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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 September 30, 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 (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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
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. . . . . . . . . . . . . . 13
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
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(UNAUDITED)
ASSETS
------
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- -----------
Current assets:
Cash and cash equivalents . . . . . $ 3,395,177 3,581,097
Restricted funds. . . . . . . . . . -- 74,370
Interest, rents and
other receivables . . . . . . . . 2,490 30,383
Prepaid expenses. . . . . . . . . . -- 65,181
----------- -----------
Total current assets. . . . . 3,397,667 3,751,031
----------- -----------
Property held for sale or
disposition . . . . . . . . . . . . -- 2,011,943
----------- -----------
Total investment properties . -- 2,011,943
----------- -----------
$ 3,397,667 5,762,974
=========== ===========
JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- -----------
Current liabilities:
Current portion of long-term debt . $ -- 18,229,266
Accounts payable. . . . . . . . . . 46,262 103,356
Advances from lender. . . . . . . . -- 575,975
Accrued interest. . . . . . . . . . -- 3,928,494
----------- -----------
Total current liabilities . . 46,262 22,837,091
Tenant security deposits. . . . . . . -- 27,333
----------- -----------
Commitments and contingencies
Total liabilities . . . . . . 46,262 22,864,424
Venture partner's subordinated
equity in venture . . . . . . . . . -- 8,552,987
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . 1,000 1,000
Cumulative net earnings (loss). . 6,271,062 4,142,636
Cumulative cash distributions . . (5,922,062) (5,922,062)
----------- -----------
350,000 (1,778,426)
----------- -----------
Limited partners (38,410 interests):
Capital contributions,
net of offering costs . . . . . 34,926,505 34,926,505
Cumulative net earnings (loss). . 56,525,614 29,648,198
Cumulative cash distributions . . (88,450,714) (88,450,714)
----------- -----------
3,001,405 (23,876,011)
----------- -----------
Total partners' capital
accounts (deficits) . . . . 3,351,405 (25,654,437)
----------- -----------
$ 3,397,667 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 AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ---------------------
2003 2002 2003 2002
----------- ---------- ---------- ----------
Income:
Rental income. . . . . .$ -- 204,267 298,035 1,244,795
Interest income. . . . . 7,613 14,886 26,983 47,932
Other income . . . . . . -- 13,000 13,857 13,000
----------- ---------- ---------- ----------
7,613 232,153 338,875 1,305,727
----------- ---------- ---------- ----------
Expenses:
Mortgage interest. . . . -- 820,317 1,093,756 2,460,951
Provision for value
impairment. . . . . . . -- 3,871,962 -- 3,871,962
Property operating
expenses. . . . . . . . -- 373,803 664,719 1,331,480
Professional services. . 38,641 13,065 143,005 96,833
General and
administrative. . . . . 19,157 12,454 86,902 60,465
----------- ---------- ---------- ----------
57,798 5,091,601 1,988,382 7,821,691
----------- ---------- ---------- ----------
(50,185)(4,859,448)(1,649,507)(6,515,964)
Venture partner's
share of venture's
operations . . . . . . . -- -- 366,684 --
----------- ---------- ---------- ----------
Earnings before
gain on disposition
of investment
property . . . . . . (50,185)(4,859,448)(1,282,823)(6,515,964)
Gain on disposition of
investment property,
net of venture
partner's share. . . . . -- -- 30,288,665 --
----------- ---------- ---------- ----------
Net earnings (loss) .$ (50,185)(4,859,448)29,005,842 (6,515,964)
=========== ========== ========== ==========
Net earnings (loss)
per limited part-
nership interest:
Earnings (loss)
before gain on
disposition of
investment
property . . . . .$ (1.27) (122.42) (32.40) (164.15)
Gain on disposition
of investment
property, net of
venture partner's
share. . . . . . . (.04) -- 732.15 --
----------- ---------- ---------- ----------
Net earnings
(loss). . . . .$ (1.31) (122.42) 699.75 (164.15)
=========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
2003 2002
----------- ----------
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . $29,005,842 (6,515,964)
Items not requiring (providing)
cash or cash equivalents:
Venture partner's share of
venture's operations. . . . . . . (366,684) --
Gain on disposition of investment
property, net of venture
partner's share . . . . . . . . . (30,288,665) --
Provision for value impairment. . . -- 3,871,962
Changes in:
Restricted funds. . . . . . . . . . 47,107 208,694
Interest, rents and other
receivables . . . . . . . . . . . 8,767 (7,886)
Prepaid expenses. . . . . . . . . . 50,666 (46,726)
Accounts payable. . . . . . . . . . 10,860 148,498
Advances from lender. . . . . . . . 211,508 --
Accrued interest . . . . . . . . . 1,093,756 2,060,951
Accrued real estate taxes . . . . . 77,986 162,608
Tenant security deposits. . . . . . (1,235) (874)
----------- ----------
Net cash provided by (used in)
operating activities. . . . . (150,092) (118,737)
----------- ----------
Cash flows from investing activities:
Additions to investment property. . . (35,828) --
----------- ----------
Net cash provided by (used in)
investing activities. . . . . (35,828) --
----------- ----------
Net increase (decrease) in
cash and cash equivalents . . (185,920) (118,737)
Cash and cash equivalents,
beginning of year . . . . . . 3,581,097 3,741,367
----------- ----------
Cash and cash equivalents,
end of period . . . . . . . . $ 3,395,177 3,622,630
=========== ==========
Supplemental disclosure of cash flow
information:
Cash paid for mortgage interest . $ -- 400,000
=========== ==========
See accompanying notes to consolidated financial statements.
