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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended March 31, 2003 Commission file #0-8716
JMB INCOME PROPERTIES, LTD. - V
(Exact name of registrant as specified in its charter)
Illinois 36-2897158
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
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 (the "Exchange Act") 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 [ ]
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . 11
Item 4. Controls and Procedures. . . . . . . . . . . . . . 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 13
Item 3. Defaults Upon Senior Securities. . . . . . . . . . 14
Item 5. Other Information. . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 15
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(UNAUDITED)
ASSETS
------
MARCH 31, DECEMBER 31,
2003 2002
----------- -----------
Current assets:
Cash and cash equivalents . . . . . $ 3,490,736 3,581,097
Restricted funds. . . . . . . . . . 81,403 74,370
Interest, rents and
other receivables . . . . . . . . 39,090 30,383
Prepaid expenses. . . . . . . . . . 27,178 65,181
----------- -----------
Total current assets. . . . . 3,638,407 3,751,031
----------- -----------
Properties held for sale or
disposition . . . . . . . . . . . . 2,011,943 2,011,943
----------- -----------
Total investment properties . 2,011,943 2,011,943
----------- -----------
$ 5,650,350 5,762,974
=========== ===========
JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
MARCH 31, DECEMBER 31,
2003 2002
----------- -----------
Current liabilities:
Current portion of long-term debt . $18,229,266 18,229,266
Accounts payable. . . . . . . . . . 90,265 103,356
Advances from lender. . . . . . . . 777,316 575,975
Accrued interest. . . . . . . . . . 4,748,811 3,928,494
Accrued real estate taxes . . . . . 58,489 --
----------- -----------
Total current liabilities . . 23,904,147 22,837,091
Tenant security deposits. . . . . . . 27,348 27,333
----------- -----------
Commitments and contingencies
Total liabilities . . . . . . 23,931,495 22,864,424
Venture partner's subordinated
equity in venture . . . . . . . . . 8,272,724 8,552,987
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . 1,000 1,000
Cumulative net earnings (loss). . 4,115,653 4,142,636
Cumulative cash distributions . . (5,922,062) (5,922,062)
----------- -----------
(1,805,409) (1,778,426)
----------- -----------
Limited partners (38,410 interests):
Capital contributions,
net of offering costs . . . . . 34,926,505 34,926,505
Cumulative net earnings (loss). . 28,775,749 29,648,198
Cumulative cash distributions . . (88,450,714) (88,450,714)
----------- -----------
(24,748,460) (23,876,011)
----------- -----------
Total partners' capital
accounts (deficits) . . . . (26,553,869) (25,654,437)
----------- -----------
$ 5,650,350 5,762,974
=========== ===========
See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
2003 2002
----------- -----------
Income:
Rental income . . . . . . . . . . . $ 231,795 843,236
Interest income . . . . . . . . . . 10,031 17,300
Other income. . . . . . . . . . . . 1,675 --
----------- ----------
243,501 860,536
----------- ----------
Expenses:
Mortgage interest . . . . . . . . . 820,317 820,317
Property operating expenses . . . . 512,058 478,924
Professional services . . . . . . . 54,970 44,026
General and administrative. . . . . 35,851 27,599
----------- ----------
1,423,196 1,370,866
----------- ----------
(1,179,695) (510,330)
Venture partner's share of
venture's operations. . . . . . . . 280,263 --
----------- ----------
Net earnings (loss). . . . . . $ (899,432) (510,330)
=========== ==========
Net earnings (loss) per
limited partnership
interest . . . . . . . . . . $ (22.71) (12.86)
=========== ==========
See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
2003 2002
----------- ----------
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . $ (899,432) (510,330)
Items not requiring (providing)
cash or cash equivalents:
Venture partner's share of
venture's operations. . . . . . . (280,263) --
Changes in:
Restricted funds. . . . . . . . . . (7,033) (435,195)
Interest, rents and other
receivables . . . . . . . . . . . (8,707) 3,907
Prepaid expenses. . . . . . . . . . 38,003 25,978
Accounts payable. . . . . . . . . . (13,091) (15,878)
Advances from lender. . . . . . . . 201,341 --
Accrued interest . . . . . . . . . 820,317 820,317
Accrued real estate taxes . . . . . 58,489 54,203
Tenant security deposits. . . . . . 15 235
---------- ----------
Net cash provided by (used in)
operating activities. . . . . (90,361) (56,763)
---------- ----------
Net increase (decrease) in
cash and cash equivalents . . (90,361) (56,763)
Cash and cash equivalents,
beginning of year . . . . . . 3,581,097 3,741,367
---------- ----------
Cash and cash equivalents,
end of period . . . . . . . . $3,490,736 3,684,604
========== ==========
Supplemental disclosure of cash flow
information:
Cash paid for mortgage interest . $ -- --
========== ==========
See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003 AND 2002
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 2002 which are
included in the Partnership's 2002 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
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.
