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, 1998
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, 1998: 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, 1998 and December 31, 1997
(Unaudited)
Assets
March 31, December 31,
1998 1997
Current assets:
Cash and cash equivalents (note 1) 1,005,502 1,659,443
Rents and other receivables 321,229 317,315
Due from affiliates 13,797 14,122
Prepaid expense 11,225 19,122
Total current assets 1,351,753 2,010,002
Investment property, at cost (note 1):
Land 1,201,880 1,201,880
Building 8,372,099 8,372,099
9,573,979 9,573,979
Less accumulated depreciation (2,104,077) (2,032,976)
7,469,902 7,541,003
Investment in unconsolidated venture,
at equity (note 2) (68,191) (58,669)
Deferred leasing and loan costs 47,094 49,488
Total assets 8,800,558 9,541,824
<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, 1998 and December 31, 1997
(Unaudited)
Liabilities and Partners' Capital Accounts
March 31, December 31,
1998 1997
Current liabilities:
Accounts payable and accrued expenses 406,544 328,632
Accrued interest 30,702 30,976
Current portion of long-term debt 170,200 166,915
Total current liabilities 607,446 526,523
Long-term debt 4,364,266 4,408,018
Venture partners' equity in
consolidated venture (note 2) 1,497,055 1,508,231
Tenant security deposits 5,433 5,433
Total long-term liabilities 5,856,741 5,921,682
Total liabilities 6,474,200 6,448,205
Partners' capital accounts (deficits):
General partners:
Capital contributions 1,000 1,000
Cumulative net income 4,013 4,280
5,013 5,280
Limited partners:
Capital contributions 4,058,963 4,058,963
Cumulative net income 397,280 423,674
Cumulative cash distributions (2,134,898) (1,394,298)
2,321,345 3,088,339
Total partners' capital accounts 2,326,358 3,093,619
Commitments and contingencies (note 2)
Total Liabilities and Partners' Capital 8,800,558 9,541,824
<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, 1998 and 1997
(Unaudited)
1998 1997
Revenues:
Rental income 293,086 311,903
Tenant charges 136,486 155,510
Interest income 15,101 4,287
Total revenues 444,673 471,700
Expenses:
Property operating expenses 237,458 226,667
Interest 92,382 95,550
Depreciation 71,101 72,879
Amortization 2,395 2,601
General and administrative expenses 46,008 41,981
Total expenses 449,343 439,679
Operating income (loss) (4,671) 32,021
Partnership's share of operations
of unconsolidated ventures (9,522) (14,066)
Venture partner's share of consolidated
venture's operations (note 1) (12,468) (32,871)
Net income (loss) (26,661) (14,916)
Net income (loss) per
limited partnership unit (2.64) (1.48)
Cash distribution per limited partnership unit 74.06 2.07
<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, 1998 and 1997
(Unaudited)
1998 1997
Cash flows from operating activities:
Net income (loss) (26,661) (14,916)
Items not requiring (providing)
cash or cash equivalents:
Depreciation 71,101 72,879
Amortization 2,395 2,601
Partnership's share of operations of
unconsolidated ventures - net of distributions 9,522 51,020
Venture partners' share of
consolidated venture's operations (11,176) (46,346)
Changes in:
Rents and other receivables (3,914) 42,662
Due from affiliates 325 (2,492)
Prepaid expenses 7,897 13,501
Accounts payable and accrued expenses 77,638 (68,600)
Tenant deposits - -
Net cash provided by operating activities 127,126 50,309
Cash flow from investment activities:
Additions to building and deferred costs - -
Net cash provided by investment activities - -
Cash flows from financing activities:
Distributions to limited partners (740,600) (20,703)
Principal payments on long-term debt (40,467) (37,320)
Net cash used in financing activities (781,067) (58,023)
Net increase (decrease) in
cash and cash equivalents (653,941) (7,714)
<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, 1998 and 1976
(Unaudited)
Readers of this quarterly report should refer to the
Partnership's audited financial statements for the fiscal year ended
December 31, 1997, which are included in the Partnership's 1997 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, 1998 and
March 31, 1997 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
months ended March 31, 1998 and March 31, 1997 and Country Isle
Associates for the three months ended March 31, 1997.
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, 1998 and 1997 is
summarized as follows:
1998 1997
GAAP Tax GAAP Tax
Basis Basis Basis Basis
Net income (loss) (26,661) (29,000) (14,916) (13,100)
Net income (loss) per
limited partnership unit (2.64) (2.87) (1.48) (1.30)
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 ($683,919 and $1,400,707 at March 31, 1998 and December 31, 1997,
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 March 31, 1998.
