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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, 1995
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 Partnerships
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,
1995. 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, 1995, the Partnership had made the real property investments set
forth in the following table:
Name, Type of Property Date of
and Location Size Purchase Type of 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.
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 the Partnership's real estate
investments. Since acquiring the Indian River Plaza investment in
1986, the Partnership has received cash distributions of $$1,436,038
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 $1,590,306. 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 disributions of $569,618.
During the past five years, operations at the Partnership's three
properties have been stable with no large fluctuations in occupancy.
The Downers Grove Building is a single tenant building. The original
tenant at Downers Grove vacated in 1994, however, they were replaced
immediately. Reference is made to the section below which discusses
the Downers Grove Building more thoroughly. Rental rates for the three
properties have not risen appreciably over the past five years. The
real estate market in general has suffered from overbuilding in the
1980's which has increased the competition for the Partnership's
properties. This resulted in a decrease in rental rates from 1990 to
1994. Since 1994, the market rental rates have begun to increase. The
decrease in market rental rates has not significantly impacted the
Partnership's properties since they were primarily occupied under long
term leases which did not result in decreased rental income for most of
the space. Since 1994, the market rental rates have leveled off and
appear to be rising.
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. Industry segment 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 1995 1994 1993
Total revenue 997,880 956,108 868,531
Operating profit (loss) 36,203 (10,589) (98,399)
Total assets 6,858,736 7,082,395 7,324,553
Mortgage indebtedness 4,586,796 4,653,680 4,714,827
Downers Grove Building
Downers Grove, Illinois 1995 1994 1993
Total revenue 565,417 2,531,122 898,955
Operating profit (loss) (195,287) 1,842,549 187,498
Total assets 8,237,790 8,781,845 7,275,680
Mortgage indebtedness 4,586,044 4,790,042 4,999,929
Sycamore Mall,
Iowa City, Iowa 1995 1994 1993
Total revenue 1,957,849 1,784,232 1,767,166
Operating profit 267,781 205,065 231,961
Total assets 8,589,852 8,672,723 8,987,738
Mortgage indebtedness 4,870,823 4,951,845 5,016,096
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,
1995, 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, 1995, 1994
and 1993.
Since the property was acquired, operations have been stable with
occupancy holding above 95%. The Partnership's original objective of
cash flow from property operations has been partially achieved.
However, rental rates in the market place have not increased since 1986
as had been originally anticipated. 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. 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.
The shopping center is located on U.S. Highway 1 in Vero Beach,
Florida, a rapidly growing community. There is a large retail center
adjacent to Indian River Plaza and there are several other shopping
centers in the immediate area. Two new shopping centers are expected
to open in the fall of 1996. The area is becoming a major retail
location, but at the same time, there is significant competition for
tenants. Management does not believe that the additional competition
will have a significant detrimental impact on the operation of Indian
River Plaza.
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
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, 1995, 1994 and
1993.
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. Costs of $843,031, reflecting previously deferred
rents receivable, were expensed as a result of the termination. The
net amount of $1,656,969 was recognized as income in 1994. The total
principal payments to be received from the annuities in 1996 aggregate
$664,256 and are included in rents and other receivables, $1,043,374
is included in deferred rents receivable on the consolidated balance
sheet, and is expected to be received in the years 1997 through 2001.
During 1995 and 1994, the Building Partnership recognized $107,031 and
$10,301, respectively, of interest income relating to the annuity
contracts.
The total amount of the two annuity contracts was determined based
on negotiations with Reichhold Chemicals, the previous tenant, 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 would provide a steady stream of cash flow, adequate to
service the mortgage obligations.
A replacement tenant had been found for the property but due to a
soft real estate market the rental amounts the new tenant was willing
to pay were less than the lease commitments of Reichhold. The total
$2,500,000 lease termination payment was secured by two annuity
contracts which would be paid out over the remaining lease term of the
Reichhold Lease. The monthly payments from the annuity, when combined
with the rental of the new replacement tenant, provides for a total
revenue stream equal to or in excess of the amounts that would be due
under the original Reichhold lease.