In accordance with SFAS No. 144, long-lived assets, such as property,
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If
the carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized by the amount by which the carrying amount
of the asset exceeds the fair value of the asset. Assets to be disposed of
are separately presented in the balance sheet and reported at the lower of
the carrying amount or fair value less costs to sell, and are no longer
depreciated.
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 was no longer being depreciated as of that date.
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 a property
investment. With the exception of cash and cash equivalents, substantially
all other assets of the Partnership relate to such property investment.
On January 1, 2003, the Partnership adopted SFAS No. 145, "Rescission
of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections. SFAS No. 145, among other things, amends existing
guidance on reporting gains and losses on the extinguishment of debt to
prohibit the classification of the gain or loss as extraordinary, as the
use of such extinguishments have become part of the risk management
strategy of many companies. The adoption of SFAS No. 145 did not have an
effect on the Partnership's financial statements presented.
TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the
Partnership to the General Partners and their affiliates as of March 31,
2003 and for the three months ended March 31, 2003 and 2002 were $0. Any
amounts deferred or payable to the General Partners and their affiliates do
not bear interest.
301 NORTH MAIN BUILDING AND PHILLIPS BUILDING
In December 1999, in partial settlement of certain defaults of the
Partnership's venture partner under the venture agreement, 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 certain contributions. 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. The Partnership has not pursued and does not
intend to pursue such legal remedies, as they have been of little practical
value because the venture partner's obligations permit recourse only to the
venture partner's interest in the Venture which has little or no value, in
part because such agreements specify that the venture partner's share of
distributions would be paid to the Partnership after December 1999 and the
foreclosure of the property did not generate proceeds to the Venture.
As a result of the December 1999 amendment to the venture agreement
referred to above, profits and losses generally have been allocated based
on the ratio of distributions (actual distributions plus any distributions
deemed to have been made) to the partners. For the year ended December 31,
2002 and the three month period ended March 31, 2003, 100% of the property
operating losses recognized during 2002 and 2003 have been allocated to the
venture partner for financial reporting purposes.
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 went into 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.
However, as the loan was non-recourse to the Partnership, it was not
expected that any accrued interest would be satisfied out of assets other
than the property. In early August 2001, the lender notified the
Partnership that a receiver was appointed to take possession of and manage
the property.
Based on information received from the receiver, occupancy at the 301
N. Main Building (formerly the Wachovia Bank Building) was approximately
10% and the Phillips Building was vacant (approximately 6% combined) as of
March 31, 2003. Prior to December 31, 1995, substantially all of the 301
North Main Building was leased to one tenant, the Wachovia Bank, which
vacated all such space prior to 2002. Wachovia Bank, which had also leased
the entire Phillips Building, vacated its space upon the expiration of its
leases for such building (approximately 178,700 square feet in January 2002
and approximately 90,000 square feet in February 2002).
In July 2002, the receiver entered into a contract for sale to sell
the property to an unaffiliated third party by the end of 2002. The
proposed purchase price pursuant to this offer was in excess of the
carrying value of the property. However, the sale was subject to various
contingencies and therefore, there was no assurance that such sale would be
completed. The potential buyer opted to terminate the sale agreement in
September 2002.
In October 2002, the Partnership became aware of an offer from an
unaffiliated third party to purchase the property for $2 million. The
lender did not pursue this offer, however, as a matter of prudent
accounting practice, and in recognition that the property had not yet been
sold despite continued efforts to do so, the Partnership recorded a
provision for value impairment in 2002 of $3,871,962 in order to reduce the
carrying value of the property to approximately $2 million.
