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 March 31, 1997
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 March 31, 1997: 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
March 31, 1997 and December 31, 1996
(Unaudited)
Assets
March 31, December 31,
1997 1996
Current assets:
Cash and cash equivalents (note 1) 584,035 592,001
Rents and other receivables 262,382 305,044
Due from affiliates 4,936 4,936
Prepaid expense 18,001 31,502
Total current assets 869,354 933,483
Investment property, at cost (note 1):
Land 1,201,880 1,201,880
Building 8,350,456 8,350,456
9,552,336 9,552,336
Less accumulated depreciation (1,811,930) (1,739,051)
7,740,406 7,813,285
Investment in unconsolidated venture,
at equity (note 2) 296,885 338,911
Deferred leasing and loan costs 56,672 59,273
Total assets 8,954,323 9,144,952
<FN>
See accompanying notes to the financial statements.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Balance Sheets
March 31, 1997 and December 31, 1996
(Unaudited)
Liabilities and Partners' Capital Accounts
March 31, December 31,
1997 1996
Current liabilities:
Accounts payable and accrued expenses 344,380 412,980
Due to affiliates (note 3) 4,668 7,160
Accrued interest 31,766 32,018
Current portion of long-term debt 154,200 153,932
Total current liabilities 535,014 606,090
Long-term debt 4,537,345 4,574,933
Venture partners' equity
in consolidated venture (note 2) 1,495,534 1,541,880
Tenant security deposits 5,439 5,439
Total long-term liabilities 6,038,318 6,122,252
Total liabilities 6,573,332 6,728,342
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions 1,000 1,000
Cumulative net losses (3,464) (3,315)
(2,464) (2,315)
Limited partners:
Capital contributions 4,058,963 4,058,963
Cumulative net losses (343,010) (328,243)
Cumulative cash distributions (1,332,498) (1,311,795)
2,383,455 2,418,925
Total partners' capital accounts 2,380,991 2,416,610
Commitments and contingencies (note 2)
Total Liabilities and Partners' Capital 8,954,323 9,144,952
<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 March 31, 1997 and 1996
(Unaudited)
1997 1996
Revenues:
Rental income 311,903 331,418
Tenant charges 155,510 148,937
Interest income 4,287 1,741
Total revenues 471,700 482,097
Expenses:
Property operating expenses 226,667 205,772
Interest 95,550 98,474
Depreciation 72,879 71,610
Amortization 2,601 2,550
General and administrative expenses 41,981 19,672
Total expenses 439,679 398,078
Operating income (loss) 32,021 84,019
Partnership's share of operations
of unconsolidated ventures (14,066) (12,920)
Venture partner's share of consolidated
venture's operations (note 1) (32,871) (46,390)
Net income (loss) (14,916) 24,709
Net income (loss)
per limited partnership unit (note 1) (1.48) 2.45
Cash distribution per limited partnership unit 2.07 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
Three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
Cash flows from operating activities:
Net income (loss) (14,916) 24,709
Items not requiring (providing)
cash or cash equivalents:
Depreciation 72,879 71,610
Amortization 2,601 2,550
Partnership's share of operations of
unconsolidated ventures 51,020 24,303
Venture partners' share of
consolidated venture's operations (46,346) 21,385
Changes in:
Rents and other receivables 42,662 9,765
Prepaid expenses 13,501 5,810
Accounts payable and accrued expenses (68,600) (96,433)
Due to affiliates (2,492) 3,500
Tenant deposits - (900)
Net cash provided by operating activities 50,309 66,299
Cash flow from investment activities:
Additions to building and deferred costs - (13,538)
Net cash by (used in) investment activities - (13,538)
Cash flows from financing activities:
Distributions to limited partners (20,703) (20,594)
Principal payments on long-term debt (37,320) (34,415)
Net cash used in financing activities (58,023) (55,009)
Net (decrease) in cash and cash equivalents (7,714) (2,245)
<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
March 31, 1997 and 1996
(Unaudited)
Readers of this quarterly report should refer to the
Partnership's audited financial statements for the fiscal year ended
December 31, 1996, which are included in the Partnership's 1996 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 month periods ended March 31, 1997 and
March 31, 1996 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 Partnership and
Country Isle Associates for the three months ended March 31, 1997 and
March 31, 1996.
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 three months ended March 31, 1996 and 1995
is summarized as follows:
1997 1996
GAAP Tax GAAP Tax
Basis Basis Basis Basis
Net income (loss) (14,916) (13,100) 24,709 23,400
Net income (loss)
per limited partnership unit (1.48) (1.30) 2.45 2.32
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 ($282,610 and $312,653 at March 31, 1997 and December 31, 1996,
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.
(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 March 31, 1997. The
Partnership has acquired, through these ventures, interests in a mixed
use retail/residential property and two shopping centers.
