UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........ to ........
Commission file number 0-19198
FIRST DEARBORN INCOME PROPERTIES L.P. II
(Exact name of registrant as specified in its charter)
Delaware 36-3591517
(State of organization) (IRS Employer Identification No.)
154 West Hubbard Street, Suite 250, Chicago, IL 60610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 464-0100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ____
Units outstanding as of September 30, 2000: 10,000
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Balance Sheets
September 30, 2000 and December 31, 1999
(Unaudited)
Assets
September 30, December 31,
2000 1999
Current assets:
Cash and cash equivalents (note 1) 376,189 819,519
Rents and other receivables 3,711 135,404
Due from affiliates - 36,365
Prepaid expense - 16,568
Total current assets 379,900 1,007,856
Investment property, at cost (note 1):
Land - 1,201,880
Building - 5,349,122
- 6,551,002
Less accumulated depreciation - (2,557,353)
- 3,993,649
Investment in unconsolidated venture,
at equity (note 2) 137,400 (80,059)
Deferred leasing and loan costs - 30,637
Total assets 517,300 4,952,083
<FN>
See accompanying notes to the financial statements.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Balance Sheets
September 30, 2000 and December 31, 1999
(Unaudited)
Liabilities and Partners' Capital Accounts
September 30, December 31,
2000 1999
Current liabilities:
Accounts payable and accrued expenses - 227,769
Accrued interest - 86,495
Other current liabilities 63 25,343
Current portion of long-term debt - 4,258,224
Total current liabilities 63 4,597,831
Total liabilities - 4,597,831
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions 1,000 1,000
Cumulative net income (loss) (1,000) (14,833)
- (13,883)
Limited partners:
Capital contributions 4,058,963 4,058,963
Cumulative net income (loss) (924,428) (1,473,530)
Cumulative cash distributions (2,617,298) (2,217,298)
517,237 368,135
Total partners' capital accounts 517,237 354,252
Commitments and contingencies (note 2)
Total Liabilities and Partners' Capital 517,300 4,952,083
<FN>
See accompanying notes to the financial statements.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statement of Operations
Three months ended September 30, 2000 and 1999
(Unaudited)
2000 1999
Revenues:
Rental income - 152,028
Tenant charges - 88,125
Interest income 4,218 9,471
Total revenues 4,218 249,624
Expenses:
Property operating expenses - 189,386
Interest - 87,119
Depreciation - 71,994
Amortization - 2,395
General and administrative expenses 9,311 15,930
Total expenses 9,311 366,824
Operating income (loss) (5,093) (117,200)
Partnership's share of operations
of unconsolidated ventures 345,150 2,217
Gain on sale of disposition
of investment property - -
Venture partner's share of consolidated
venture's operations (note 1) - 49,811
Net income (loss) 340,057 (65,172)
Net income (loss) per limited partnership unit 32.85 (6.45)
Cash distribution per limited partnership unit - -
<FN>
See accompanying notes to the financial statements.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statement of Operations
Nine months ended September 30, 2000 and 1999
(Unaudited)
2000 1999
Revenues:
Rental income 56,765 577,693
Tenant charges 2,843 276,200
Interest income 19,480 27,289
Total revenues 79,088 881,182
Expenses:
Property operating expenses 32,500 607,401
Interest 88,000 264,106
Depreciation - 213,034
Amortization 2,395 7,184
General and administrative expenses 76,815 91,837
Total expenses 199,710 1,183,562
Operating income (loss) (120,622) (302,380)
Partnership's share of operations
of unconsolidated ventures 359,393 581
Gain on sale of disposition
of investment property 324,164 -
Venture partner's share of consolidated
venture's operations (note 1) - 110,800
Net income (loss) 562,935 (190,999)
Net income (loss) per limited partnership unit 54.91 (18.91)
Cash distribution per limited partnership unit 40.00 2.06
<FN>
See accompanying notes to the financial statements.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Consolidated Statements of Cash Flows
