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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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 0-16820
FIRST DEARBORN INCOME PROPERTIES L.P.
(Exact name of registrant as specified in its charter)
Delaware 36-3473943
(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
Securities registered pursuant to Section 12(b) of the Act:
Names of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP UNITS
(Title of Class)
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 ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.
PART 1
Item 1. Business
The registrant, First Dearborn Income Properties L.P. (the "Partnership"),
is a limited partnership formed in October 1986 under the Revised Uniform
Limited Partnership Act of the State of Delaware to invest in income
producing commercial real estate consisting principally of existing shopping
centers and office buildings. On February 25, 1987, the Partnership
commenced an offering of $10,000,000 of its limited partnership interests
(the "Units") (subject to increase by an additional $5,000,000 of Units)
pursuant to a Registration Statement on Form S-11 under the Securities Act
of 1933 (File No. 33-10244). A total of 20,468.5 Units was sold to the
public in the offering at $500 per Unit. The holders of 10,991.5 Units were
admitted to the Partnership in 1987 and the holders of 9,477 Units were
admitted to the Partnership in 1988. The offering terminated on November
15, 1988 (extended from its originally scheduled termination date of February
25, 1988). Since admission to the Partnership, no holder of Units
(hereinafter, a "Limited Partner") has made any additional capital
contributions. The Limited Partners of the Partnership share in the benefits
of ownership of the Partnership's real property investments in proportion to
the number of Units held.
Net of offering costs, Limited Partners have contributed a total of
$8,800,461 to the Partnership. The Partnership is engaged solely
in the business of real estate investment. It is the Partnership's objective
to realize cash flow from operations and appreciation in the value of the
real estate. 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 $7,685,642 through December 31, 1999. The Partnership has
acquired, through these ventures, interests in two shopping centers and an
office building. No investments have been made since 1990 and no properties
have been sold as of December 31, 1999. However on March 13, 2000, the
Sycamore Mall property was deeded to the lender in lieu of threatened
foreclosure. As of December 31, 1999, the Partnership had made the real
property investments set forth in the following table:
Name, Type of Property Date of Type of
and Location Size Purchase Ownership
Indian River Plaza 147,111 S.F. 11/30/86 99.9% interest in a
Shopping Center partnership that has
Vero Beach, Florida fee ownership of land
and improvements(a)
Downers Grove Building 56,449 S.F. 02/01/88 66.7% interest in a
Office Building partnership that has
Downers Grove, Illinois fee ownership of land
and improvements(a)
Sycamore Mall 240,206 S.F. 10/26/90 25.2% interest in a
Shopping Center partnership that has
Iowa City, Iowa fee ownership of land
and improvements
(a) Reference is made to Note 3 of Notes to Consolidated Financial
Statements filed with this annual report for the current outstanding principal
balance and a description of the long-term mortgage indebtedness secured by
the Partnership's real property investments.
Note: "S.F." represents the amount of rentable square feet area in each of
the properties.
During the past five years, operations at two of the Partnership's three
properties have provided sufficient cash flow to meet the obligations of the
Partnership. Since the forth quarter of 1998, the Sycamore Mall property has
experienced significant vacany. A larger shopping mall opened in the market
area and has made it difficult to find tenants for the property. As a result
of the inability to find new tenants, the property was unable to meet its
financial obligations and beginning in October of 1999, payments to the
lender were halted. This resulted in a default of the loan terms and in
March 2000, the property was deeded to the lender in lieu of threatened
foreclosure.
Indian River Plaza represents the most significant investment made by the
Partnership. A total of $4,710,642 has been invested by the Partnership
which represents 61% of the Partnership's real estate investments. Since
acquiring the Indian River Plaza investment in 1986, the Partnership has
received cash distributions of $1,446,028 from Indian River Plaza. The
Downers Grove building represents an investment of $1,900,000 or 25% of the
Partnership's real estate investments. Since acquiring the Downers Grove
investment in 1988, the Partnership has received distributions of $1,757,143.
Sycamore Mall accounts for $1,075,000 or 14% of the Partnership's real
estate investments. Since acquiring the Sycamore Mall investment in 1990,
the Partnership has received distributions of $853,007.
The major tenants at Indian River Plaza are K Mart and Publix, which occupy
approximately 56% and 25%, respectively, of the property's net leaseable area.
During the second quarter of 1996 Walgreens vacated 12,000 square feet at
Indian River Plaza. Walgreens continued to pay the base rental amounts due
under their lease until a replacement tenant was located. Occupancy dropped
from 98% to 89%, however, in 1997 the vacant space was leased to Beall's
Outlet. As of December 31, 1999, the property has an occupancy level of 98%.
The first mortgage debt was refinanced in 1997, and it is anticipated that
the Vero Beach property will be able to produce enough cash flow to meet its
obligations.
The Downers Grove Building is a single tenant building with a lease to a
subsidiary of Amoco Oil, which expires in 2004. The original tenant at
Downers Grove vacated in 1994, however, it was replaced immediately. It is
anticipated that the Downers Grove property will be able to produce enough
cash flow to meet its obligations. As of October 1, 1997, the Downers Grove
property was considered to be held for sale and depreciation was suspended.
As of October 1, 1998, the Partnership no longer considered the property
held for sale and in 1998, recorded an adjustment to expense previously
suspended depreciation.
During 1996, Randall's, a tenant at Sycamore Mall, vacated its leased
premises of 19,800 square feet. As a result of the Randall's vacancy,
occupancy at Sycamore Mall fell to approximately 86% during the second
quarters of 1996. However, Randall's continued to pay rent through December,
1996. Sears, Roebuck and Co. was a tenant under a lease which had an original
termination date of March 31, 1992. Prior to that termination, a ten-year
extension was agreed to which provided Sears an option to terminate the
lease at any time after March 31, 1997 by giving the landlord a one year
written notice. Sears gave such notice on September 17, 1997 and terminated
its lease on September 1, 1998. The Partnership has, so far, been unsuccessful
in its efforts to find new tenants for the property. Sycamore Mall is located
in Iowa City, Iowa. A new 1,000,000 square foot regional mall has opened in
the area, which created additional competition for Sycamore Mall. As of
December 31, 1999, the property was 44% occupied, and has needed to provide
concessions to the remaining tenants in order to keep them from vacating. As
a result of the inability to find new tenants, the property was unable to meet
its financial obligations and beginning in October of 1999, payments to the
lender were halted. This resulted in a default of the loan terms and in March
2000, the property was deeded to the lender in lieu of threatened foreclosure.
The Partnership's real property investments are subject to competition from
similar types of properties in the vicinities in which they are located.
Approximate occupancy levels for the Partnership's properties are set forth
on a quarterly basis in the table set forth in Item 2 below to which reference
is hereby made. The Partnership has no real property investments located
outside the United States.
Only two of the three Partnership's investments are consolidated for financial
reporting purposes. Information is presented below in order to illustrate
applicable information about each of the three properties individually and
does not relate to financial information presented about the Partnership in
Item 6 and Item 8.
Indian River Plaza,
Vero Beach, Florida 1999 1998 1997
Total revenue 806,117 747,490 778,708
Operating profit (loss) (106,975) (207,583) (584,228)
Total assets 5,528,643 5,827,472 6,056,411
Mortgage indebtedness 4,362,528 4,458,494 4,547,364
Downers Grove Building
Downers Grove, Illinois 1999 1998 1997
Total revenue 495,545 504,827 519,643
Operating profit (loss) (88,053) (157,330) (54,508)
Total assets 6,572,749 6,943,722 7,445,731
Mortgage indebtedness 3,542,821 3,823,915 4,101,987
Sycamore Mall,
Iowa City, Iowa 1999 1998 1997
Total revenue 1,185,202 1,515,937 1,828,997
Operating profit (loss) (2,136,404) (1,010,483) 222,766
Total assets 4,266,654 6,484,454 8,113,686
Mortgage indebtedness 4,258,224 4,408,025 4,574,933
The Partnership has no employees and is largely dependent on the General
Partners and their affiliates for services. A description of the terms of
transactions between the Partnership and affiliates of the General Partners
is set forth in Item 11 below to which reference is hereby made.
Vero Beach Associates
On November 30, 1986, the Partnership purchased an interest in Indian River
Plaza, a 147,111 gross leaseable square foot shopping center on U.S. Highway
1 in Vero Beach, Florida. The Partnership's ownership of Indian River Plaza
was effected through its 1% partnership interest in Vero Beach Associates
(the "Operating Partnership") which holds fee title to the property. An
affiliate of the Managing General Partner purchased the remaining 99% interest
in the Operating Partnership. In May 1987, upon the sale of a sufficient
number of Units, the Partnership made an additional capital contribution to
increase its interest in the Operating Partnership. At December 31, 1999,
the Partnership had made capital contributions aggregating $4,710,642 to the
Operating Partnership. The Partnership's interest in the cash distributions
and allocations for Federal income tax purposes of all losses of the
Operating Partnership and of profits of the Operating Partnership from the
sale or refinancing of the property is 99.9%, and its interest in the
allocation of profits from operations of the Operating Partnership for
Federal income tax purposes is 98%. The Partnership has consolidated the
assets and operations of the Vero Beach Associates as of and for the years
ended December 31, 1999, 1998 and 1997.
Since the property was acquired, occupancy held above 95%, until the second
quarter of 1996, when Walgreens vacated 12,000 square feet. During 1997, two
new leases were signed. One was for 12,000 square feet to Beall's Outlet
store, which replaced Walgreen's. The Beall's lease expires in April, 2002.
A lease was also entered into for 5,960 square feet to Sunshine Furniture,
which provides for a termination in May 2000. The real estate market in
general and the Vero Beach market more specifically have experienced an
oversupply of retail shopping centers which have resulted in a soft market
for rental rate increases. The shopping center is located on U.S. Highway 1
in Vero Beach, Florida. There is a large retail center adjacent to Indian
River Plaza and there are several other shopping centers in the immediate
area. The area is a major retail location and there is significant
competition for tenants. Therefore, the amount of cash flow generated from
the property is less than originally anticipated. As a result, the value of
property has not appreciated as had originally been anticipated. However,
the property has continued to operate at levels which have allowed it to meet
its financial obligations.
Downers Grove Building Partnership
The Partnership has contributed a total of $1,900,000 to, and owns a 66-2/3%
interest in, Downers Grove Building Partnership (the "Building Partnership").
The remaining 33-1/3% interest in the Building Partnership is held by a
non-affiliate of the General Partners. The Building Partnership owns a
56,449 square foot two-story office and laboratory building (the "Downers
Grove Building"). The Partnership has consolidated the assets and operations
of the Building Partnership as of and for the years ended December 31, 1999,
1998 and 1997.