In years subsequent to 1994, income will be recognized from the
payment of rent by the new tenant, and interest earned on the balance
of the annuity which has not been paid out. Total payments from the
annuity in 1995 totaled $840,000 of which $107,031 represented interest
income and the remainder was treated as payment of rents receivable.
Total payments in 1996 are expected to be $740,927 of which $76,477
represents interest income. Annual payments in years 1997 through 2000
are expected to be $245,563 per year with interest income of $57,473 in
1997, $45,872 in 1998, $33,566 in 1999 and $20,480 in 2000. The total
payments in 2001 are expected to aggregate $225,100 of which $6,598
represents interest.
Scheduled monthly payments due under the new lease are as follows:
11/1/96 - 11/30/97 $37,701
12/1/97 - 11/30/01 $42,413
12/1/01 - 11/30/04 $56,551
The Downers Grove Building is managed by an unaffiliated entity
under an initial five year management agreement which provided for
fixed management fees of $9,000 per year through 1990 and $11,000 per
year through 1993. Thereafter the management agreement 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 is competition for the property. The
market had experienced vacancy rates of over 20% for most of the late
1980's and early 1990's. There has been very little new construction
in the marketplace, since 1988, and the vacancy rate in the area is now
close to 12%. Since the Downers Grove Building has been occupied under
long term leases, the falling market rental rates has not adversely
effected the lease income. Market rental rates have begun rising over
the last two years, as the overall vacancy rate for the area began to
decline.
Sycamore Mall Associates
On October 26, 1990, the Partnership contributed $1,075,000 to
acquire a 25.2% 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.
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 $1,075,000 and $910,000 for
25.24% 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 partner's 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 1995,
1994 and 1993 the property incurred management fees of $97,270, $88,306
and $87,325, respectively.
Sycamore Mall is located in Iowa City, Iowa. There has been
discussion of a new regional shopping center being planned in the area.
There are no definite announcements of construction, however the
proposed location would create additional competition for Sycamore
Mall. As a precautionary measure, Sycamore Mall Associates has reduced
distributions to its partners. It is believed that the additional
working capital may be necessary if additional retail space, that would
compete with Sycamore Mall, is constructed. There are no definite
plans for improvements to the property, at this time. Distributions to
the Partnership in 1995 were $89,940 as compared to $116,262 in 1994.
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:
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 to
McDonalds. 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 $4,870,823 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 balance comes due.
The major tenants are Sears and Von Maur which occupy approximately 34%
and 17%, respectively, of the net rentable area. Occupancy at Sycamore
Mall has remained in the 94% - 99% range during the last five years.
The Sears lease expires in 2002 and the annual rent is approximately
$109,000. The Von Maur lease expires in 2009 and the annual rent is
approximately $210,000. Average total rents received per square foot
at the property during the last three years are $8.14 in 1995, $7.42 in
1994, $7.34 in 1993.
Sycamore Mall is located in Iowa City, Iowa. There has been discussion
of a new regional shopping center being planned in the area. There are
no definite announcements of construction, however, if such a center
was developed at the proposed location, such a development would create
additional competition for Sycamore Mall. As a precautionary measure,
Sycamore Mall Associates has reduced distributions to its partners in
order to maintain its working capital reserves. It is believed that
the additional working capital may be necessary if additional retail
space, that would compete with Sycamore Mall, is constructed. The
Partnership has no definite plans for improvements to the property at
this.
The following table illustrates the scheduled lease expirations for
Sycamore Mall, over the next ten years:
# of % of total
leases expiring square feet annual rent annual rent
1996 9 7,259 $ 45,450 4.2%
1997 9 37,989 $ 180,031 16.8%
1998 7 19,911 $ 245,073 22.8%
1999 6 21,200 $ 127,739 11.8%
2000 1 2,800 $ 33,600 3.1%
2001 - - - -
2002 4 89,428 $ 210,449 19.6%
2003 - - - -
2004 1 3,464 $ 45,032 4.2%
2005 - - - -
Management believes that the Sycamore Mall property has adequate
insurance coverage.
