented September 20, 1977, filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference. Certain pages of the Prospectus are incorporated herein by reference.
3-B.* Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which is incorporated herein by reference and which agreement is hereby incorporated herein by reference.
4-A. Documents relating to the refinancing of the mortgage loan, dated October 17, 1986, secured by the Wachovia Bank Building and Phillips Building office buildings in Winston-Salem, North Carolina are hereby incorporated by reference to the Partnership's Report on Form 10-K (File No. 0-8716) dated March 19, 1993.
4-B. Documents relating to the mortgage loan secured by the Bristol Mall shopping center in Bristol, Virginia are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-8716) dated October 17, 1977.
4-C. Documents relating to the construction loan, dated July 25, 1996 secured by the Bristol Mall shopping center in Bristol, Virginia are hereby incorporated by reference to the Partnership's Report on Form 10-Q (File No. 0-8716) dated November 8, 1996.
4-D. Modification and extension agreement related to the mortgage loan secured by the Wachovia Bank Building and Phillips Building, office buildings in Winston Salem, North Carolina, effective November 1, 1996 is hereby incorporated herein by reference to the Partnership's Report for December 31, 1996 on Form 10-K (File No. 0-8716) dated March 21, 1997.
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in the Wachovia Bank Building and Phillips Building in Winston Salem, North Carolina are hereby incorporated by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-58026) dated September 20, 1977.
10-B. Acquisition documents relating to the purchase by the Partnership of the Bristol Mall shopping center in Bristol, Virginia are hereby incorporated by reference to the Partnership's Report on Form 8- K (File No. 0-8716) dated October 17, 1977.
10-C. Letter Agreement between Bristol Mall, L.L.C. and Bristol Mall Associates dated February 16, 1999 is hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-8716) dated March 2, 1999.
10-D. Letter Agreement between Bristol Mall, L.L.C. and Bristol Mall Associates dated January 7, 1999 is hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-8716) dated March 2, 1999.
10-E. Purchase Agreement between Bristol Mall Associates and Bristol Mall, L.L.C., dated February 17, 1999 is hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-8716) dated March 2, 1999.
21. List of Subsidiaries.
24. Powers of Attorney.
----------
* Previously filed as Exhibits 3-A and 3-B, respectively, to the Partnership's Report for December 31, 1992 on Form 10-K of the Securities Exchange Act of 1934 (File no. 0-8716) filed on March 19, 1993 and hereby incorporated herein by reference.
(b) No Reports on Form 8-K were filed since the beginning of the last quarter of the period covered by this report.
No annual report for the fiscal year 2001 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 Exchange 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. - V
By: JMB Realty Corporation Managing General Partner
GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date: March 25, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation Managing General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 25, 2002
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 25, 2002
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 25, 2002
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President and Principal Accounting Officer Date: March 25, 2002
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 25, 2002
STUART C. NATHAN* By: Stuart C. Nathan, Director Date: March 25, 2002
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull Attorney-in-Fact Date: March 25, 2002
JMB INCOME PROPERTIES, LTD. - V
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------- ---- 3-A. Certain pages of the Prospectus of the Partnership dated August 15, 1977 as supplemented September 20, 1977 Yes
3-B. Amended and Restated Agreement of Limited Partnership Yes
4-A. Refinancing loan documents related to the Wachovia Bank Building and Phillips Building Yes
4-B. Mortgage loan documents related to the Bristol Mall Yes
4-C. Documents relating to the construction loan dated July 25, 1996 secured by the Bristol Mall Shopping Center Yes
4-D. Modification and extension documents related to the Wachovia Bank Building and Phillips Building Yes
10-A. Acquisition documents related to the Wachovia Bank Building and Phillips Building Yes
10-B. Acquisition documents related to the Bristol Mall Yes
10-C. Letter agreement related to the Bristol Mall dated February 16, 1999 Yes
10-D. Letter agreement related to the Bristol Mall dated January 7, 1999 Yes
10-E. Purchase agreement related to the Bristol Mall dated February 17, 1999 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 15, 1977, as supplemented September 20, 1977, filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference. Certain pages of the Prospectus are incorporated herein by reference.