The Downers Grove Building has been 100% occupied for more than the last five
years. The current tenant is a subsidiary of Amoco Oil, and is obligated
under the lease until 2004. The Downers Grove Building was originally leased
to Reichhold Chemicals, Inc. ("Reichhold"), on a 15 year triple net lease,
which provided for bi-annual escalations of 8%, and expiration on February 2,
2002. In November 1994, Reichhold vacated the Downers Grove Building. In
connection with the termination of its lease, two annuity contracts were
purchased by Reichhold in the amount of $2,500,000. The annuity contracts
were subsequently assigned to the Building Partnership to collateralize
payment of the lease termination fee. The annuity contracts provide for
payments beginning December 1, 1994, through November 1, 2001. The total
principal payments to be received from the annuities in 2000 aggregate
$225,084 and are included in rents and other receivables, $218,502 is
included in deferred rents receivable on the consolidated balance sheet, and
is expected to be received in the year 2001. During 1999 and 1998, the
Building Partnership recognized $33,556 and $45,872, respectively, of interest
income relating to the annuity contracts. The total amount of the annuity
contracts was determined based on negotiations with Reichhold and the lender
on the property. Reichhold had been committed under a lease which lasted
through 2002, with a provision to terminate the lease early upon payment of
a lease termination penalty. Reichhold wanted to terminate the lease and the
parties had agreed to allow Reichhold to terminate the lease in exchange for
a total payment of $2,500,000. However, the funds were utilized to purchase
the annuity contracts. These annuities provide a steady stream of cash flow
to supplement the rental income. Together, these amounts are adequate to
service the mortgage obligations.
Income will be recognized from the payment of rent by the current tenant, and
interest earned on the balance of the annuity which has not been paid out.
Total payments from the annuity in 1999 and 1998 totaled $245,563 and $245,563
respectively, of which $33,556 and $45,872 represented interest income in the
respective years while the remainder was treated as payment of rents
receivable. Annual payments in year 2000 are expected to be $245,563 with
interest income of $20,480. The total payments in 2001 are expected to
aggregate $225,100 of which $6,598 represents interest.
Scheduled monthly payments due under the lease are $42,423 through November
2001 and $56,551 from December 2001 through November 2004.
The Downers Grove Building is managed by an unaffiliated entity under an
agreement which will continue in effect from year to year, unless and until
terminated, for a management fee of $13,000 per year.
The Downers Grove Building is located in the western suburbs of Chicago. The
west suburban office market contains over 15 million square feet of office
space which competes with the property. The market had experienced vacancy
rates of over 20% for most of the late 1980's and early 1990's. Market rental
rates have been rising over the last several years, as the overall vacancy
rate for the area continues to decline. The vacancy rate in the area is now
under 10%. Since the Downers Grove Building has been occupied under long term
leases, the impoving market has not affected the current lease income.
Sycamore Mall Associates
On October 26, 1990, the Partnership contributed $1,075,000 to acquire a
25.24% general partnership interest in Sycamore Mall Associates, a general
partnership formed to acquire the Sycamore Mall Shopping Center in Iowa City,
Iowa. The property, situated on an approximate 21.2 acre site, includes a
main building containing 213,206 square feet and an out parcel building
containing 27,000 square feet. A 14,000 square foot parcel which contains a
4,590 square foot building is under a ground lease. Sycamore Mall Associates
acquired the property on October 26, 1990 for a purchase price of $9,400,000,
subject to a purchase money note of $5,140,000 bearing interest at 10% payable
interest only until maturity on October 26, 1995. On August 8, 1991, Sycamore
Mall Associates obtained a first mortgage in the amount of $5,140,000 which
bore interest at a rate of 9.625% payable in monthly installments of principal
and interest of $45,355 commencing October 1, 1991 for 60 months until
September 30, 1996. The proceeds of this first mortgage were used to repay
the original purchase money note. In October 1995, the first mortgage loan
was modified. The terms of the modification reduced the interest rate to
8.125%, reduced the monthly payments of principal and interest to $44,375
and extended the maturity to March 1, 2002. In October 1999, monthly payments
to the lender were halted and the lender declared the loan in default. In
March 2000, the property was deeded to the lender in lieu of threatened
foreclousure.
First Dearborn Income Properties L.P. II, a public limited partnership
affiliated with the General Partners of the Partnership, and First Dearborn
Sycamore Associates Limited Partnership ("FDSALP"), a privately offered
limited partnership also affiliated with the General Partners, are the joint
venture partners in Sycamore Mall Associates and contributed a total of
$2,275,000 and $910,000 for 53.40% and 21.36% of the general partner
interests, respectively.
The property is managed by an affiliate of the General Partners and an
affiliate of the seller under a five year management agreement that provides
for a fee equal to 5% of the effective gross income, of which 1% is paid to
an affiliate of the General Partners. During 1999, 1998 and 1997 the property
incurred management fees of $62,639, $84,679 and $93,053, respectively.
During 1996, Randall's vacated its leased premises of 19,800 square feet.
Occupancy fell to 86%, however, Randall's continued to pay rent through
December, 1996 so that there was no adverse financial impact in 1996. Sears,
Roebuck and Co. was a tenant under a lease which had an original termination
date of March 31, 1992. Prior to that termination, a ten-year extension was
agreed to which provided Sears an option to terminate the lease at any time
after March 31, 1997 by giving landlord a one year written notice. Sears gave
such notice on September 17, 1997, and terminated its lease on September 1,
1998. The Sears lease comprised 82,605 square feet which is 34% of the
leaseable area of the shopping center.
The Partnership has been unsuccessful in its efforts to find new tenants for
the property. Sycamore Mall is located in Iowa City, Iowa. A new 1,000,000
square foot regional mall has opened, which created additional competition for
Sycamore Mall. As of December 31, 1999, the property was 44% occupied, and
it has needed to provide concessions to the remaining tenants in order to keep
them from vacating. Managements efforts to find replacement tenants has
generally been unsuccessful. In response to the uncertainty relative to
Sycamore Mall Associates ability to recover the net carrying value of Sycamore
Mall through future operations and sale, Sycamore Mall Associates, as a matter
of prudent accounting practices and for financial reporting purposes, recorded
a provision for value impairment in 1998 in the amount of $1,100,000, of which
the Partnership's share was $278,000. In 1999, an additional provision for
value impairment was recorded in the amount of $1,890,000, of which the
Partnership's share was $477,650. In October 1999, the property was unable
to meet its obliagtions for payment under the terms of the first mortgage.
The lender declared the loan in default and began foreclosure proceedings. In
March 2000, title to the propery was transferred to the lender in consideration
of the entire mortgae balance including accrued interest.
Affiliated Transactions
A description of the terms of transactions between the Partnership and
affiliates of the General Partners is set forth in Item 11 below to which
reference is hereby made.
Item 2. Properties
The Partnership owns, through joint venture partnerships, the properties
referred to in Item 1. The three properties that the Partnership has an
interest in are described below:
Indian River Plaza
On November 30, 1986, the Partnership purchased an interest in Indian River
Plaza, a 147,111 gross leaseable square foot shopping center on U.S. Highway
1 in Vero Beach, Florida. The Partnership's ownership of Indian River Plaza
was effected through its 1% partnership interest in Vero Beach Associates
(the "Operating Partnership") which holds fee title to the property. An
affiliate of the Managing General Partner purchased the remaining 99% interest
in the Operating Partnership. In May 1987, upon the sale of a sufficient
number of Units, the Partnership made an additional capital contribution to
increase its interest in the Operating Partnership. The Partnership's interest
in the cash distributions and allocations for Federal income tax purposes of
all losses of the Operating Partnership and of profits of the Operating
Partnership from the sale or refinancing of the property is 99.9%, and its
interest in the allocation of profits from operations of the Operating
Partnership for Federal income tax purposes is 98%. At December 31, 1999,
the Partnership had made capital contributions aggregating $4,710,642 to the
Operating Partnership.
The property is subject to a first mortgage with an original amount of
$4,185,000, bearing interest at 8.31%, amortized over 30 years payable in
monthly installments of principal and interest of $31,617, until maturity on
November 11, 2027 when the remaining principal balance is payable; secured by
the real and personal property of Indian River Plaza. In addition to the
first mortgage, the property is also encumbered by a second mortgage with an
original principal amount of $365,000, bearing interest at a floating rate
which is 5% above the LIBOR rate. This loan is payable in monthly installments
of principal and interest, until maturity on November 11, 2002.
The major tenants at Indian River Plaza are K Mart and Publix, which occupy
approximately 56% and 25%, respectively, of the property's net leaseable area.
Occupancy at Indian River Plaza had remained in the 96% - 100% range through
1995. Walgreens, which was a tenant in about 12,000 square feet, vacated the
property during the second quarter of 1996, and moved into a new free-standing
building. In March 1997, management entered into a new lease for the Walgreens
space. A five year gross lease has been entered into with Beall's Outlet
Store, Inc. providing for annual rent of $90,000. This compares to $47,340
per year which was being paid by Walgreens. The K Mart lease expires in 2004
and the annual rent is approximately $220,000. The Publix lease was to expire
in 1999 and the annual rent was approximately $125,000. A 5 year extension of
the lease was entered into which provides for a new termination date of
September 30, 2004 at an annual rental of approximately $127,624. Average
total rent received per square foot at the property during the last three years
were $5.48 in 1999, $5.08 in 1998 and $5.29 in 1997.
K- Mart is disputing the calculation of amounts due for tenant charges, under
the lease. The total amount disputed from K-Mart is $123,952 as of December
31, 1999. The Partnership has begun legal proceedings to collect the amounts
due. As of December 31, 1999, the Partnership has reserved $123,952 of the
amount due from K-Mart. This amount has been charged to operating expenses.
The following table illustrates the scheduled lease expirations for Indian
River Plaza, over the next ten years:
# of % of total
leases expiring square feet annual rent annual rent
2000 2 9,000 55,470 9%
2001 1 1,200 8,400 1%
2002 2 13,200 99,000 15%
2003 2 3,600 37,534 6%
2004 4 121,786 430,656 66%
2005 1 3,200 22,176 3%
2006 - - - -
2007 - - - -
2008 - - - -
2009 - - - -
Management believes that the Indian River Plaza property has adequate
insurance coverage.
Downers Grove Building
The Partnership has contributed a total of $1,900,000 to, and owns a 66-2/3%
interest in, Downers Grove Building Partnership (the "Building Partnership").
The remaining 33-1/3% interest in the Building Partnership is held by a non
affiliate of the General Partners. The Building Partnership owns a 56,449
square foot two-story office and laboratory building (the "Downers Grove
Building"). The Downers Grove Building was leased to Reichhold Chemicals, Inc.
("Reichhold"), on a 15 year triple net lease, which provided for bi-annual
escalations of 8%, and expiration on February 2, 2002. The Partnership has
consolidated the assets and operations of the Building Partnership as of and
for the years ended December 31, 1999, 1998 and 1997.