Nine months ended September 30, 2000 and 1999
(Unaudited)
2000 1999
Cash flows from operating activities:
Net income (loss) 562,935 (190,999)
Items not requiring (providing)
cash or cash equivalents:
Depreciation - 213,034
Amortization 2,395 7,184
Partnership's share of operations of
unconsolidated ventures (273,993) (581)
Venture partners' share of
consolidated venture's operations - (110,869)
Gain on disposition of investment property (324,164) -
Changes in:
Rents and other receivables 131,639 77,850
Due from affiliates 36,365 -
Prepaid expenses 16,568 (2,373)
Accounts payable and accrued expenses (314,264) (24,175)
Other current liabilities (25,280) -
Deferred Costs 30,637 -
Net cash provided by (used in) operating activities (157,162) (30,929)
Cash flow from investment activities:
Additions to building and deferred costs - (28,737)
Disposition of investment property 4,372,056 -
Net cash provided by (used in) investment activities 4,372,056 (28,737)
Cash flows from financing activities:
Distributions to limited partners (400,000) (20,600)
Capital from reduction in syndication costs - 63,000
Principal payments on long-term debt (4,258,224) (134,861)
Net cash used in financing activities (4,658,224) (91,961)
Net decrease in cash and cash equivalents (443,330) (151,627)
<FN>
See accompanying notes to the financial statements.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements
September 30, 2000 and 1999
(Unaudited)
Readers of this quarterly report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1999, which are
included in the Partnership's 1999 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
(1) Basis of Accounting
For the three and nine months ended September 30, 2000 and September 30,
1999 the accompanying consolidated financial statements include the accounts
of the Partnership and its consolidated venture - Sycamore Mall Associates
(the "Venture"). The effect of all transactions between the Partnership and
the Venture has been eliminated.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's interest
in Evanston Galleria Limited for the three and nine months ended September 30,
2000 and September 30, 1999.
The Partnership 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, where applicable, to present the Partnership's
accounts in accordance with generally accepted accounting principles (GAAP).
Such adjustments are not recorded on the records of the Partnership. The net
effect of these adjustments for the nine months ended September 30, 2000 and
September 30, 1999 is summarized as follows:
2000 1999
GAAP Tax GAAP Tax
Basis Basis Basis Basis
Net income (loss) 562,935 (1,672,000) (190,999) (178,000)
Net income (loss) per
limited partnership unit 54.91 (165.53) (18.91) (17.62)
The net loss per limited partnership unit presented is based on the weighted
limited partnership units outstanding at the end of each period (10,000).
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
Partnership distributions from unconsolidated ventures are considered
cash flow from operating activities to the extent of the Partnership's
cumulative share of net operating earnings before depreciation and non-cash
items. In addition, the Partnership records amounts held in U.S. Government
obligations, commercial paper and certificates of deposit at cost which
approximates market. For the purposes of these statements the Partnership's
policy is to consider all such investments, with an original maturity of three
months or less ($273,216 and $788,980 at September 30, 2000 and December 31,
1999, respectively), as cash equivalents.
Deferred offering costs were charged to the partners' capital accounts
upon consummation of the offering. Deferred loan costs are amortized over the
terms of the related agreements using the straight-line method.
Depreciation on the investment properties acquired has been provided over
the estimated useful lives of 5 to 30 years using the straight-line method.
No provision for Federal income taxes has been made, as any liability
for such taxes would be that of the partners rather than the Partnership.
