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 June 30, 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 June 30, 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
June 30, 1997 and December 31, 1996
(Unaudited)
Assets
June 30, December 31,
1997 1996
Current assets:
Cash and cash equivalents (note 1) 738,932 592,001
Rents and other receivables 216,633 305,044
Due from affiliates 4,936 4,936
Prepaid expense 4,500 31,502
Total current assets 965,001 933,483
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 (1,884,810) (1,739,051)
7,667,526 7,813,285
Investment in unconsolidated venture,
at equity (note 2) 238,353 338,911
Deferred leasing and loan costs 54,277 59,273
Total assets 8,925,157 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
June 30, 1997 and December 31, 1996
(Unaudited)
Liabilities and Partners' Capital Accounts
June 30, December 31,
1997 1996
Current liabilities:
Accounts payable and accrued expenses 418,926 412,980
Due to affiliates (note 3) - 7,160
Accrued interest 31,508 32,018
Current portion of long-term debt 155,300 153,932
Total current liabilities 605,734 606,090
Long-term debt 4,498,159 4,574,933
Venture partners' equity in
consolidated venture (note 2) 1,473,372 1,541,880
Tenant security deposits 5,433 5,439
Total long-term liabilities 5,976,964 6,122,252
Total liabilities 6,582,698 6,728,342
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions 1,000 1,000
Cumulative net losses (3,643) (3,315)
(2,643) (2,315)
Limited partners:
Capital contributions 4,058,963 4,058,963
Cumulative net losses (360,763) (328,243)
Cumulative cash distributions (1,353,098) (1,311,795)
2,345,102 2,418,925
Total partners' capital accounts 2,342,459 2,416,610
Commitments and contingencies (note 2)
Total Liabilities and Partners' Capital 8,925,157 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 June 30, 1997 and 1996
(Unaudited)
1997 1996
Revenues:
Rental income 323,104 331,829
Tenant charges 129,935 149,282
Interest income 5,406 5,101
Total revenues 458,445 486,212
Expenses:
Property operating expenses 254,354 210,538
Interest 94,782 97,776
Depreciation 72,880 71,611
Amortization 2,395 2,549
General and administrative expenses 20,640 44,972
Total expenses 445,051 427,446
Operating income (loss) 13,394 58,766
Partnership's share of operations
of unconsolidated ventures (18,548) 25,191
Venture partner's share of consolidated
venture's operations (note 1) (12,779) (47,649)
Net income (loss) (17,933) 36,308
Net income (loss) per
limited partnership unit (note 1) (1.78) 3.59
Cash distribution per limited partnership unit 2.06 23.13
<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
Six months ended June 30, 1997 and 1996
(Unaudited)
1997 1996
Revenues:
Rental income 635,007 663,247
Tenant charges 285,445 298,219
Interest income 9,693 6,842
Total revenues 930,145 968,309
Expenses:
Property operating expenses 481,021 416,310
Interest 190,332 196,240
Depreciation 145,759 143,221
Amortization 4,996 5,099
General and administrative expenses 62,621 64,644
Total expenses 884,729 825,514
Operating income (loss) 45,416 142,795
Partnership's share of operations
of unconsolidated ventures (32,614) 12,271
Venture partner's share of consolidated
venture's operations (note 1) (45,650) (94,039)
Net income (loss) (32,848) 61,026
Net income (loss) per
limited partnership unit (note 1) (3.25) 6.04
Cash distribution per
limited partnership unit 4.13 25.18
<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
Six months ended June 30, 1997 and 1996
(Unaudited)
1997 1996
Cash flows from operating activities:
Net income (loss) (32,848) 61,030
Items not requiring (providing)
cash or cash equivalents:
Depreciation 145,759 143,221
Amortization 4,996 5,099
Partnership's share of operations of
unconsolidated ventures 100,558 294,830
Venture partners' share of
consolidated venture's operations (68,508) 40,454
Changes in:
Rents and other receivables 88,411 97,110
Prepaid expenses 27,002 16,831
Accounts payable and accrued expenses 5,436 (10,791)
Due to affiliates (7,160) 4
Tenant deposits (6) (900)
Net cash provided by (used in)
operating activities 263,640 646,885
Cash flow from investment activities:
Additions to building and deferred costs - (13,538)
Net cash provided by (used in)
investment activities - (13,538)
Cash flows from financing activities:
Distributions to limited partners (41,303) (251,845)
Principal payments on long-term debt (75,406) (140,255)
Net cash used in financing activities (116,709) (392,100)
Net increase (decrease) in
cash and cash equivalents 146,931 241,247
<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
June 30, 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 six month periods ended June 30, 1997 and June
30, 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 and six months ended June 30,
1997 and June 30, 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 six months ended June 30, 1997 and 1996 is
summarized as follows:
1997 1996
GAAP Tax GAAP Tax
Basis Basis Basis Basis
Net income (loss) (32,848) (49,301) 61,026 58,500
Net income (loss) per
limited partnership unit (3.25) (4.90) 6.04 5.79
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
($452,792 and $466,049 at June 30, 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 June 30, 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 six months
ended June 30, 1997 and 1996 are as follows:
Unpaid at
June 30,
1997 1996 1997
Reimbursement (at cost) 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
(4) Unconsolidated Venture - Summary Information
Summary income statement information for Evanston Galleria
Limited Partnership and Country Isle Plaza for the six months ended
June 30, 1997 and 1996 is as follows:
1997 1996
Total revenue 1,565,761 1,641,327
Operating income (loss) (118,320) 72,817
Partnership's share of income (loss) (32,614) 12,271
(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 June 30, 1997 and 1996.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At June 30, 1997, the Partnership had cash and cash equivalents
of $738,932 which will be utilized for working capital requirements
and for future distributions to Partners. This is $146,931 more than
the $592,001 balance at December 31, 1996. The Partnership made a
special distribution to Limited Partners during the second quarter of
1996. The Partnership received a special distribution in the amount
of $210,650 from Country Isles Asssociates, which it then distributed
to the Limited Partners, as more fully described below. During the
three and six month periods ended June 30, 1996, the Partnership
distributed $231,251 ($23.13 per unit) and $251,845 ($25.18 per unit),
respectively, to Limited Partners. This compares to $20,600 ( $2.06
per unit) and $41,303 ( $4.13 per unit) during the three and six month
periods ended June 30, 1997. The Partnership has continued to build
additional cash reserves for Sycamore Mall's anticipated releasing
program.