During the first quarter of 2003, the Venture was notified that the
lender was marketing its mortgage loan for sale. The Venture was advised
that the lender sold the loan to a third party on March 17, 2003. The
Venture then entered negotiations with the new third party lender with the
goal of having the new lender take title to the property as soon as
practicable. As a result of such negotiations, the new lender and the
Venture entered into certain agreements whereby the Venture agreed to
facilitate an expeditious transfer of title, and each party agreed to
provide general releases to the other. Consequently, the new lender began
legal proceedings to realize upon its security in the properties and took
possession of the property on May 1, 2003. Reference is made to the
subsection entitled "Subsequent Events" for a further discussion of the
disposition of the property. As a result of the disposition of the
property, the Partnership expects to liquidate its affairs in 2003 barring
unforseen circumstances.
The Partnership will be required to remit to the state tax authorities
withholding for income taxes due as a result of its surrender of the
property to the new lender. This withholding amount is currently estimated
to be approximately $650,000.
ADJUSTMENTS
In reliance on the accuracy of the financial information provided by
the receiver of the property as to rental income and property operating
expenses, and also subject to the fact that it is the lender (not the
Partnership) that determines fair value of the property through its
authority to enter into a sale transaction, 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 figures as of March 31, 2003 and for the three months ended
March 31, 2003.
SUBSEQUENT EVENT
During the first quarter of 2003, the Venture was notified that the
lender was marketing its mortgage loan for sale. The Venture was advised
that the lender sold the loan to a third party on March 17, 2003. The
Venture then entered negotiations with the new third party lender with the
goal of having the new lender take title to the property as soon as
practicable. As a result of such negotiations, the new lender and the
Venture entered into certain agreements whereby the Venture agreed to
facilitate an expeditious transfer of title, and each party agreed to
provide general releases to the other. Consequently, the new lender began
legal proceedings to realize upon its security in the property. On
April 16, 2003, the Partnership and the third party lender entered into a
foreclosure agreement in which, among other things, the Venture waived a
foreclosure hearing. The foreclosure sale occurred on April 16, 2003 at
which the third party lender was the highest bidder and after a certain
redemption period, title was transferred to the new lender on May 1, 2003.
In connection therewith, the Partnership entered into a mutual release
agreement with the third party lender which, among other things, released
the Venture from liability under the mortgage loan. As a result of the
disposition of the property, the Partnership expects to liquidate its
affairs in 2003 barring unforeseen circumstances.
As a result of the transfer of title of the property to the lender,
the Partnership expects to recognize a gain on disposition of property and
gain on discharge of indebtedness and write off of venture partner's
subordinated equity aggregating approximately $30,000,000 for financial
reporting purposes. The Partnership also expects to recognize a gain of
approximately $10,500,000 for Federal income tax purposes for 2003.
Additionally, the Partnership will be required to remit to the state tax
authorities withholding for income taxes due as a result of its surrender
of the properties to the mortgage lender. This withholding amount is
currently estimated to be approximately $650,000.
As a result of the disposition of the 301 N. Main Building and
Phillips Building, after May 1, 2003, there will be no further rental
income, interest income from the property, mortgage and other interest
expense, property operating expenses (including provision for property
impairment) or venture partner's share of venture's operations recorded for
the property in the consolidated financial statements of the Partnership,
which for the Partnership's most recent fiscal year (the year ended
December 31, 2002) were approximately $1,435,000, $1,000, $3,281,000,
$5,636,000 and $4,199,000, respectively. For the three months ended March
31, 2003, the Partnership's consolidated financial statements reflected
rental income, interest income, mortgage and other interest, property
operating expenses and venture partner's share of venture's operations of
approximately $232,000, $0, $820,000, $512,000 and $280,000, respectively.
Also, as a result of the disposition of the property, there will be no
further assets and liabilities related to the property in the Partnership's
consolidated financial statements, which at March 31, 2003, consisted of
restricted funds and other current assets of approximately $143,000,
properties held for sale or disposition of approximately $2,012,000,
current liabilities of approximately $23,873,000, tenant security deposits
of approximately $27,000 and venture partner's subordinated equity in
venture of approximately $8,273,000. The Partnership's future operations
are expected to consist primarily of interest income and administrative
expenses until the Partnership's winding up and termination as the property
was the Partnership's last remaining investment property.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the notes to the accompanying financial
statements for additional information concerning the Partnership's
investments.
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.