The property is owned fee simple by the Building Partnership. It is subject
to a first mortgage in the amount of $3,823,915, bearing interest at 9.125%,
payable in monthly installments of principal and interest of $55,170 from
March 1, 1996 through August 1, 1998; and principal and interest of $49,731
from September 1, 1998 until August 1, 2005 when the remaining principal
balance is due; secured by the real and personal property of the Downers Grove
Building.
The Downers Grove Building is a single tenant building. The property has been
100% occupied for over five years. The current tenant is a subsidiary of Amoco
Oil, and is obligated under the lease until 2004.
Management believes that the Downers Grove property has adequate
insurance coverage.
Sycamore Mall Associates
The property is a retail shopping center located in Iowa City, Iowa, and is
situated on an approximate 21.2 acre site. It includes a main building
containing 213,206 square feet and an out parcel building containing 27,000
square feet. A 14,000 square foot parcel which contains a 4,590 square foot
building is under a ground lease. The property is owned fee simple by a
partnership of which the Partnership is a partner. It is subject to a first
mortgage in the amount of $4,408,024 which bears interest at a rate of 8.125%
payable in monthly installments of principal and interest of $44,375 until
March 1, 2002, when the remaining balance is due. As of December 31, 1999,
the property was 44% occupied, and has needed to provide concessions to the
remaining tenants in order to keep them from vacating. As a result of the
inability to find new tenants, the property was unable to meet its financial
obligations and beginning in October of 1999, payments to the lender were
halted. This resulted in a default of the loan terms and on March 13, 2000,
title to the land buildings and improvements as well as the other assets and
liabilities of the property was transferred to the lender in consideration of
a disccharge of the mortgage loan. As of December 31, 1999, Sycamore Mall
Associates recorded a provision for value impairment of $2,990,000, of which
$1,100,000 was recorded in 1998 and $1,890,000 was recorded in 1999.
There are no plans for any significant improvements to the property.
Management believes that the Sycamore Mall property has adequate
insurance coverage.
The following is a list of approximate occupancy levels by quarter for the
Partnership's investment properties:
1998 1999
at at at at at at at at
03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
Indian River Plaza
Vero Beach,
Florida 97% 97% 97% 98% 98% 99% 100% 98%
Downers Grove Building
Downers Grove,
Illinois 100% 100% 100% 100% 100% 100% 100% 100%
Sycamore Mall
Iowa City,
Iowa 85% 79% 84% 47% 47% 44% 44% 44%
Item 3. Legal Proceedings
The Partnership is not aware of any material pending legal proceedings to
which it or its properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of December 31, 1999, there were 1,288 Limited Partners holding
20,468.5 Units. There is no public market for Units and it is not anticipated
that a public market for Units will develop. Pursuant to the terms of the
Limited Partnership Agreement of the Partnership (the "Partnership Agreement"),
there are restrictions on the ability of the Limited Partners to transfer
their Units. In all cases, the General Partners must consent to the
substitution of a Limited Partner.
Distributions to Limited Partners, through December 31, 1999, have
totaled $3,358,904 since the Partnership's formation. This is approximately
$164.10 of cash distributions per Unit. Each Unit originally sold for $500
and the offering was closed on November 15, 1988. Reference is made to Item
6 herein for a summary of annual cash distributions, per Unit, made to the
Limited Partners.
Item 6. Selected Financial Data
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
December 31, 1999, 1998, 1997, 1996 and 1995
(not covered by Independent Auditors' Report)
1999 1998 1997 1996 1995
Total revenues 1,310,191 1,253,960 1,305,716 1,360,339 1,579,111
Operating loss (282,869) (473,079) (745,757) (382,721) (267,289)
Partnership's share
of unconsolidated
venture operartions (539,228) (255,045) 56,226 96,014 67,587
Venture partners'
share of
consolidated
operations 29,333 52,438 18,758 34,611 65,054
Net loss (792,764) (675,686) (670,773) (286,707) (134,648)
Net loss per Unit (38.34) (32.68) (32.44) (12.19) (6.51)
Total assets 12,688,303 13,960,459 15,169,140 16,317,347 16,959,731
Long-term debt 7,517,873 7,928,552 8,249,873 4,101,986 8,889,627
Cash distributions
per Unit (a) 0.00 6.59 7.48 7.50 11.26
The above selected financial data should be read in conjunction with
the Consolidated Financial Statements and the related notes appearing elsewhere
in this annual report.
(a) The net loss per Unit and cash distributions per Unit are based on
the number of Units outstanding at the end of each period (20,468.5.)
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources:
On February 25, 1987 the Partnership commenced a public offering of
$10,000,000 of Units (subject to increase to $15,000,000 of Units) pursuant
to a Registration Statement on Form S-11 under the Securities Act of 1933,
with the offering terminating November 15, 1988. A total of 20,468.5 Units
were issued to the public in the offering, resulting in gross proceeds of
$10,234,250 and net proceeds of $8,800,461 after the deduction of offering
costs. No additional Units are to be offered.
At December 31, 1999, the Partnership had cash and cash equivalents of
$230,685 as compared to $298,500 as of December 31, 1998. The decrease in
cash and cash equivalents is primarily a result of cash flow used by financing
activities and used by investment activities exceeding cash provided from
operations. During 1998, distributions to limited partners were $18,071
($0.89 per Unit). Distributions to limited partners have been suspended in
1999.
Currently the Vero Beach property is subject to a first mortgage with an
original amount of $4,185,000, bearing interest at 8.31%, amortized over 30
years payable in monthly installments of principal and interest of $31,617,
until maturity on February 11, 2027 when the remaining principal balance is
payable; secured by the real and personal property of Indian River Plaza. In
addition to the first mortgage, the property is also encumbered by a second
mortgage with an original principal amount of $365,000, bearing interest at a
floating rate which is 5% above the LIBOR rate. This loan is payable in
monthly installments of principal and interest, until maturity on November 11,
2002.
In November 1994, Reichhold vacated the Downers Grove Building. In
connection with the termination of its lease, two annuity contracts were
purchased by Reichhold in the amount of $2,500,000. The annuity contracts
were subsequently assigned to the Building Partnership to collateralize
payment of the lease termination fee. The annuity contracts provide for
payments beginning December 1, 1994 through November 1, 2001. The total
principal payments to be received from the annuities in 2000 aggregate
$225,084 and are included in rents and other receivables, $218,502 is included
in deferred rents receivable on the consolidated balance sheet, and is expected
to be received in 2001. During 1999 and 1998, the Building Partnership
recognized $33,556 and $45,872, respectively, of interest income relating to
the annuity contracts.
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 distributable capital is expected to come from cash generated by the
Partnership's investment properties and from the sale and refinancing of such
properties. To the extent a property does not generate adequate cash flow to
meet its working capital requirements, the Partnership may (i) withdraw funds
from the working capital reserve it maintains, (ii) fund such shortfall from
excess cash generated by other properties owned by it, or (iii) pursue outside
financing sources. However, the Partnership may decide not to, or may not be
able to, commit additional funds to certain of its investment properties.
Nonetheless, it is anticipated that the current and future capital resources
of the Partnership will be adequate to fund currently anticipated short and
long-term requirements of its investment portfolio taken as a whole.
As of October 1, 1997, the Downers Grove property was considered to be
held for sale and depreciation was suspended. As of October 1, 1998, the
Partnership no longer considered the property held for sale and has recorded
an adjustment to expense previously suspended depreciation.
There are certain risks and uncertainties associated with the
Partnership's investments made through joint ventures, including the
possibility that the Partnership's joint venture partners in an investment
might become unable or unwilling to fulfill their financial or other
obligations, or that such joint venture partners may have economic or business
interests or goals that are inconsistent with those of the Partnership.
In response to the U.S. economy in general and the problems being
experienced at the Sycamore Mall property in particular, the Partnership is
taking steps to preserve its working capital. Therefore, the Partnership
carefully scrutinizes the appropriateness of any possible discretionary
expenditures, particularly as such expenditures relate to the amount of working
capital reserves the Partnership has available. By conserving working capital,
the Partnership expects to be in a better position to meet future needs of its
properties without having to rely on external financing sources.
Results of Operations:
The results of operations for the years ended December 31, 1999, December
31, 1998 and December 31, 1997 reflect the consolidated operations of the
Partnership and its consolidated ventures, Vero Beach Associates (the "Vero
Partnership") and Downers Grove Building Partnership (the "Building
Partnership") and its equity investment in Sycamore Mall Associates (the
"Sycamore Partnership"). The results of operations of the Vero Partnership
reflect the operations of the Indian River Plaza Shopping Center. The results
of operations of the Building Partnership reflect the operations of the Downers
Grove Building. The equity investment in the Sycamore Partnership reflects
the Partnership's share of the operations of the Sycamore Mall Shopping Center.
Changes from 1997 to 1998:
In 1998, the Partnership had a net loss of $675,686 as compared to a net
loss of $670,773 in 1997. In 1997 the Partnership recognized an impairment
loss of $400,000 related to the Vero Beach property. In 1998 the Partnership
recognized approximately $250,000 in losses from the Sycamore Mall property
related to an impairment loss recorded at that property.
The Partnership's interest income decreased $20,568 (29%) from $71,680
in 1997 to $50,112 in 1998. The decrease is primarily attributable to the
decrease in interest earned on the annuity contracts relating to the Downers
Grove property. As the annuity contracts have been paid down, the interest
income has been reduced on the reduced principal amounts remaining.
Property operating expenses increased $38,217 (13%) to $336,626 in 1998
from $298,409 in 1997, primarily as a result of a write down of accounts
receivable at the Vero Beach property. An allowance for doubtful accounts
was established in the amount of $83,519 for expense reimbursements from a
tenant. The tenant is disputing the calculation of amounts due to be
reimbursed under the lease. Management has taken legal action against the
tenant.
Interest expense decreased $48,041 (6%) from $790,313 in 1997 to $742,272
in 1998. The decrease is a result of the reduction in mortgage indebtedness
in the amount of $366,942 which occurred throughout the year.
Depreciation expense increased $94,926 (21%) from $448,396 in 1997 to
$543,322 in 1998. As of October 1, 1997, the Downers Grove property was
considered to be held for sale. As of October 1, 1998, the Partnership is
no longer considering the property held for sale and has recorded a cummulative
adjustment to recapture depreciation expense from October 1, 1997.
General and administrative expense increased $1,495 (2%) from $98,704 in
1997 to $100,199 in 1998. This increase resulted from an increase in
accounting and professional fees.
The Partnership's share of operations of unconsolidated venture resulted
in a loss of $255,045 in 1998 compared to income of $56,226 in 1997. This
decrease is attributable to increased vacancy at Sycamore Mall and the
Partnership's share ($278,000) of a provision for value impairment. Revenues
decreased $313,000 in 1998 as compared to 1997, as a result of the increase
in vacancy. Interest expense decreased by $13,000 in 1998 as compared to
1997 due to a reduction in the outstanding loan balance. Property operating
expenses decreased $99,000 in 1998 as compared to 1997 primarily due to a
decrease in property maintenance and landscaping costs. Property taxes
decreased $156,000 in 1998 as compared to 1997 primarily due to a reduction
in assessed value due to the increase in vacancy. Net loss at Sycamore Mall
was approximately $1,010,000 in 1998 as compared to net income of approximately
$223,000 in 1997.