Net cash provided by operating activities during the six months
ended June 30, 1997 was $263,640, a decrease of $383,245 from the
$646,885 of cash provided by operating activities during the six
months ended June 30, 1996. The decrease results primarily from a
$210,650 distribution which was received from Country Isles Associates
during the three month period ended Jume 30, 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 June 30, 1997 was 85%. 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 - 1997 compared to 1996
For the three and six month periods ended June 30, 1997 and June
30, 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.
Net loss for the six months ended June 30, 1997 was $32,848 as
compared to income of $61,030 during the six months ended June 30,
1996. The decrease in operating results are a result of decreased
profitability at Sycamore Mall, and an increase in losses allocated
from Evanston Galleria. This is a result of increased vacancy and
higher maintenance expenses at both properties. In addition, cash
flow from operations decreased by $383,245, from the prior year. The
decrease in cash flow is largely impacted by the receipt, in 1996, of
the special distribution in the amount of $210,650 from Country Isles
Associates. The special distribution resulted from a refinancing of
the mortgage indebtedness at Country Isles. The Evanston Galleria has
stabilized its operations but is still searching for a tenant for an
11,500 square foot space.
The $28,240 (4%) decrease in rental income for the six month
period ended June 30, 1997 as compared to the six month period ended
June 30, 1996 is attributed to an increase in vacancy at Sycamore
Mall.
The $64,711 (16%) increase in property operating expenses for the
six month period ended June 30, 1997 as compared to the six month
period ended June 30, 1996 is attributed to an increase in property
maintenance expenses at Sycamore Mall. The property is incurring a
higher level of maintenance expenses due to the higher vacancy levels.
The $24,332 (54%) decrease in general and administrative expenses
for the three month period ended June 30, 1997 as compared to the
three month period ended June 30, 1996 is attributable to timing of
payment of professional fees related to the annual audit and tax
return preparation. The six month amounts are nearly the same.
The Partnership's share of operations of unconsolidated
subsidiaries resulted in a loss allocation of $32,614 during the six
months ended June 30, 1997, as compared to an income allocation of
$12,271 during the six month period ended June 30, 1996. Evanston
Galleria has experience higher vacancy levels in the commercial
spaces, which increased the property's operating losses. In
addition, the operations of Country Isles has continued to improve,
resulting in an income allocation of $37,393 during the six months
ended June 30, 1996 as compared to a loss allocation of $14,265 during
the six months ended June 30, 1995.
The Partnership's allocation of consolidated venture's operations
to the venture partners was an allocation of $45,650 during the six
months ended June 30, 1997 as compared to an allocation of $94,039
during the six months ended June 30, 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 at Sycamore Mall decreased from 95% to 86% during
the three month period ended June 30, 1996. Randall's a drug store
operation vacated its leased space, which totaled approximately 19,800
square feet. Its lease term expires January 10, 1997 and rent is
being paid currently. The partnership anticipates no adverse
financial impact during the remainder of 1996 and management is
currently searching for a replacement tenant for the vacant space.
The total monthly rent, including tax and operating expense
reimbursements, which is being paid under the terms of the Randall's
lease is $3,300.
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% 86%
Country Isles
Ft. Lauderdale, FL 99% 98% 98% 99% 100% 99%
Sycamore Mall
Iowa City, Iowa 95% 86% 87% 87% 88% 89%
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)
August 18, 1997 By: Robert S. Ross
President
(Principal Executive Officer)
August 18, 1997 By: Bruce H. Block
Vice President
(Principal Financial Officer)