The Partnership adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and
for Long Lived Assets to be Disposed Of", on January 1, 1996. SFAS 121
requires that the Partnership record an impairment loss on its property held
for investment whenever the property's carrying value cannot be fully recovered
through estimated undiscounted cash flows from its operations and sale. The
amount of the impairment loss to be recognized would be the difference between
the property's carrying value and the property's estimated fair value. In
addition, SFAS 121 provides that a property may not be depreciated while being
held for sale. As of October 1, 1997, the Evanston Galleria property was
considered to be held for sale. In accordance with SFAS 121, no depreciation
expense relative to the property was recorded from October 1, 1997 through
September 30, 2000. As of December 31, 1999, the Sycamore Mall property was
considered to be held for disposal. In response to the uncertainty relative to
the Sycamore property, as a matter of prudent accounting practices and for
financial reporting purposes, the Partnership recorded a provision for value
impairment in 1999 and 1998 in the amount of $1,890,000 and $1,100,000,
respectively. As a result of the inability to find new tenants, the Sycamore
Mall property was unable to meet its financial obligations and beginning in
October of 1999, payments to the lender were halted. This resulted in a
default of the loan terms and on March 13, 2000, title to the land buildings
and improvements as well as the other assets and liabilities of the property
was transferred to the lender in consideration of a discharge of the mortgage
loan.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(2) Venture Agreements
The Partnership has entered into three joint venture agreements with
partnerships sponsored by affiliates of the General Partners. Pursuant to
such agreements, the Partnership has made capital contributions aggregating
$3,652,066 through September 30, 2000. The Partnership acquired, through
these ventures, interests in a mixed use retail/residential property and two
shopping centers.
(3) Disposition of Sycamore Mall
In March 2000, title to the land buildings and improvements as well as the
other assets and liabilities of the Sycamore Mall property was transferred to
the lender in consideration of a discharge of the mortgage loan. Total
consideration from the lender was $4,741,517. The outstanding mortgage
balance was $4,258,224 and there was $453,293 of accrued interest, prepayment
penalties and other costs associated with the transfer. All operating
liabilities and assets were also assumed as a part of this transaction. This
disposition resulted in a net gain of $336,111 to the Partnership. No net
cash flow was realized from this disposition.
(4) Transactions with Affiliates
Fees, commissions and other expenses required to be paid by the
Partnership to affiliates of the General Partners for the nine months ended
September 30, 2000 and 1999 are as follows:
Unpaid at
June 30,
2000 1999 2000
<C
Reimbursement for administrative services 10,000 10,000 -
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(5) Unconsolidated Venture
On July 12, 2000, Evanston Galleria was sold for a sale price in the amount of
$9,900,000. Coincidentally, there was a settlement of the original claims of
the partnership against the original developers of the project. Evanston
Galleria was relieved of $175,000 of second mortgage debt and accrued interest
thereon. From the $9,900,000 sale proceeds, Evanston Galleria repaid
$8,311,740 of first mortgage debt. Property tax prorations totaled $314,680,
and other closing related prorations and expenses totaled $560,809. Net
proceeds from the sale totaled $703,771. A total of $222,745 will be received
by the Partnership upon the liquidation of Evanston Galleria LP. Of that
amount, $85,345 was received as of September 30, 2000.
The Evanston Galleria property was the only remaining real estate investment
of the Partnership.
(6) Subsequent event
In October 2000, the partnership received a final distribution from Evanston
Galleria in the amount of $137,400. The Partnership reserved sufficient funds
to wrap up and liquidate the business and distributed $494,619 to the Limited
Partners.
(7) Adjustments
In the opinion of the Managing General Partner, all adjustments (consisting
solely of normal recurring adjustments) necessary for a fair presentation
have been made to the accompanying consolidated financial statements as of
September 30, 2000 and 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At September 30, 2000, the Partnership had cash and cash equivalents of
$376,189 which will be utilized for future distributions to Partners. This is
$443,330 less than the $819,519 balance at December 31, 1999. The decrease
results primarily from a $400,000 distribution to limited partners which was
made during the second quarter of 2000. The Partnership made a final
distribution of $494,619 to the Limited Partners in October 2000.
During the first quarter of 2000, title to the land buildings and
improvements as well as the other assets and liabilities of the Sycamore Mall
property was transferred to the lender in consideration of a discharge of the
mortgage loan. This disposition resulted in a net gain of $324,164. No net
cash flow was realized from this disposition.
On July 12, 2000, Evanston Galleria was sold for a sale price in the
amount of $9,900,000. Coincidentally, there was a settlement of the original
claims of the partnership against the original developers of the project.