3-B.* Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which is incorporated herein by reference and which agreement is hereby incorporated herein by reference.
4-A. Documents relating to the refinancing of the mortgage loan, dated October 17, 1986, secured by the Wachovia Bank Building and Phillips Building office buildings in Winston-Salem, North Carolina are hereby incorporated by reference to the Partnership's Report on Form 10-K (File No. 0-8716) dated March 19, 1993.
4-B. Documents relating to the mortgage loan secured by the Bristol Mall shopping center in Bristol, Virginia are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-8716) dated October 17, 1977.
4-C. Documents relating to the construction loan, dated July 25, 1996 secured by the Bristol Mall shopping center in Bristol, Virginia are hereby incorporated by reference to the Partnership's Report on Form 10-Q (File No. 0-8716) dated November 8, 1996.
4-D. Modification and extension agreement related to the mortgage loan secured by the Wachovia Bank Building and Phillips Building, office buildings in Winston Salem, North Carolina, effective November 1, 1996 is hereby incorporated herein by reference to the Partnership's Report for December 31, 1996 on Form 10-K (File No. 0-8716) dated March 21, 1997.
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in the Wachovia Bank Building and Phillips Building in Winston Salem, North Carolina are hereby incorporated by reference to the Partnership's Registration Statement on Form S-11 (File No. 2-58026) dated September 20, 1977.
10-B. Acquisition documents relating to the purchase by the Partnership of the Bristol Mall shopping center in Bristol, Virginia are hereby incorporated by reference to the Partnership's Report on Form 8- K (File No. 0-8716) dated October 17, 1977.
10-C. Letter Agreement between Bristol Mall, L.L.C. and Bristol Mall Associates dated February 16, 1999 is hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-8716) dated March 2, 1999.
10-D. Letter Agreement between Bristol Mall, L.L.C. and Bristol Mall Associates dated January 7, 1999 is hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-8716) dated March 2, 1999.
10-E. Purchase Agreement between Bristol Mall Associates and Bristol Mall, L.L.C., dated February 17, 1999 is hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-8716) dated March 2, 1999.
21. List of Subsidiaries.
24. Powers of Attorney.
----------
* Previously filed as Exhibits 3-A and 3-B, respectively, to the Partnership's Report for December 31, 1992 on Form 10-K of the Securities Exchange Act of 1934 (File no. 0-8716) filed on March 19, 1993 and hereby incorporated herein by reference.
(b) No Reports on Form 8-K were filed since the beginning of the last quarter of the period covered by this report.
No annual report for the fiscal year 2001 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 Exchange 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. - V
By: JMB Realty Corporation Managing General Partner
GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date: March 25, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: JMB Realty Corporation Managing General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 25, 2002
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 25, 2002
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 25, 2002
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President and Principal Accounting Officer Date: March 25, 2002
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 25, 2002
STUART C. NATHAN* By: Stuart C. Nathan, Director Date: March 25, 2002
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull Attorney-in-Fact Date: March 25, 2002
JMB INCOME PROPERTIES, LTD. - V
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE PAGE ------------- ---- 3-A. Certain pages of the Prospectus of the Partnership dated August 15, 1977 as supplemented September 20, 1977 Yes
3-B. Amended and Restated Agreement of Limited Partnership Yes
4-A. Refinancing loan documents related to the Wachovia Bank Building and Phillips Building Yes
4-B. Mortgage loan documents related to the Bristol Mall Yes
4-C. Documents relating to the construction loan dated July 25, 1996 secured by the Bristol Mall Shopping Center Yes
4-D. Modification and extension documents related to the Wachovia Bank Building and Phillips Building Yes
10-A. Acquisition documents related to the Wachovia Bank Building and Phillips Building Yes
10-B. Acquisition documents related to the Bristol Mall Yes
10-C. Letter agreement related to the Bristol Mall dated February 16, 1999 Yes
10-D. Letter agreement related to the Bristol Mall dated January 7, 1999 Yes
10-E. Purchase agreement related to the Bristol Mall dated February 17, 1999 Yes
21. List of Subsidiaries No
24. Powers of Attorney No