Changes from 1998 to 1999:
In 1999, the Partnership had a net loss of $792,764 as compared to a net
loss of $675,686 in 1998. This significant increase in net loss is
attributable to the Partnership's recognition of losses from its investment
in Sycamore Mall Associates. The Sycamore Mall property recorded an additional
$1,890,000 value impairment loss due to its continued inability to attract
new tenants, of which the Partnership's share was $477,650.
The $61,677 increase in rental income and the $7,068 increase in tenant
charges for the year ended December 31, 1999 as compared to the year ended
December 31, 1998 primarily resulted from an increase in occupancy at the
Vero Beach property. The Vero Beach occupancy averaged 99% during 1999 as
compared to 97% in 1998.
The Partnership's interest income decreased from $50,112 in 1998 to
$37,598 in 1999. The decrease is primarily attributable to the decrease in
interest earned on the annuity contracts relating to the Downers Grove
property. As the annuity contracts have been paid down, the interest income
has been reduced on the reduced principal amounts remaining.
Property operating expenses decreased $19,894 (6%) to $306,732 in 1999
from $326,626 in 1998, primarily as a result of a write down of accounts
receivable at the Vero Beach property, during 1998. An allowance for doubtful
accounts was established in the amount of $83,519 for expense reimbursements
from a tenant. The tenant is disputing the calculation of amounts due to be
reimbursed under the lease. Management has started legal action against the
tenant.
Interest expense decreased $30,117 (4%) from $742,272 in 1998 to $712,155
in 1998. The decrease is a result of the reduction in mortgage indebtedness
in the amount of $377,060 which occurred throughout the year.
Depreciation expense decreased from $543,322 in 1998 to $464,046 in
1999. As of October 1, 1997, the Downers Grove property was considered to
be held for sale. In accordance with SFAS 121, no depreciation expense
relative to the property was recorded by the Partnership from October 1, 1997
through December 31, 1997. During 1998, the property was no longer considered
held for sale and an adjustment was made to record the 1997 deferred
depreciation expense.
General and administrative expense decreased $4,818 (5%) from $100,199
in 1998 to $95,381 in 1999. This decrease resulted in a decrease in
administrative costs charged by an affiliate of the General Partner.
The Partnership's share of losses from unconsolidated venture increased
$284,183 (111%) from $255,045 in 1998 to $539,228 in 1999. This increased
loss is attributable to an increase in a provision for value impairment
recorded at Sycamore Mall.
Inflation:
The Partnership has completed its twelfth full year of operations. During.
the last eleven years the annual inflation rate has ranged from 2.0% to 5.4%
with an average of 3.6%. The effect which inflation has had on income from
operations has been minimal.
Inflation in future periods may increase rental income levels (from leases
to new tenants or renewals of existing leases) in accordance with normal market
conditions. Such increases in rental income should offset most of the adverse
impact that inflation has on property operating expenses with little effect on
operating income. Continued inflation may also tend to cause capital
appreciation of the Partnership's investment properties over a period of time
as rental rates and replacement costs of properties continue to increase.
Year 2000
The General Partner determined that it would not expect that the consequences
of the Partnership's year 2000 issues would have a material effect on the
Partnership's business, results of operations or financial condition. No
material consequences were incurred.
Item 7a. Quantitative and Qualitative Disclosures about Market Rate
The Partnership has identified interest rate changes as a potential
market risk. However, as a majority of the Partnership`s long-term debt bears
interest at a fixed rate, the Partnership does not believe that it is exposed
to market risk relative to interest rate changes.
Item 8. Financial Statements and Supplementary Data
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
INDEX
Page (s)
Independent Auditors' Report 15
Consolidated Balance Sheets, December 31, 1999 and 1998 16 - 17
Consolidated Statements of Operations, years
ended December 31, 1999, 1998 and 1997 18
Consolidated Statements of Partners' Capital Accounts
(Deficits), years ended December 31, 1999, 1998 and 1997 19
Consolidated Statements of Cash Flows,
years ended December 31, 1999, 1998 and 1997 20
Notes to Consolidated Financial Statements 21 - 29
Schedule
Consolidated Real Estate and Accumulated Depreciation III 30
Sycamore Mall Associates
(a general partnership)
INDEX
Page (s)
Independent Auditors' Report 31
Balance Sheets, December 31, 1999 and 1998 32 - 33
Statements of Operations, years
ended December 31, 1999, 1998 and 1997 34
Statements of Partners' Capital Accounts (Deficits),
years ended December 31, 1999, 1998 and 1997 35
Statements of Cash Flows,
years ended December 31, 1999, 1998 and 1997 36
Notes to Financial Statements 37 - 40
Schedule
Real Estate and Accumulated Depreciation III 41
Schedules not filed:
All schedules other than those indicated in the index have been omitted as
the required information is inapplicable or the information is presented in
the financial statements or the related notes.
Independent Auditors' Report
The Partners
First Dearborn Income Properties L.P.:
We have audited the consolidated financial statements of First Dearborn Income
Properties L.P. (a limited partnership) and consolidated ventures as listed
in the accompanying index. In connection with our audits of the consolidated
financial statements, we also have audited the financial statement schedule as
listed in the accompanying index. These consolidated financial statements and
the financial statement schedule are the responsibility of the General Partners
of the Partnership. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by the General Partners of the Partnership, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Dearborn Income Properties L.P. and consolidated ventures as of December 31,
1999 and 1998 and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1999, in conformity
with generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG LLP
Chicago, Illinois
April 14, 2000
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Consolidated Balance Sheets
December 31, 1999 and 1998
Assets
1999 1998
Current assets:
Cash and cash equivalents (note 1) 230,685 298,500
Rents and other receivables 420,962 371,630
Due from affiliates 17,193 6,934
Prepaid expenses 8,454 8,767
Total current assets 677,294 685,831
Investment properties:
Land 2,233,114 2,233,114
Buildings and improvements 15,407,591 15,375,453
17,640,705 17,608,567
Less accumulated depreciation (6,760,373) (6,296,327)
Total properties held for investment
net of accumulated depreciation 10,880,332 11,312,240
Investment in unconsolidated venture,
held for disposition, at equity (notes 2 and 7) (9,828) 529,400
Deferred rents receivable 933,974 1,211,836
Deferred loan costs 206,531 221,152
Total assets 12,688,303 13,960,459
See accompanying notes to Consolidated Financial Statements.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Consolidated Balance Sheets - Continued
December 31, 1999 and 1998
Liabilities and Partners' Capital Accounts (Deficits)
1999 1998
Current liabilities:
Accounts payable and accrued expenses 125,108 228,452
Due to affiliates (note 6) 375,986 306,643
Accrued interest 39,539 49,216
Current portion of long-term debt (note 3) 387,476 353,857
Total current liabilities 928,109 938,168
Long-term liabilities:
Long-term debt (note 3) 7,517,873 7,928,552
Venture partners' equity
in consolidated ventures (note 2) 1,117,020 1,176,676
Deposits 18,769 17,767
Total long-term liabilities 8,653,662 9,122,995
Total liabilities 9,581,771 10,061,163
Partners' capital accounts (deficits)
General partners - cumulative net loss (23,425) (15,497)
Total general partner capital (deficit) (23,425) (15,497)
Limited partners (20,468.5 units):
Capital contributions 8,800,461 8,800,461
Cumulative net loss (2,311,600) (1,526,764)
Cumulative cash distributions (3,358,904) (3,358,904)
Total limited partner capital 3,129,957 3,914,793
Total partners' capital accounts 3,106,532 3,899,296
Commitments and contingencies (notes 2 and 6)
Total liabilities and partners' capital 12,688,303 13,960,459
See accompanying notes to Consolidated Financial Statements.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Consolidated Statements of Operations
Years ended December 31, 1999, 1998, and 1997
1999 1998 1997
Revenues:
Rental income 1,179,430 1,117,753 1,136,271
Tenant charges 93,163 86,095 97,765
Interest income 37,598 50,112 71,680
Total revenues 1,310,191 1,253,960 1,305,716
Expenses:
Property operating expenses 306,732 326,626 298,409
Interest 712,155 742,272 790,313
Depreciation 464,046 543,322 448,396
Amortization 14,746 14,621 15,651
Provision for value impairment - - 400,000
General and administrative expenses 95,381 100,199 98,704
Total expenses 1,593,060 1,727,039 2,051,473
Operating loss (282,869) (473,079) (745,757)
Partnership's share of operations
of unconsolidated venture (539,228) (255,045) 56,226
Venture partners' share of consolidated
ventures' operations (note 1) 29,322 52,438 18,758
Net loss (792,764) (675,686) (670,773)
Net loss per
limited partnership unit (note 1) (38.34) (32.68) (32.44)
Cash distribution per
limited partnership unit 0.00 6.59 7.48
See accompanying notes to Consolidated Financial Statements.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Consolidated Statements of Partners' Capital Accounts (Deficits)
Years ended December 31, 1999, 1998 and 1997
General Partners Limited Partners (20,468.5 Units) .