JMB INCOME PROPERTIES, LTD. - V
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 2002,
which are included in the Partnership's 2002 Annual Report on Form 10-K
(File No. 0-8716) filed on March 31, 2003, as certain footnote disclosures
which would substantially duplicate those contained in such audited
financial statements have been omitted from this report. Capitalized terms
used but not defined in this quarterly report have the same meanings as in
the Partnership's 2002 Annual Report on Form 10-K.
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 in an 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 its sole
remaining 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
September 30, 2003 and for the nine months ended September 30, 2003 and
2002 were as follows:
Unpaid at
September 30,
2003 2002 2003
------ ------ -------------
Insurance commissions . . . . . . $ -- 12,305 --
====== ====== ======
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 would be of little practical
value because the venture partner's obligations permit recourse only to the
venture partner's interest in the Venture which has 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 nine month period ended September 30, 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 (collectively, the "property") 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 have required major renovation to the buildings as well as
significant tenant improvements which, in turn, would have been 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 8%
and the Phillips Building was vacant (yielding occupancy of approximately
5% combined) as of April 30, 2003. Prior to December 31, 1995,
substantially all of the 301 North Main Building was leased to one tenant,
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 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. The
third party lender was the highest bidder at such date and, after the
required 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 during the fourth quarter of 2003, barring unforeseen
circumstances.
As a result of the transfer of title of the property to the lender,
the Partnership recognized a gain on disposition of property aggregating
approximately $30,289,000 for financial reporting purposes, which gain
included the discharge of indebtedness and write off of venture partner's
subordinated equity. 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, on behalf of the
partners, to the state tax authorities withholding amounts for income taxes
due as a result of its surrender of the properties to the mortgage lender.
This withholding amount is currently estimated to aggregate approximately
$650,000.
ADJUSTMENTS
During 2003, a re-allocation of current year's gain was made among the
partners for financial reporting purposes. Such re-allocation did not have
an effect on total assets, total partners' capital or net earnings.
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 September 30, 2003 and for the three and nine
months ended September 30, 2003 and 2002.
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 consolidated
financial statements for additional information concerning the
Partnership's investments.
At September 30, 2003, the Partnership had cash and cash equivalents
of approximately $3,395,000. Such funds are available for distributions to
partners, for payment of withholding for income taxes as a result of the
Partnership's disposal of the 301 North Main Building and Phillips
Building, and for 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 property was 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. The
third party lender was the highest bidder at such date and, after the
required 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 transfer of title of the property to the lender,
the Partnership recognized a gain on disposition of property aggregating
approximately $30,289,000 for financial reporting purposes, which gain
included the discharge of indebtedness and write off of venture partner's
subordinated equity. 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, on behalf of the
partners, to the state tax authorities withholding amounts for income taxes
due as a result of its surrender of the properties to the mortgage lender.
This withholding amount is currently estimated to aggregate approximately
$650,000.
As a result of the disposition of the Partnership's last remaining
investment property, the Partnership's future operations are expected to
consist primarily of interest income, fees for professional services and
administrative expenses until the Partnership's winding up and termination,
which is expected to occur during the fourth quarter of 2003, barring
unforeseen circumstance. However, although no claims have been asserted or
threatened against the Partnership that have not been resolved, there can
be no assurance that no claims will be made against the Partnership prior
to the winding up of its affairs.
RESULTS OF OPERATIONS
Significant fluctuations between periods in the accompanying
consolidated financial statements are primarily the result of the
disposition of the Partnership's interest in the 301 N. Main and Phillips
Buildings in May 2003. Reference is made to the Notes in the accompanying
consolidated financial statements for discussions of such disposition.
The decrease in rental income for the nine months ended September 30,
2003 as compared to the same period in 2002 is primarily due to a decrease
in occupancy at the 301 North Main and Phillips Buildings during the first
quarter of 2002 and to the disposition of the property in May 2003. The
decrease in rental income for the three months ended September 30, 2003 as
compared to the same period in 2002 is due to the disposition of the
property in May 2003. None of such rental income generated any cash
proceeds for the Partnership.
The decreases in interest income for the three and nine months ended
September 30, 2003 as compared to the same periods in 2002 are primarily
due to lower interest rates on the Partnership's invested funds in 2003.
Other income for the nine months ended September 30, 2003 is primarily
due to the collection in May 2003 of approximately $12,000 related to
litigation with former tenants of a formerly owned property. Other income
for the three and nine months ended September 30, 2002 represents the
return to the Partnership of a payroll imprest fund related to a formerly
owned property in the third quarter of 2002.
The increases in professional services for the three and nine months
ended September 30, 2003 as compared to the same periods in 2002 are
primarily due to increased legal and other professional fees related to
issues pertaining to the receivership at and disposition of the 301 N. Main
and Phillips Buildings in 2003.
The increases in general and administrative expenses for the three and
nine months ended September 30, 2003 as compared to the same periods in
2002 are primarily due to an increase in certain administrative costs in
2003.
Venture partner's share of venture's operations for the nine months
ended September 30, 2003 is due to the allocation to the venture partner of
100% of the operating 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-15 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 the end of the period covered by this report.
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 end of the period covered by this
report 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 rules and form of the Securities and Exchange
Commission for this report.
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 nonrecourse 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 had 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 was in default as of June 1,
2001 and matured November 2001. As of April 30, 2003, aggregate amounts
due to the lender were approximately $24,039,000 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 Consolidated 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 2003:
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% N/A N/A
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
hereby incorporated herein by reference to the
Partnership's Report for March 31, 2003 on Form 10-Q
(File No. 0-8716) dated May 14, 2003.
31. Certifications pursuant to Rule 13a-14(a)/15d-14(a) of
the Securities and Exchange Commission are filed
herewith.
32. Certifications pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 are filed herewith.
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
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: November 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: November 14, 2003