Evanston Galleria was relieved of $175,000 of second mortgage debt and accrued
interest thereon. From the $9,900,000 sale proceeds, Evanston Galleria repaid
$8,311,740 of first mortgage debt. Property tax prorations totaled $314,680,
and other closing related prorations and expenses totaled $560,809. Net
proceeds from the sale totaled $703,771. A total of $222,745 will be received
by the Partnership upon the liquidation of Evanston Galleria LP. Of that
amount, $85,345 was received as of September 30, 2000.
As the Partnership intends to distribute all "net cash receipts" and
"sales proceeds" in accordance with the terms of the Partnership Agreement,
and does not intend to reinvest any such proceeds, the Partnership is intended
to be self-liquidating in nature. The Partnership's future source of
liquidity and distributions is expected to be through cash generated by the
Partnership's investment properties and from the sale and refinancing of such
properties. To the extent that additional payments are required under a
purchase agreement or a property does not generate an adequate cash flow to
meet its requirements, the Partnership may withdraw funds from the working
capital reserve, which it maintains.
Results of Operations - 2000 compared to 1999
For the three and nine months ended September 30, 2000 and September 30,
1999, the accompanying consolidated financial statements include the accounts
of the Partnership and its consolidated venture - Sycamore Mall Associates.
The effect of all transactions between the Partnership and the Venture has been
eliminated. The equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to the
Partnership's interest in Evanston Galleria Limited for the nine months ended
September, 2000 and September 30, 1999.
The $520,928 decrease in rental income and the $273,357 decrease in
tenant charges income for the nine months ended September 30, 2000 as compared
to the nine months ended September 30, 1999 and the elimination of rental
income and tenant charges income in the second quarter of 2000 is attributed
to the disposition of the Sycamore Mall property which occurred in the first
quarter of 2000.
The $574,901 decrease in property operating expenses for the nine months
ended September 30, 2000 as compared to the nine months ended September 30,
1999 and the elimination of property operating expenses during the second
quarter of 2000 is attributed to the disposition of the Sycamore Mall property
which occurred in the first quarter of 2000.
The $213,034 (100%) decrease in depreciation expense for the nine months
ended September 30, 2000 as compared to the nine months ended September, 1999
is attributable to the fact that the Sycamore property was considered to be
held for sale during the first quarter of 2000. In accordance with SFAS 121,
a property may not be depreciated while being held for sale.
The $15,022 (16%) decrease in general and administrative expenses for the
nine months ended September 30, 2000 as compared to the nine months ended
September 30, 1999 is attributable to the disposition of the Sycamore Mall
property and the winding up of the affairs of the company.
The Partnership's share of operations of unconsolidated subsidiaries
resulted in an income allocation of $359,393, during the nine months ended
September 30, 2000, as compared to a loss allocation of $581 during the nine
months ended September 30, 1999. Evanston Galleria was disposed of and
resulted in a gain in 2000.
The Partnership's allocation of consolidated venture's operations to the
venture partners was an income allocation of $110,800 during the nine months
ended September 30, 1999. Sycamore Mall was disposed of during the first
quarter of 2000 and no allocation of income or loss was made for the benefit
of the venture's partners. A gain of $324,164 was recognized upon the
disposition of Sycamore during the 2nd quarter 2000.
OCCUPANCY
The following is a list of approximate occupancy levels by quarter for
the Partnership's investment properties:
at at at at at at at
03/31/99 06/30/99 09/30/99 12/31/99 03/31/00 06/30/00 09/30/00
Evanston Galleria
Evanston, IL 92% 97% 98% 92% 92% 92% n/a
Sycamore Mall
Iowa City, Iowa 47% 44% 44% 44% n/a n/a n/a
Part II - OTHER INFORMATION
Items 1, 2, 3, 4, and 5 of Part II are omitted because of the absence of
conditions under which they are required.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
Form 8-K reporting the disposition of the Sycamore Mall property was
filed on March 23, 2000. Form 8-K reporting the disposition of the Evanston
Galleria property was filed on July 25, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(Registrant)
By: FDIP, Inc.
(Managing General Partner)
November 14, 2000 By: Robert S. Ross
President
(Principal Executive Officer)
November 14, 2000 By: Bruce H. Block
Vice President
(Principal Financial Officer)