Contributions, Cash
Net income net of Net income distrib-
(loss) Total offering costs (loss) utions Total
Balance (deficit)
at December 31, 1996 (2,032) (2,032) 8,800,461 (193,770) (3,070,939) 5,535,752
Net loss (6,708) (6,708) - (664,065) - (664,065)
Cash distributions - - - - (153,018) (153,018)
Balance (deficit)
at December 31, 1997 (8,740) (8,740) 8,800,461 (857,835) (3,223,957) 4,718,669
Net loss (6,757) (6,757) - (668,929) - (668,929)
Cash distributions - - - - (134,947) (134,947)
Balance (deficit)
at December 31, 1998 (15,497) (15,497) 8,800,461 (1,526,764) (3,358,904) 3,914,793
Net loss (7,928) (7,928) - (784,836) - (784,836)
Cash distributions - - - - - -
Balance (deficit)
at December 31, 1999 (23,425) (23,425) 8,800,461 (2,311,600) (3,358,904) 3,129,957
See accompanying notes to Consolidated Financial Statements.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
1999 1998 1997
Cash flows from operating activities:
Net loss (792,764) (675,686) (670,773)
Items not requiring cash
or cash equivalents:
Depreciation 464,046 543,322 448,396
Amortization 14,746 14,621 15,651
Provision for value impairment - - 400,000
Partnership's share of operations of
unconsolidated venture 539,228 361,032 18,217
Venture partners' share of
consolidated ventures' operations (29,322) (52,438) (18,758)
Changes in:
Rents and other receivables (49,332) 51,237 (129,480)
Due from affiliates (10,259) (605) (4,114)
Prepaid expense 313 5,435 (4,895)
Deferred rents receivable 277,862 264,805 252,470
Accounts payable and accrued expenses (103,344) 13,303 (9)
Due to affiliates 69,343 25,461 18,673
Accrued interest (9,677) (5,159) (12,753)
Unearned revenues - - (60,538)
Deposits 1,002 4,336 960
Net cash provided by operating activities 371,842 549,664 253,047
Cash flows from investing activities-
additions to investment properties (32,138) (53,636) (52,606)
Cash flows from financing activities:
Payment of deferred loan costs (125) 2,343 (170,990)
Venture partners' distributions
from consolidated ventures (30,334) (16,609) (11,715)
Distributions to limited partners - (134,947) (153,018)
Proceeds from refinancing
of long-term debt - - 4,550,000
Principal payments on long-term debt (377,060) (366,942) (4,790,276)
Net cash used in financing activities (407,519) (516,155) (575,999)
Net increase (decrease)
in cash and cash equivalents (67,815) (20,127) (375,558)
Cash and cash equivalents
at beginning of year 298.500 318,627 694,185
Cash and cash equivalents at end of year 230,685 298,500 318,627
Supplemental disclosure
of cash flow information-
cash paid for mortgage
and other interest 721,832 747,431 803,066
See accompanying notes to Consolidated Financial Statements.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(1) Organization and Basis of Accounting
The Partnership was formed under the Delaware Revised Uniform Limited
Partnership Act by the recording of a Certificate of Limited Partnership as
of October 1, 1986. The Initial Limited Partner (an affiliate of the Managing
General Partner) contributed $1,000 and withdrew as a Limited Partner upon
the admission of the first additional Limited Partners on May 21, 1987 when
the initial closing of the offering was consummated. The Agreement of Limited
Partnership authorized the issuance of up to 20,000 additional Units (subject
to increase by an additional 10,000 Units) at $500 per Unit. A total of
20,468.5 Units were subscribed for and issued between February 25, 1987 and
November 15, 1988. The offering terminated on November 15, 1988.
For the years ended December 31, 1999, 1998 and 1997, the accompanying
Consolidated Financial Statements include the accounts of the Partnership and
its Consolidated Ventures - Vero Beach Associates and Downers Grove Building
Partnership, and its equity investment in Sycamore Mall Associates. The
Partnerships policy is to consolidate the operations of ventures in which it
controls more than 50% of the equity interest. The equity method is used to
account for ventures in which it controls 50% or less of the equity interest.
The effect of all transactions between the Partnership and the Consolidated
Ventures has been eliminated.
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 for the Partnership. The net effect of
these is as follows:
(unaudited) (unaudited)
1999 1999 1998 1998
GAAP Tax GAAP Tax
Basis Basis Basis Basis
Total assets 12,688,303 4,110,579 13,960,459 4,482,586
Partners' capital accounts (deficits):
General partners (23,425) (36,186) (15,497) (32,385)
Limited partners 3,129,957 3,832,076 3,914,793 4,208,328
Net loss:
General partners (7,928) (3,801) (6,757) (1,699)
Limited partners (784,836) (376,252) (668,929) (168,290)
Net loss per limited partnership unit (38.34) (18.38) (32.68) (8.22)
The net loss per limited partnership unit presented is based on the
limited partnership units outstanding at the end of each period (20,468.5).
All distributions to partners through December 31, 1999 have been considered
to be a return of capital.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
The Partnership's distributions from its unconsolidated venture are
considered cash flow from operating activities to the extent of the
Partnership's cumulative share of net income. 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 ($0 and $18,810
at December 31, 1999 and 1998, 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.
Although certain leases of the Partnership provide for tenant occupancy
during periods for which no rent was due and/or increases in minimum lease
payments over the term of the lease, the Partnership accrues rental income for
the full period of occupancy on a straight-line basis.
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 preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partners to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent 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.
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 Downers Grove property was
considered to be held for sale, and depreciation was suspended. As of October
1, 1998, the Partnership no longer considered the property held for sale and
recorded an adjustment to expense previously unrecognized depreciation from
October 1, 1997. At December 31, 1997, an impairment loss of $400,000 was
recognized as it relates to the Vero Beach property. In response to the
uncertainty relative to Sycamore Mall Associates ability to recover the net
carrying value of Sycamore Mall through future operations and sale, Sycamore
Mall Associates, as a matter of prudent accounting practices and for financial
reporting purposes, recorded a provision for value impairment in 1998 in the
amount of $1,100,000, of which the Partnership's share was $278,000. During
1999, an additional $1,890,000 provision for value impairment was recorded at
the Sycamore Mall property, of which the Partnerships share was $477,655.
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 expense, professional services and general and administrative
expenses, substantially all other components of net earnings (loss) of the
Partnership relate to property investments. With the exception of cash and
cash equivalents, substantially all other assets of the Partnership relate to
property investments.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
(2) Venture Agreements
(a) General
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
$7,685,642 through December 31, 1999. The Partnership has acquired, through
these ventures, interests in two shopping centers and an office building.
(b) Vero Beach Associates
On November 30, 1986, the Partnership purchased an interest in Indian
River Plaza, a 147,111 gross leaseable square foot shopping center on U.S.
Highway 1 in Vero Beach, Florida. The Partnership's ownership of Indian River
Plaza was effected through its 1% partnership interest in Vero Beach Associates
(the "Operating Partnership") which holds fee title to the property. An
affiliate of the Managing General Partner purchased the remaining 99% interest
in the Operating Partnership. In May 1987, upon the sale of a sufficient
number of Units, the Partnership made an additional capital contribution to
increase its interest in the Operating Partnership. The Partnership's interest
in the cash distributions and allocations for Federal income tax purposes of
all losses of the Operating Partnership and of profits of the Operating
Partnership from the sale or refinancing of the property is 99.9%, and its
interest in the allocation of profits from operations of the Operating
Partnership for Federal income tax purposes is 98%. At December 31, 1999, the
Partnership had made capital contributions aggregating $4,710,642 to the
Operating Partnership.
The first mortgage at Indian River Plaza was refinanced as of November
11, 1997. The property had been encumbered by a first mortgage which had a
principal balance of $4,513,476, as of December 31, 1996. The old loan was
being amortized over 30 years with monthly payments of principal and interest
of $40,250, bearing interest at the rate of 9%. Currently the property is
subject to a first mortgage with an original amount of $4,185,000, bearing
interest at 8.31%, amortized over 30 years payable in monthly installments of
principal and interest of $31,617, until maturity on November 11, 2027 when
the remaining principal balance is payable; secured by the real and personal
property of Indian River Plaza. In addition to the first mortgage, the
property is also encumbered by a second mortgage with an original principal
amount of $365,000, bearing interest at a floating rate which is 5% above
the LIBOR rate. This loan is payable in monthly installments of principal
and interest, until maturity on November 11, 2002.
The property is managed by an affiliate of the seller under a management
agreement that provides for a fee equal to 3% of operating income, payable on
a monthly basis. Management fees deferred pursuant to a previous management
agreement aggregate $105,952 at December 31, 1999 and 1998.
(c) Downers Grove Building Partnership
The Partnership has contributed a total of $1,900,000 to, and owns a
66-2/3% interest in, Downers Grove Building Partnership (the "Building
Partnership"). The remaining 33-1/3% interest in the Building Partnership is
held by a non-affiliate of the General Partners. The Building Partnership
owns a 56,449 square foot two-story office and laboratory building (the
"Downers Grove Building").
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
The Downers Grove Building was originally leased to Reichhold Chemicals,
Inc. ("Reichhold"), on a 15 year triple net lease, which provided for bi-annual
escalations of 8%, and expiration on February 2, 2002. In November 1994,
Reichhold vacated the Downers Grove Building. In connection with the
termination of their lease, two annuity contracts were purchased by Reichhold
in the amount of $2,500,000. The annuity contracts were subsequently assigned
to the Building Partnership to collateralize payment of the lease termination
fee. The annuity contracts provide for payments beginning December 1, 1994,
through November 1, 2001. The total principal payments to be received from
the annuities in 1999 aggregate $212,008 and are included in rents and other
receivables, $443,374 is included in deferred rents receivable on the
consolidated balance sheet, and is expected to be received in the years 2000
through 2001. During 1999 and 1998, the Building Partnership recognized
$33,556 and $45,872, respectively, of interest income relating to the annuity
contracts.
The Downers Grove Building is managed by an unaffiliated entity under a
management agreement that will continue in effect from year to year, unless
and until terminated, for a management fee of $13,000 per year.
(d) Sycamore Mall Associates
On October 26, 1990, the Partnership contributed $1,075,000 to acquire a
25.24% general partnership interest in Sycamore Mall Associates, a general
partnership formed to acquire the Sycamore Mall Shopping Center in Iowa City,
Iowa. The property, situated on an approximate 21.2 acre site, includes a
main building containing 213,206 square feet and an out parcel building
containing 27,000 square feet. A 14,000 square foot parcel which contains a
4,590 square foot building is under a ground lease. Sycamore Mall Associates
acquired the property on October 26, 1990 for a purchase price of $9,400,000,
subject to a purchase money note of $5,140,000 bearing interest at 10% payable
interest only until maturity on October 26, 1995. On August 8, 1991, Sycamore
Mall Associates obtained a first mortgage in the amount of $5,140,000 which
bore interest at a rate of 9.625% payable in monthly installments of principal
and interest of $45,355 commencing October 1, 1991 for 60 months until
September 30, 1996. The proceeds of this first mortgage were used to repay
the original purchase money note. In October 1995, the first mortgage loan
was modified. The terms of the modification reduced the interest rate to
8.125%, reduced the monthly payments of principal and interest to $44,375 and
extended the maturity to March 1, 2002. In October 1999, monthly payments
to the lender were halted and the lender declared the loan in default. In
March 2000, the property was deeded to the lender in lieu of threatened
foreclousure.
First Dearborn Income Properties L.P. II, a public limited partnership
affiliated with the General Partners of the Partnership, and First Dearborn
Sycamore Associates Limited Partnership ("FDSALP"), a privately offered
limited partnership also affiliated with the General Partners, are the joint
venture partners in Sycamore Mall Associates and contributed a total of
$2,275,000 and $910,000 for 53.40% and 21.36% of the general partner interests,
respectively.
The terms of the Sycamore Mall Associates partnership agreement provide
that cash flow, sale or refinancing proceeds and profit and loss will be
distributed or allocated in proportion to the partners' ownership interests.