(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, 1998. The
Partnership has acquired, through these ventures, interests in a mixed
use retail/residential property and two shopping centers.
FIRST DEARBORN INCOME PROPERTIES L.P. II
(a limited partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements - Continued
(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, 1998 and 1997 are as follows:
Unpaid at
Mar 31,
1998 1997 1998
Reimbursement (at cost) for
administrative services 5,000 5,000 -
5,000 5,000 -
(4) Unconsolidated Venture - Summary Information
Summary income statement information for Evanston Galleria
Limited Partnership for the three months ended March 31,1998 and
Evanston Galleria Limited Partnership and Country Isle Plaza for the
three months ended March 31,1997, is as follows:
1998 1997
Total revenue 326,573 796,358
Operating income (loss) (35,068) (51,803)
Partnership's share of income (loss) (9,522) (14,066)
(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, 1998 and 1997.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At March 31,1998, the Partnership had cash and cash equivalents
of $1,005,502 which will be utilized for working capital requirements
and for future distributions to Partners. This is $653,941 less than
the $1,659,443 balance at December 31, 1997. Net cash provided by
operating activities during the quarter ended March 31, 1998 was
$127,126, an increase of $76,817 from the $50,309 of cash provided by
operating activities during the quarter ended March 31, 1997. This
improvement relates to the timing of property tax payments at Sycamore
Mall. Payments normally made in the first quarter were prepaid at
December 31, 1997.
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 1997, the Evanston Galleria experienced occupancy rates
which ranged from 77% to 86%. As of December 31, 1997 occupancy was
83%. However, a lease had been entered into to lease the lower level
space of 11,300 square feet. This tenant has taken occupancy along
with one additional retail tenant. This has increased occupancy to
95%, as of March 31, 1998. The first mortgage on the property
matured on May 1, 1998, however an amendment has been entered into
which extends the maturity of the loan to August 31, 1998. The
Evanston Galleria property is currently being marketed for sale.
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 - 1998 compared to 1997
For the three month periods ended March 31, 1998 and March 31,
1997, 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 three months ended March 31, 1998 and March
31, 1997 and Country Isle Associates for the three months ended March
31, 1997.
Accounts payable and accrued expenses have increased $77,912 to
$406,544 as of March 31, 1998 from $328,632 at December 31, 1997.
This increase relates primarily to the timing of the payment of
property taxes at Sycamore Mall.
The $18,817 (6%) decrease in rental income for the three month
period ended March 31, 1998 as compared to the three month period
ended March 31, 1997 is attributed to the vacancy of several small
retail tenants, shortly after the holiday shopping season, at Sycamore
Mall. Occupancy at Sycamore Mall has fallen to 85% as of March 31,
1998 Income from tenant charges decreased $19,024 (12%) during the
three months ended March 31, 1998 as compared to the three months
ended March 31, 1997. This decrease results from the decreased
occupancy levels at Sycamore Mall.
The $10,791 (5%) increase in property operating expenses for the
three months ended March 31, 1998 as compared to the three months
ended March 31, 1997 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 $4,027 increase in general and administrative expenses for
the three month periods ended March 31, 1998 as compared to the three
month periods ended March 31, 1997 is attributable to an increase in
professional and accounting fees related to the 1997 year-end.
The Partnership's share of operations of unconsolidated
subsidiaries resulted in a loss allocation of $9,522, during the three
months ended March 31, 1998, as compared to a loss allocation of
$14,066 during the three month period ended March 31, 1997. 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. Evanston Galleria's
allocation shows an improvement of $8,000 from the prior year, which
results from the increased occupancy at Evanston Galleria.
The Partnership's allocation of consolidated venture's operations
to the venture partners was an allocation of $12,468 during the three
months ended March 31, 1998 as compared to an allocation of $32,871
during the three months ended March 31, 1997. 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
03/31/97 06/30/97 09/30/97 12/31/97 03/31/98
Evanston Galleria
Evanston, IL 86% 86% 77% 83% 95%
Country Isles (sold 1997)
Ft. Lauderdale, FL 100% 99% 100% n/a n/a
Sycamore Mall
Iowa City, Iowa 88% 89% 89% 90% 85%
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 21, 1998 By: Robert S. Ross
President
(Principal Executive Officer)
May 21, 1998 By: Bruce H. Block
Vice President
(Principal Financial Officer)