At March 31, 2003, the Partnership had cash and cash equivalents of
approximately $3,491,000. 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 were no
longer a source of liquidity. In such regard, reference is made to the
Partnership's property specific discussions above. The venture's mortgage
obligation was a non-recourse loan secured by the investment property and
therefore, the Partnership and its venture partner were not personally
liable for the payment of the mortgage indebtedness.
In October 2002, the Partnership became aware of an offer from an
unaffiliated third party to purchase the property for $2 million. The
lender did not pursue this offer, however, as a matter of prudent
accounting practice, and in recognition that the property had not yet been
sold despite continued efforts to do so, the Partnership recorded a
provision for value impairment in 2002 of $3,871,962 in order to reduce the
carrying value of the property to approximately $2 million.
During the first quarter of 2003, the Venture was notified that the
lender was marketing its mortgage loan for sale. The Venture was advised
that the lender sold the loan to a third party on March 17, 2003. The
Venture then entered negotiations with the new third party lender with the
goal of having the new lender take title to the property as soon as
practicable. As a result of such negotiations, the new lender and the
Venture entered into certain agreements whereby the Venture agreed to
facilitate an expeditious transfer of title, and each party agreed to
provide general releases to the other. Consequently, the new lender began
legal proceedings to realize upon its security in the property. On April
16, 2003, the Partnership and the third party lender entered into a
foreclosure agreement in which, among other things, the Venture waived a
foreclosure hearing. The foreclosure sale occurred on April 16, 2003 at
which the third party lender was the highest bidder and after a certain
redemption period, title was transferred to the new lender on May 1, 2003.
In connection therewith, the Partnership entered into a mutual release
agreement with the third party lender which, among other things, released
the Venture from liability under the mortgage loan. As a result of the
disposition of the property, the Partnership expects to liquidate its
affairs in 2003 barring unforeseen circumstances. Reference is made to the
subsection entitled "Subsequent Events" in the Notes to the Financial
Statements filed with this report for a further discussion of the
disposition of the property.
RESULTS OF OPERATIONS
The increase in interest, rents and other receivable, at March 31,
2003 as compared to December 31, 2002 is primarily due to the timing of
receipt of rental revenues at the 301 North Main Building.
The decrease in prepaid expenses at March 31, 2003 as compared to
December 31, 2002 is due to the timing of payment of insurance premiums at
the 301 North Main and Phillips Buildings.
The increase in advances from lender at March 31, 2003 as compared to
December 31, 2002 is primarily due to cash advances made by the lender in
the first quarter of 2003 for operating expenses at the property.
The increase in accrued interest at March 31, 2003 as compared to
December 31, 2002 is primarily due to the Partnership's decision to cease
making debt service payments as of June 1, 2001, and also 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.
The increase in accrued real estate taxes at March 31, 2003 as
compared to December 31, 2002 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 three months ended March 31,
2003 as compared to the same period in 2002 is primarily due to the
decrease in occupancy at the 301 North Main and Phillips Buildings.
The decrease in interest income for the three months ended March 31,
2003 as compared to the same period in 2002 is primarily due to lower
interest rates in 2003.
The increase in property operating expenses for the three months ended
March 31, 2003 as compared to the same period in 2002 is primarily due to
increased costs for insurance and provision of doubtful accounts at the 301
N. Main and Phillips buildings in 2003.
The increase in professional services for the three months ended
March 31, 2003 as compared to the same period in 2002 is primarily due to
increased legal fees related to issues relating to the receivership at the
301 N. Main and Phillips Buildings and higher fees for accounting services
in 2003.
The increase in general and administrative expenses for the three
months ended March 31, 2003 as compared to the same periods in 2002 is
primarily due to an increase in certain administrative costs during 2003.
The increase in venture partner's share of venture's operations for
the three months ended March 31, 2003 as compared to the same period in
2002 is due to the allocation to the venture partner of 100% of the loss
recognized during 2003 at the 301 N. Main Building and Phillips Building.
ITEM 4. CONTROLS AND PROCEDURES
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14 of
the Securities Exchange Act of 1934 (the "Exchange Act") promulgated
thereunder, the principal executive officer and the principal financial
officer of the Partnership have evaluated the effectiveness of the
Partnership's disclosure controls and procedures (which do not include
those of the receiver or the lender of the 301 North Main Building and
Phillips Building) as of a date within 90 days prior to the date of the
filing of this report (the "Evaluation Date") with the Securities and
Exchange Commission ("SEC"). Based on such evaluation, the principal
executive officer and the principal financial officer have concluded that
the Partnership's disclosure controls and procedures were effective as of
the Evaluation Date to ensure that information required to be disclosed in
this report was recorded, processed, summarized and reported within the
time period specified in the applicable SEC rules and form for this report.