The property is managed by an affiliate of the General Partners and an
affiliate of the seller under a five year management agreement that provides
for a fee equal to 5% of the effective gross income, of which 1% is paid to
an affiliate of the General Partners. During 1999, 1998 and 1997 the property
incurred management fees of $62,639, $84,679 and $93,053, respectively.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
(3) Long-Term Debt
Long-term debt consists of the following at December 31, 1999 and 1998:
1999 1998
$4,185,000 mortgage note, bearing interest at 8.31%,
amortized over 30 years payable in monthly
installments of principal and interest of $31,617
until February 11, 2007. If the remaining principal
balance is not paid; the interest rate will increase
to the greater of 13.31% or the Treasury Rate, as
defined, for the remaining term of the loan, until
maturity on November 11, 2027. The loan is secured
by the real and personal property of Indian River
Plaza. 4,100,000 4,156,833
$365,000 floating rate note, bearing interest at
LIBOR plus 5%, payable in monthly installments of
principal and interest until maturity on November
11, 2002. The loan is secured by the real and
personal property of Indian River Plaza. 262,528 301,661
$4,586,044 mortgage note, bearing interest at
9.125%, payable in monthly installments of
interest only of $34,873 from August 1, 1995
through February 1, 1996; principal and interest
of $55,170 from March 1, 1996 through August 1,
1998; and principal and interest of $49,731 from
September 1, 1998 until August 1, 2005 when the
remaining principal balance is due; secured by
the real and personal property of the Downers
Grove Building. 3,542,821 3,823,915
Total debt 7,905,349 8,282,409
Less current portion of long-term debt 387,476 353,857
Total long-term debt 7,517,873 7,928,552
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
Five year maturities of long-term debt are as follows:
2000 387,476
2001 426,444
2002 468,226
2003 411,618
2004 452,644
(4) Partnership Agreement
Pursuant to the terms of the Partnership Agreement, net profits or losses
of the Partnership for Federal income tax purposes from operations generally
will be allocated 99% to the Limited Partners and 1% to the General Partners.
Net profits for Federal income tax purposes from the sale or refinancing of
properties will be allocated as follows: (i) first, to the Partners who have
a deficit capital account balance in an amount equal to their deficit balance;
(ii) second, to the Limited Partners in an amount equal to their contributed
capital plus a stipulated return thereon; and (iii) thereafter, 85% to the
Limited Partners and 15% to the General Partners. Net losses from the sale or
refinancing of properties will be allocated as follows: (i) first, to the
Partners who have a positive capital account balance in an amount equal to
their positive balance; and (ii) thereafter, 99% to the Limited Partners and
1% to the General Partners.
Operating Cash Flow, as defined in the Partnership Agreement, prior to the
date the public offering terminated, was distributed 100% to the Limited
Partners. Operating Cash Flow subsequent to termination of the public offering
will be distributed during the first five years, 99% to the Limited Partners
and 1% to the General Partners and, thereafter, 90% to the Limited Partners
and 10% to the General Partners subject to certain limitations. Sale or
refinancing proceeds will be distributed 100% to the Limited Partners until
the Limited Partners have received their contributed capital plus a stipulated
return thereon. Any remaining sale or refinancing proceeds will then be
distributed 85% to the Limited Partners and 15% to the General Partners.
For financial reporting purposes, net profits or losses from operations
are allocated 99% to the Limited Partners and 1% to the General Partners. The
General Partners are not required to make any capital contributions except
under certain limited circumstances upon dissolution and termination of the
Partnership.
(5) Leases
At December 31, 1999, the Partnership and its Consolidated Ventures'
principal assets are a shopping center and an office building. The Partnership
has determined that all leases relating to the properties are properly
classified as operating leases; therefore, rental income is reported when
earned and the cost of the property, excluding the cost of the land, is
depreciated over the estimated useful life of the property. Leases with
tenants range in term from two to thirty years and provide for fixed minimum
rent and partial to full reimbursement of operating costs. In addition,
substantially all leases with shopping center tenants provide for additional
rent based upon percentages of tenants' sales volume.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
Cost and accumulated depreciation of the leased assets are summarized as
follows at December 31, 1999:
Shopping center:
Cost 9,535,507
Accumulated depreciation (4,081,703)
5,453,804
Office building:
Cost 8,105,198
Accumulated depreciation (2,678,670)
5,426,528
Total 10,880,332
Minimum lease payments, including amounts representing executory costs
(e.g. taxes, maintenance, insurance) and any related profit, to be received
in the future under the operating leases are as follows:
2000 1,126,585
2001 1,096,154
2002 1,204,980
2003 1,164,338
2004 928,538
Thereafter 1,848
5,522,443
Percentage rents (based on tenants' sales volume) included in rental
income were $64,410, $24,859 and $108,000 for the years ended December 31,
1999, 1998 and 1997, respectively. In addition, the Partnership's Consolidated
Ventures recognize income on a straight-line basis over the life of the related
leases. Included in deferred rents receivable at December 31, 1999 and 1998
is $768,463 and $821,242, respectively, which represents rental income due
from tenants in future periods.
(6) Transactions with Affiliates
In connection with the evaluation, investigation, negotiation, selection
and purchase of the Partnership's investment properties, affiliates of the
General Partners were entitled to receive acquisition fees from the
Partnership, equal to 4.85% of the gross proceeds from the offering of Units.
As of December 31, 1999, the aggregate amount of acquisition fees earned by
affiliates of the General Partners was $496,361, all of which was paid.
Affiliates of the General Partners are entitled to an annual
non-accountable expense reimbursement, subordinated to the Limited Partners'
receipt of distributions of Operating Cash Flow equal to 6% per annum, in
connection with the management of the Partnership in an amount equal to the
greater of .25% of the gross proceeds of the offering or $25,000.
The Managing General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Managing General Partner and its affiliates relating to the administration
of the Partnership.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
Fees, commissions and other expenses required to be paid by the Partnership to
affiliates of the General Partners for the years ended December 31, 1999, 1998
and 1997 are as follows:
Unpaid at
Dec 31,
1999 1998 1997 1999
Non-accountable expense reimbursement - 25,588 25,588 305,257
Reimbursement (at cost)
for administrative services 5,343 1,336 1,652 5,343
5,343 26,924 27,240 310,600
(7) Investment in Unconsolidated Venture
Summary financial information for Sycamore Mall Associates as of December
31, 1999 and 1998 is as follows:
1999 1998
Current assets 180,595 286,207
Current liabilities (4,591,382) (445,759)
Working capital (deficit) (4,410,787) 159,552
Deferred expenses 30,637 40,215
Venture partners' equity 246,735 (1,350,441)
Investment property, net 4,055,409 6,158,032
Long-term liabilities (5,430) (4,232,462)
Partnership's capital (83,436) 455,792
Represented by:
Invested capital 1,075,000 1,075,000
Cumulative cash distributions (853,032) (853,032)
Cumulative income (loss) (305,404) 233,824
(83,436) 455,792
Total revenues 1,185,202 1,515,937
Total expenses 3,321,606 2,526,420
Net income (loss) (2,136,404) (1,010,483)
The total revenues, expenses and net income for the above venture for the year
ended December 31, 1997 were $1,828,997, $1,606,231 and $222,766, respectively.
The Partnership's investment in Sycamore Mall Associates differs from the
Partnership's capital primarily due to acquisition costs incurred by the
Partnership which were not reimbursed by Sycamore Mall Associates and are
being amortized over 30 years.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
(8) Subsequent Event
As a result of the inability of the Sycamore Mall Property to find new
tenants, the property was unable to meet its financial obligations. Beginning
in October of 1999, payments to the lender were halted. This resulted in a
default of the loan terms and on March 13, 2000, title to the land, buildings
and improvements as well as the other assets and liabilities of the property
was transferred to the lender in consideration of a discharge of the mortgage
loan. This may result in a taxable loss of approximately $2,900,000. There
will be no distributable cash as a result of this transaction.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
December 31, 1999
Schedule III
Consolidated Real Estate and Accumulated Depreciation
(a) (b)
Initial Cost to Partnership Additions Gross amount of asset at period end
Building & Building & Building & Accumulated Date Date
Encumbrance Land Improvements Improvements Land Improvements Total Depreciation Constructed Acquired
Shopping Center 5/21/87
Vero Beach, FL 4,362,528 891,905 8,172,052 442,502 920,953 8,614,554 9,535,507 4,006,799 1979 11/30/86
Office Building 1983
Downers Grove, IL 3,542,821 1,312,161 6,728,640 64,397 1,312,161 6,793,037 8,105,198 2,753,574 1987 2/1/88
Total 7,905,349 2,204,066 14,900,692 506,899 2,233,114 15,407,591 17,640,705 6,760,373
(a) The initial cost represents the original purchase price of the properties
reduced by any provision for value impairment.
(b) The aggregate cost of the above real estate at December 31, 1999 for
Federal income tax purposes is $16,643,203.
1999 1998 1997
(c) Reconciliation of real estate owned
Balance at beginning of period 17,608,567 17,554,931 17,902,325
Reserve for value impairment - - (400,000)
Additions 32,138 53,636 52,606
Balance at end of period 17,640,705 17,608,567 17,554,931
(d) Reconciliation of accumulated depreciation
Balance at beginning of period 6,296,327 5,753,005 5,304,609
Depreciation expense 464,046 543,322 448,396
Balance at end of period $6,760,373 6,296,327 5,753,005
Independent Auditors' Report
The Partners
Sycamore Mall Associates:
We have audited the financial statements of Sycamore Mall Associates as listed
in the accompanying index. In connection with our audits of the financial
statements, we also have audited the financial statement schedule as listed in
the accompanying index. These financial statements and the financial
statement schedule are the responsibility of the General Partners of the
Partnership. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by the General Partners of the Partnership, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sycamore Mall Associates as
of December 31, 1999 and 1998 and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1999,
in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information set forth herein. As discussed, in
Note 2 to the Financial Statemets, subsequent to year end, the property was
deeded to the lender in lieu of foreclosure.
KPMG LLP
Chicago, Illinois
April 14, 2000
SYCAMORE MALL ASSOCIATES
(a general partnership)
Balance Sheets
December 31, 1999 and 1998
Assets
1999 1998
Current assets:
Cash and cash equivalents 36,157 98,915
Rents and other receivables 123,362 161,492
Due from affiliates 4,509 4,509
Prepaid expenses 16,567 21,291
Total current assets 180,595 286,207
Investment properties:
Land - 1,206,880
Buildings and improvements - 7,246,641
- 8,453,521
Less accumulated depreciation - (2,295,489)
Property held for investment - 6,158,032
Property held for disposition 4,055,409 -
Deferred leasing and loan costs 30,332 39,910
Other assets 305 305
Total assets 4,266,641 6,484,454
See accompanying notes to Financial Statements.
SYCAMORE MALL ASSOCIATES
(a general partnership)
Balance Sheets - Continued
December 31, 1999 and 1998
Liabilities and Partners' Capital Accounts
1999 1998
Current liabilities:
Accounts payable and accrued expenses 226,753 234.920
Accrued interest 86,495 29,846
Current portion of long-term debt 4,258,224 180,993
Other current liabilities 19,910 -
Total current liabilities 4,591,382 445,759
Long-term liabilities:
Long-term debt (note 2) - 4,227,032
Deposits 5,430 5,430
Total long-term liabilities 5,430 4,232,462
Total liabilities 4,596,812 4,678,221
General Partners' capital accounts
Capital contributions 4,260,000 4,260,000
Cumulative net income (1,209,917) 926,487
Cumulative cash distributions (3,380,254) (3,380,254)
Total general partner capital (330,171) 1,806,233
Commitments and contingencies (notes 2 and 3)
Total liabilities and partners' capital 4,266,641 6,484,454
See accompanying notes to Financial Statements.