(3) Transactions with Affiliates
Fees, commissions and other expenses required to be paid by the
Partnership to affiliates of the General Partners for the three months
ended March 31, 1997 and 1996 are as follows:
Unpaid at
Mar 31,
1997 1996 1997
Reimbursement (at cost)
for administrative services 5,000 5,000 4,668
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(4) Unconsolidated Venture - Summary Information
Summary income statement information for Evanston Galleria
Limited Partnership and Country Isle Plaza for the three months ended
March 31,1997 and 1996 is as follows:
1997 1996
Total revenue 796,358 809,698
Operating income (loss) (51,803) (55,104)
Partnership's share of income (loss) (14,066) (12,920)
(5) 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 March 31, 1997 and 1996.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At March 31,1996, the Partnership had cash and cash equivalents
of $584,035 which will be utilized for working capital requirements
and for future distributions to Partners. This is $7,966 less than
the $592,001 balance at December 31, 1996. Net cash provided by
operating activities during the quarter ended March 31, 1997 was
$50,309, a decrease of $15,990 from the $66,299 of cash provided by
operating activities during the quarter ended March 31, 1996.
During 1996, Randall's, a tenant at Sycamore Mall, vacated its
leased premises of 19,800 square feet. Occupancy at Sycamore Mall,
fell to 86% during the second quarter of 1996, however, Randall's has
continued to pay rent through December, 1996 so that there was no
adverse financial impact in 1996. During the first quarter of 1997,
the Randall's lease obligations ended and Sycamore Mall's revenues
have decreased $12,942 as compared to the three months ended March 31,
1996. Management is currently negotiating with prospective tenants,
but there can be no assurance that a replacement tenant will be found.
If this vacant space is not released, the ability of the Sycamore Mall
to meet its financial obligations could be effected as a result of
decreased revenues.
During 1995, the Evanston Galleria experienced a problem with
retail tenants. There is currently 13,635 square feet of retail space
of which the tenants are in default of their leases for non payment of
rent. Occupancy at March 31, 1997 was 84%. Management has taken
legal action to collect amounts due under the defaulted leases and it
is expected that partial payments will eventually be obtained.
However, management does not have an estimate of the amount or timing
of any such collection. Re-leasing efforts are in process and
negotiations are currently taking place with prospective tenants, but
there can be no assurance that new leases will be entered into. If
this vacant space is not released, the ability of the Evanston
Galleria to meet its financial obligations could be effected as a
result of decreased revenues.
The Evanston Galleria continues to search for a replacement
tenant for approximately 11,500 square feet of retail space.
Management is currently negotiating with prospective replacement
tenants. During the fourth quarter of 1995, a second tenant
representing 2,135 square feet defaulted under the terms of its lease
and vacated the space. This space has been released for a five year
term, beginning, January 11, 1996, at the same rental rate as the
previous tenant. Management is continuing to take legal action
against the defaulted tenant; there is currently no estimate of the
amount of or timing of any payments which may be received.
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 - 1996 compared to 1995
For the three month periods ended March 31, 1997 and March 31,
1996, 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 Associates and Country Isles.
Accounts payable and accrued expenses have decreased $68,600 to
$344,380 as of March 31, 1997 from $412,980 at December 31, 1996.
This decrease relates primarily to the timing of the payment of
property taxes at Sycamore Mall.
The $19,515 (6%) decrease in rental income for the three month
period ended March 31, 1997 as compared to the three month period
ended March 31, 1996 is attributed to the vacancy by Randall's at
Sycamore Mall. Income from tenant charges increased $6,573 (4%)
during the three months ended March 31, 1997 as compared to the three
months ended March 31, 1996. This increase results from increased
property operating expenses which were partly offset by the effect of
the vacancy of Randall's.
The $20,896 (10%) increase in property operating expenses for the
three months ended March 31, 1997 as compared to the three months
ended March 31, 1996 is attributable to a $9,600 increase in property
taxes, a $5,800 increase in natural gas costs and $5,500 in roof
repairs at Sycamore Mall.
The $22,309 increase in general and administrative expenses for
the three month periods ended March 31, 1997 as compared to the three
month periods ended March 31, 1996 is attributable to an increase in
professional fees which results from the timing of payment of
accounting fees related to the 1996 year-end.
The Partnership's share of operations of unconsolidated
subsidiaries resulted in a loss allocation of $5,073, during the three
months ended March 31, 1997, as compared to a loss allocation of
$12,920 during the three month period ended March 31, 1996. Evanston
Galleria resulted in a loss allocation of $17,521 during the three
months ended March 31, 1997, which was partly offset by an income
allocation of $12,448 from Country Isles..
The Partnership's allocation of consolidated venture's operations
to the venture partners was an allocation of $32,871 during the three
months ended March 31, 1997 as compared to an allocation of $46,390
during the three months ended March 31, 1996. As a result of a
decrease in operating income at Sycamore Mall, the Partnership has
decreased the amount of the income which is then allocated to the
venture's partners.
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
03/31/96 06/30/96 09/30/96 12/31/96 03/31/97 06/30/97 09/30/97
Evanston Galleria
Evanston, IL 86% 86% 86% 84% 86%
Country Isles
Ft. Lauderdale, FL 99% 98% 98% 99% 100%
Sycamore Mall
Iowa City, Iowa 95% 86% 87% 87% 88%
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
No reports on Form 8-K were filed for the period covered by this
report.
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)
May 14, 1997 By: Robert S. Ross
President
(Principal Executive Officer)
May 14, 1997 By: Bruce H. Block
Vice President
(Principal Financial Officer)