Furthermore, there have been no significant changes in the internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of their most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
PART II. OTHER INFORMATION
ITEM 1. 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 owned 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
from and after April 2002 if the Noteholder failed 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 had possession or control of the Property.
The receiver had been marketing the property for sale. After the contract
for sale that had previously been entered into was terminated, the lender
notified the Venture that it was examining its alternatives with respect to
the property. As indicated above, the lender sold its loan on March 17,
2003, rather than effect a foreclosure or attempt to sell the property to a
third party, which would have extended the period of time needed for the
property to be sold and for the Partnership to be wound up. On May 1,
2003, title to the property was transferred to the new lender.
Given the non-recourse nature of both the loan and the indemnities
provided by the Venture in connection therewith, the Partnership had
believed (although there was no assurance in that regard) that these
efforts were unlikely to increase liabilities to the Partnership or the
venture with respect to the property. However, the Venture and the
Partnership continued to expend resources to monitor these efforts and
continue in existence. Furthermore, the court overseeing the receivership
may not have permitted the receivership to continue indefinitely
considering that the lender had not moved toward foreclosure as it had
represented to the court that it would. As reported earlier, title to the
property was held by 301 Main, LLC, which was substantially without assets
other than the property. In the event that the receivership may have been
terminated by the Court, there may have been no entity that was willing and
capable of continuing to operate the property, which may have caused third-
party claims to arise against the property and further prolonged the period
until the property was sold. In order to avoid such a scenario, the
Partnership explored certain alternatives with the goal of effecting a
faster resolution of these matters, finally culminating in the transfer of
title described above.
The Partnership is not subject to any other material legal
proceedings.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Partnership has not made debt service payments on the mortgage
note secured by the 301 North Main Building and Phillips Building since
June 1, 2001. As a result, the mortgage loan is in default as of June 1,
2001 and matured November 2001. As of March 31, 2003, aggregate amounts
due to the lender were approximately $23,775,000 including certain default
interest and advances. The lender sold the loan to a third party on March
17, 2003. On May 1, 2003, title to the property was transferred to the new
lender. Reference is made to the subsection entitled "301 North Main
Building and Phillips Building" in Notes to the Financial Statements filed
with this report for a further discussion of the default under the mortgage
note secured by the 301 North Main Building and Phillips Building, which
discussion is hereby incorporated herein by reference.
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter
for the Partnership's investment properties owned during 2002:
2002 2003
------------------------- -------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
301 North Main
Building and
Phillips Building
Winston-Salem,
North Carolina. . 7% 7% 6% 6% 6%
PART IV
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 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 to the
Partnership's Report for June 30, 2002 on Form 10-Q
(File No. 0-8716) dated August 12, 2002.
3-B. Amended and Restated Agreement of Limited Partnership
set forth as Exhibit A to the Prospectus is hereby
incorporated herein by reference to the Partnership's
Report for June 30, 2002 on Form 10-Q (File No. 0-
8716) dated August 12, 2002.
10-A. Disposition documents relating to the foreclosure of
the 301 N. Main Building and Phillips Building are
filed herewith.
99. Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 is filed herewith.
(b) No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company 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)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: May 14, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on behalf of JMB Income Properties, Ltd. - V by
the following person in the capacity and on the date indicated.
By: GAILEN J. HULL
Gailen J. Hull, Chief Financial Officer
and Principal Accounting Officer
Date: May 14, 2003
CERTIFICATIONS
--------------
I, H. Rigel Barber, certify that:
1. I have reviewed this quarterly report on Form 10-Q of JMB Income
Properties, Ltd. - V;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date:May 14, 2003
/s/ H. Rigel Barber
----------------------------
Principal Executive Officer
I, Gailen J. Hull, certify that:
1. I have reviewed this quarterly report on Form 10-Q of JMB Income
Properties, Ltd. - V;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date:May 14, 2003
/s/ Gailen J. Hull
----------------------------
Principal Accounting Officer