SYCAMORE MALL ASSOCIATES
(a general partnership)
Statements of Operations
Years ended December 31, 1999, 1998, and 1997
1999 1998 1997
Revenues:
Rental income 833,114 935,717 1,293,749
Tenant charges 337,399 563,197 514,760
Interest income 1,237 3,112 4,651
Miscellaneous income 13,452 13,911 15,837
Total revenues 1,185,202 1,515,937 1,828,997
Expenses:
Property operating expenses 773,420 682,200 882,636
Interest 350,601 364,462 377,530
Depreciation 241,358 290,412 288,146
Amortization 9,578 9,578 9,785
Provision for value impairment 1,890,000 1,100,000 -
General and administrative expenses 56,649 79,768 48,134
Total expenses 3,321,606 2,526,420 1,606,231
Net income (loss) (2,136,404) (1,010,483) 222,766
See accompanying notes to Financial Statements.
SYCAMORE MALL ASSOCIATES
(a general partnership)
Statements of Partners' Capital Accounts (Deficits)
Years ended December 31, 1999, 1998 and 1997
First First First
Dearborn Dearborn Dearborn
Sycamore Income Income
Associates Properties Properties
Limited Limited Limited
Partnership Partnership I Partnership II
(FDSALP) (FDIP LP I) (FDIP LP II) Total
Balance at December 31, 1996 706,841 835,041 1,767,483 3,308,950
Net income 47,583 56,226 118,957 222,766
Cash distributions (63,015) (74,443) (157,542) (295,000)
Balance at December 31, 1997 691,409 816,824 1,728,483 3,236,716
Net income (loss) (215,841) (255,045) (539,597) (1,010,483)
Cash distributions (89,716) (105,987) (224,297) (420,000)
Balance at December 31, 1998 385,852 455,792 964,589 1,806,233
Net income (loss) (456,336) (539,228) (1,140,840) (2,136,404)
Cash distributions - - - -
Balance at December 31, 1999 (70,484) (83,436) (176,251) (330,171)
See accompanying notes to Financial Statements.
SYCAMORE MALL ASSOCIATES
(a general partnership)
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
1999 1998 1997
Cash flows from operating activities:
Net income (2,136,404) (1,010,483) 222,766
Items not requiring cash or
cash equivalents:
Depreciation and amortization 250,936 299,990 297,931
Provision for value impairment 1,890,000 1,100,000 -
Changes in:
Rents and other receivables 38,130 153,520 (10,717)
Prepaid expense 4,724 (2,157) 12,380
Other assets - - (305)
Accounts payable (8,167) 54,289 (169,351)
Accrued interest 56,649 (1,130) (1,042)
Other liabilities 19,910 (85,000) 85,000
Net cash provided by operations 115,778 509,029 436,662
Cash flows from investing activities-
additions to investment property (28,735) (45,588) (21,643)
Cash flows from financing activities:
Distributions to partners - (420,000) (295,000)
Principal payments on long-term debt (149,801) (166,908) (153,932)
Net cash used in financing activities (149,801) (586,908) (448,932)
Net increase (decrease) in
cash and cash equivalents (62,758) (123,467) (33,913)
Cash and cash equivalents
at beginning of year 98,915 222,382 256,295
Cash and cash equivalents
at end of year 36,157 98,915 222,382
Supplemental disclosure of cash
flow information - cash paid
for mortgage and other interest 293,952 365,592 378,572
See accompanying notes to Financial Statements.
SYCAMORE MALL ASSOCIATES
(a general partnership)
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
(1) Organization and Basis of Accounting
The accompanying financial statements have been prepared for the purpose of
complying with Rule 3.09 of Regulation S-X of the Securities and Exchange
Commission. They include the accounts of the unconsolidated general
partnership, Sycamore Mall Associates, (the "Partnership") in which First
Dearborn Income Properties L.P. II, First Dearborn Income Properties L.P. I,
and First Dearborn Sycamore Associates Limited Partnership are general
partners. The general partners contributed a total of $2,275,000 $1,075,000,
$910,000 respectively, for 53.40%, 25.24%, and 21.36% general partner
interests, respectively. The property, situated on an approximate 21.2 acre
site, includes a shopping center containing 213,206 square feet and an out
parcel building containing 27,000 square feet. Additionally, a 14,000 square
foot parcel which contains a 4,590 square foot building is under a ground
lease. Occupancy at the mall has decreased substantially during 1998 to
approximately 47% at December 31, 1998 and 44% at December 31, 1999. This is
primarily due to Sears terminating their lease on September 1, 1998. The Sears
lease comprised 82,605 square feet which is 34% of the leaseable area of the
shopping center. However, the annual rental income received form Sears was
only approximately $109,000 or approximately 6% of revenues. The terms of the
partnership agreement provide that cash flow, sale or refinancing proceeds and
profit and loss will be distributed or allocated in proportion to the partners'
ownership interests. The property is managed by an affiliate of the General
Partners and an affiliate of the seller under a five year management agreement
that provides for a fee equal to 5% of the effective gross income, of which 1%
is paid to an affiliate of the General Partners. During 1999, 1998, and 1997
the property incurred management fees of $84,679, $84,679 and $93,053,
respectively.
The Partnership records are maintained on the accrual basis of accounting
as adjusted for Federal income tax reporting purposes. The accompanying
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 for the Partnership. The net effect of these
is as follows:
1999 1999 1998 1998
GAAP Tax GAAP Tax
basis basis basis basis
(unaudited) (unaudited)
Total assets 4,266,641 7,549,240 6,484,454 7,918,377
General partners' capital accounts (330,171) 2,950,525 1,806,233 3,066,505
General partners' net loss (2,136,404) (115,980) (1,010,483) (6,050)
Deferred loan costs are amortized over the terms of the related agreements
using the straight-line method. Leasing commissions are amortized over the
terms of the related tenant leases using the straight-line method.
Depreciation on the buildings and improvements was provided over the estimated
useful lives of 5 to 30 years using the straight-line method.
SYCAMORE MALL ASSOCIATES
(a general partnership)
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and were depreciated
over their estimated useful lives.
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 preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partners to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent 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. 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. In response to the uncertainty relative to Sycamore Mall
Associates ability to recover the net carrying value of Sycamore Mall through
future operations and sale, Sycamore Mall Associates, as a matter of prudent
accounting practices and for financial reporting purposes, recorded a provision
for value impairment in 1999 and 1998 in the amount of $1,890,000 and
$1,100,000, respectively. As of December 31, 1999, the Partnership has
considered the Sycamore property held for disposition.
(2) Long-Term Debt
The Partnership acquired the property on October 26, 1990 for a purchase
price of $9,400,000 subject to a purchase money note of $5,140,000 bearing
interest at 10% payable interest only until maturity on October 26, 1995. On
August 8, 1991, the Partnership obtained a first mortgage in the amount of
$5,140,000 which bore interest at a rate of 9.625% payable in monthly
installments of principal and interest of $45,355 commencing October 1, 1991
for 60 months until September 30, 1996. The proceeds of this first mortgage
were used to repay the original purchase money note. In October 1995, the first
mortgage loan was modified. The terms of the modification reduced the interest
rate to 8.125%, reduced the monthly payments of principal and interest to
$44,375 and extended the maturity to March 1, 2002. As of December 31, 1999,
the Partnership was in default under the terms of the loan and the lender
accelerated the maturity of the loan and required immediate payment. On March
13, 2000, title to the land buildings and improvements as well as the other
assets and liabilities of the property was transferred to the lender in
consideration of a discharge of the mortgage loan.
SYCAMORE MALL ASSOCIATES
(a general partnership)
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
(3) Leases
At December 31, 1999, the Partnership's principal asset is an enclosed shopping
center. The Partnership has determined that all leases relating to the property
are properly classified as operating leases; therefore, rental income is
reported when earned and the cost of the property, excluding the cost of the
land, is depreciated over the estimated useful life of the property. Leases
with tenants range in term from one to thirty years and provide for fixed
minimum rent and partial to full reimbursement of operating costs. In addition,
many of the leases provide for additional rent based upon percentages of
tenants' sales volume. Minimum lease payments, including amounts representing
executory costs (e.g. taxes, maintenance, insurance) and any related profit,
to be received in the future (see note 2) under the operating leases are as
follows:
2000 452,258
2001 361,591
2002 285,843
2003 187,002
2004 178,000
Thereafter 744,003
2,208,697
Percentage rents (based on tenants' sales volume) included in rental income
were $194,960, $204,819, and $192,100 for the years ended December 31, 1999,
1998, and 1997, respectively.
SYCAMORE MALL ASSOCIATES
(a general partnership)
December 31, 1999
Schedule III
Real Estate and Accumulated Depreciation
(a) (b)
Initial Cost to Partnership Additions Gross amount of asset at period end
Building & Building & Building & Accumulated Date Date
Encumbrance Land Improvements Improvements Land Improvements Total Depreciation Constructed Acquired
Shopping Center 1969
Iowa City, IA 4,258,224 1,206,880 7,910,902 491,221 1,206,880 5,385,364 6,592,244 2,536,835 1972 10/26/90
(a) The initial cost represents the original purchase price of the properties,
reduced by any provision for value impairment.
(b) The aggregate cost of the above real estate at December 31, 1999 for
Federal income tax purposes is $9,575,280.
1999 1998 1997
(c) Reconciliation of real estate owned
Balance at beginning of period 8,453,521 9,507,933 9,486,290
Provision for value impairment (1,890,000) (1,100,000) -
Additions 28,723 45,588 21,643
Balance at end of period 6,592,244 8,453,521 9,507,933
(d) Reconciliation of
accumulated depreciation
Balance at beginning of period 2,295,439 2,005,077 1,716,931
Depreciation expense 241,346 290,412 288,146
Balance at end of period 2,536,835 2,295,439 1,716,931
Item 9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure
None
Part III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Partnership are:
FDIP, Inc., an Illinois corporation, Managing General Partner; and FDIP
Associates, an Illinois general partnership, Associate General Partner.
FDIP, Inc., the Managing General Partner, is a corporation formed under
the laws of the State of Illinois. Its issued and outstanding shares are owned
by Messrs. Bruce H. Block and Robert S. Ross. The officers of the Managing
General Partner are Robert S. Ross, President, and Bruce H. Block, Vice
President and Secretary. Messrs. Block and Ross are its sole directors.
FDIP Associates, the Associate General Partner, was formed under the laws of
the State of Illinois and has a nominal net worth. Its constituent partners
are First Dearborn Partners, an Illinois general partnership formed in January,
1984, whose constituent partners are Messrs. Block and Ross, and Hampshire
Syndications, Inc., a New Hampshire corporation. Hampshire Syndications, Inc.
is wholly owned by Jefferson-Pilot Investments, Inc., a North Carolina
corporation, which is a wholly-owned subsidiary of Jefferson-Pilot Corporation.
The officers and directors of Hampshire Syndications, Inc. are Ronald
Angarella, President and Director, Charles C. Cornelio, Vice President and
Director, Sheri J. Lease, Secretary, Dennis R. Glass, Executive Vice President
and Director, John C. Ingram, Executive Vice President and Director, John A.
Weston, Treasurer.
Messrs. Block and Ross are not affiliated with Jefferson Pilot Securities
Corporation, except that each is affiliated with the Associate General Partner.
The persons listed below occupy key management position with the General
Partners:
Mr. Bruce H. Block, age 62, has been a principal in numerous real estate
ventures which own, have an interest in, or have owned various types of
property that have included apartment and office buildings, shopping centers
and vacant land. Mr. Block is an Illinois licensed attorney, a certified
public accountant and a licensed real estate broker in the State of Illinois.
Mr. Block practiced corporate and real estate law in Chicago for over 20 years
and is a shareholder in the Chicago law firm of Ross & Block, P.C.
Mr. Robert S. Ross, age 62, has been a principal in many real estate ventures
which own, have an interest in, or have owned various types of property
including apartment and office buildings, shopping centers and vacant land.
Mr. Ross is an Illinois licensed attorney, a licensed real estate broker in
the State of Illinois and is an affiliate member of Real Estate Securities and
Syndication Institute. He also practiced general and real estate law in the
Chicago area for over 22 years and is a shareholder in the Chicago law firm of
Ross & Block P.C.
Mr. Ronald R. Angarella, age 42, has served as President and Director of
Hampshire Syndications, Inc. since October 23, 1995. He also currently serves
as President, Chairman and Director of Jefferson Pilot Securities Corporation
and Hampshire Funding, Inc. His principal occupation is Senior Vice President
and Chief Marketing Officer of Jefferson Pilot Financial Insurance Company.
He also currently serves as an officer and/or director of various affiliated
entities. Mr. Angarella also serves as President and Director of Jefferson
Pilot Variable Fund, Inc.
Mr. Charles C. Cornelio, age 40, has served as Vice President of Hampshire
Syndications, Inc. since June 4, 1993, and Director since May 7, 1990. Mr.
Cornelio served as Secretary of Hampshire Syndications, Inc. from May 17, 1990,
until May 13, 1997. Mr. Cornelio is also Vice President, Secretary and
Director of Jefferson Pilot Securities Corporation. His principal occupation
is Senior Vice President of Jefferson Pilot Corporation and Executive Vice
President of various insurance company subsidiaries. He also serves as an
officer and/or director of other various affiliated entities. Mr. Cornelio
also is General Counsel and Vice President of Jefferson Pilot Variable Fund,
Inc.
Shari J. Lease, age 45, has served as Secretary of Hampshire Syndications, Inc.
since May 13, 1997 and previously served as Assistant Secretary beginning on
May 9, 1994. Ms. Lease is also currently Secretary of Hampshire Funding, Inc.
and Assistant Secretary of Jefferson Pilot Securities Corporation. Her
principal occupation since April 1995 has been as Assistant Vice President and
Counsel of Jefferson Pilot Financial Insurance Company until her election as
Vice President and Counsel in February 1998. She also currently serves as an
officer of other various affiliated entities and is Secretary of Jefferson
Pilot Variable Fund, Inc.
John Weston, age 40, has served as Treasurer of Hampshire Syndications, Inc.
since July 19, 1991. He also currently serves as Treasurer of Jefferson Pilot
Securities Corporation, Hampshire Funding, Inc., Jefferson Pilot Variable Fund,
Inc. and Jefferson Pilot Advisory Corporation. His principal occupation since
April 1995, has been as Assistant Vice President of Jefferson Pilot Financial
Insurance Company until his election as Vice President in February 1999. Mr.
Weston also currently serves as an officer of other various affiliated entites.
Dennis R. Glass, age 50, was elected Executive Vice President and Director of
Hampshire Syndications, Inc. on May 13, 1997. Mr. Glass is also a Director of
Hampshire Funding, Inc. Since October 1993, his principal occupation has been
as Executive Vice President, Chief Financial Officer and Treasurer of Jefferson
Pilot Corporation. He also currently serves as an officer and/or director of
various entities affiliated with Jefferson Pilot Corporation. Prior to October
1993, Mr. Glass was associated with Protective Life Corporation and the
Portman Companies.
John C. Ingram, age 55, was elected Executive Vice President and Director of
Hampshire Synciations, Inc. on May 3, 1999. Mr. Ingram is also a Director of
Hampshire Funding, Inc. Since September 1999, Mr. Ingram's principal
occupation has been as Executive Vice President and Chief Investment Officer
of Jefferson Pilot Corporation. Prior to that date he served as Senior Vice
President and Manager-Security Dept. for more than ten years. Mr. Ingram is
also an officer and/or director of various entities affiliated with Jefferson
Pilot Corporation.
Item 11. Executive Compensation
The Partnership has no officers or directors and instead is managed by
FDIP, Inc., its Managing General Partner.
Officers and directors of the Managing General Partner receive no direct
remuneration in such capacities from the Partnership. In addition, the
Partnership is a registrant that qualifies as a small business issuer as
defined in Item 10(a)(1) of Regulation S-B. Accordingly, certain of the
disclosures typically required by Item 402 are not applicable to the
Partnership and the information set forth herein has been appropriately
modified.
The Partnership is required to pay certain fees to the General Partners
or their affiliates and the General Partners are entitled to receive a share
of cash distributions, when and as cash distributions are made to the Limited
Partners, and a share of profits or losses as described under the caption
"Compensation Table" at pages 9-10 of the Prospectus, a copy of which
descriptions is filed herewith and is hereby incorporated herein by reference.
Reference is also made to Note 4 of Notes to Consolidated Financial Statements
filed with this annual report for a description of such distributions and
allocations.
Certain compensation has accrued to the General Partners and their
affiliates for services rendered on behalf of the Partnership. In connection
with the evaluation, investigation, negotiation, selection and purchase of the
Partnership's investment properties, affiliates of the General Partners were
entitled to receive acquisition fees from the Partnership, equal to 4.85% of
the gross proceeds from the offering of Units. As of December 31, 1997, the
aggregate amount of acquisition fees earned by affiliates of the General
Partners was $496,361, all of which was paid.
Affiliates of the General Partners are entitled to an annual
non-accountable expense reimbursement, subordinated to the Limited Partners'
receipt of distributions of Operating Cash Flow equal to 6% per annum, in
connection with the management of the Partnership in an amount equal to the
greater of .25% of the gross proceeds of the offering or $25,000.
The Managing General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Managing General Partner and its affiliates relating to the administration
of the Partnership.
Fees, commissions and other expenses required to be paid by the
Partnership to affiliates of the General Partners for the years ended
December 31, 1999, 1998 and 1997 are as follows:
Unpaid at
Dec 31,
1999 1998 1997 1999
Non-accountable expense reimbursement - 25,588 25,588 305,257
Reimbursement (at cost)
for administrative services 5,343 1,336 1,652 5,343
5,343 26,924 27,240 310,600
There are no compensatory plans or arrangements regarding termination of
employment or change of control.
Item 12. Security ownership of certain Beneficial Owners and Management
(a) No person or group is known by the Partnership to own beneficially
more than 5% of the outstanding Units of the Partnership.
(b) The following table sets forth information regarding the beneficial
ownership of Units as of December 31, 1999 by directors and/or general partners
of the General Partners, and by all officers, directors and for general
partners of the General Partners as a group:
Amount and
Title Name and address of nature of Percent
Class Beneficial Owner Ownership of Class
Limited Robert S. Ross 0 Units 0%
Partnership 154 W. Hubbard
Units Chicago, Illinois
Limited Bruce H. Block 4 Units less than 1%
Partnership 154 W. Hubbard
Units Chicago, Illinois
Limited Jefferson Pilot 380 Units(1) 1.9%
Partnership Securities Corporation
Units One Granite Place
Concord, NH
Limited All officers 399 Units (2) 1.9%
Partnership directors, and
Units general partners
as a group
(1) During 1993, Jefferson Pilot Securities Corporation, an affiliate
of Hampshire Syndications, Inc., acquired 280 Units pursuant to an agreement
with the Partnership. During 1998, Jefferson Pilot Securities Corporation
acquired 100 additional units. Hampshire Syndications, Inc. is a partner of
the Associate General Partner of the Partnership and because it is an affiliate
of Jefferson Pilot Securities Corporation, could be deemed to have a beneficial
interest in such Units. Accordingly, such Units are included in this table.
(2) Includes 15 units owned by the immediate family of one of the
officers of a general partner of the Associate General Partner.
Item 13. Certain Relationships and Related Transactions
There were no significant transactions or business relationships with the
Managing General Partner, affiliates, or other management other than those
described in Item 10 and 11 above, and Note 6 to the Consolidated Financial
Statements.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1)(2) See Index to Financial Statements and Financial
Statement Schedules on page 15.
(3) Exhibits
(3-A) The Prospectus of the Partnership dated February 25, 1987
as supplemented April 2, 1987, February 5, 1988, April
15, 1988 and May 6, 1988, filed pursuant to Rule 424(b)
under the Securities Act of 1933 as amended (File No.
33-10244), is hereby incorporated herein by reference.
(3-B) Amended Agreement of Limited Partnership set forth as
Exhibit A to the Prospectus, pursuant to Rule 424(b)
under the Securities Act of 1933 as amended (File No.
33-10244), is hereby incorporated herein by reference.
(b) No reports on Form 8-K were filed in the last quarter of 1999.
(c) An annual report for the fiscal year 1999 will be sent to the Limited
Partners subsequent to this filing and the Partnership will furnish
copies of such report to the Securities and Exchange Commission at
that time.
(d) Exhibits - See Item 14(a) - (3).
(e) Financial Statement Schedules. See Index to Financial Statements
and Financial Statement Schedules on page 14.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST DEARBORN INCOME PROPERTIES L.P.
(Registrant)
BY: FDIP, Inc.
(Managing General Partner)
Date: May 1, 2000 BY: _______ Robert S. Ross
Its: President
BY: FDIP Associates
(Associate General Partner)
BY: First Dearborn Partners, a Partner
Date: May 1, 2000 BY: ________ Robert S. Ross
a Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
/s/ Robert S. Ross President and Director May 1, 2000
Robert S. Ross of FDIP, Inc. (Principal
Executive Officer)
/s/ Bruce H. Block Secretary and Director May 1, 2000
Bruce H. Block of FDIP, Inc. (Principal
Financial Officer)