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, 1995, the Partnership had made capital contributions
aggregating $4,710,642 to the Operating Partnership.
Indian River Plaza is encumbered by a first mortgage with an original
amount of $5,000,000 ($4,586,796 outstanding on December 31, 1995),
bearing interest at 9%, amortized over 30 years payable in monthly
installments of principal and interest of $40,250 until maturity on
July 1, 1997 when the remaining principal balance of $4,474,527 is
payable; secured by the real and personal property of Indian River
Plaza.
The major tenants are K Mart and Publix which occupy approximately 56%
and 25%, respectively, of the property's net leaseable area. Occupancy
at Indian River Plaza has remained in the 96% - 100% range during the
last five years. The K Mart lease expires in 2004 and the annual rent
is approximately $220,000. The Publix lease expires in 1999 and the
annual rent is approximately $125,000. Average total rent received per
square foot at the property during the last three years were $6.78 in
1995, $6.50 in 1994, $5.90 in 1993.
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
1996 4 7,009 $ 70,881 11.1%
1997 1 1,200 $ 11,100 1.7%
1998 2 4,951 $ 53,109 8.3%
1999 1 36,464 $ 127,623 20.0%
2000 2 5,040 $ 39,656 6.2%
2001 - - - -
2002 - - - -
2003 - - - -
2004 2 82,922 $ 289,743 45.5%
2005 - - - -
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, 1995, 1994 and 1993.
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 $4,586,044, 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 $58,405 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 the last 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.
The following is a list of approximate occupancy levels by quarter
for the Partnership's investment properties:
1994 1995
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 99% 99% 100% 99% 99% 99% 99% 97%
Downers Grove Building
Downers Grove,
Illinois 100% 100% 100% 100% 100% 100% 100% 100%
Sycamore Mall
Iowa City,
Iowa 96% 99% 97% 97% 99% 98% 97% 97%
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, 1995, there were 1,381 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, 1995, have
totaled $2,917,472 since the Partnership's formation. This is
approximately $142.53 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, 1995, 1994, 1993, 1992, and 1991
(not covered by Independent Auditors' Report)
1995 1994 1993 1992 1991
Total revenues $ 1,579,111 3,495,931 1,772,834 1,810,066 1,755,999
Operating income (loss)$ (267,289) 1,721,130 (40,396) (27,324) (251,008)
Partnership's share of operations of
unconsolidated ventures 67,587 51,758 56,220 48,336 63,550
Venture partners' share of
consolidated ventures'
operations 65,054 (614,111) (62,400) (49,028) (45,072)
Net income (loss) $ (134,648) 1,158,777 (46,576) (28,016) (232,530)
Net income (loss)
per Unit (a) $ (6.51) 56.05 (2.25) (1.36) (11.25)
Total assets $16,959,731 17,726,940 16,531,557 16,919,254 17,437,305
Long-term debt $ 8,889,627 4,586,785 4,653,667 9,714,771 9,770,686
Cash distributions
per Unit (a) $ 11.26 14.96 13.54 17.52 18.11
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 income (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, 1995, the Partnership had cash and cash
equivalents of $394,223 as compared to $509,641 as of December 31,
1994. The decrease in cash and cash equivalents is primarily a result
of net cash used in financing activities exceeding net cash provided by
operations. Cash provided by operations decreased $223,691 from the
prior year primarily due to the timing of receipt of certain payments
under the terms of the Reichhold termination agreement.. Distributions
to venture partners decreased $54,468 from the prior year as a result
of suspending distributions from Vero Beach Associates and the Downers
Grove property. Distributions are expected to begin in 1996.
Distributions to limited partners decreased $75,731 from the prior
year.
In October 1995, the first mortgage loan at Sycamore Mall was
modified. The terms of the modification reduced the interest rate to
8.125% from 9.625%, reduced the monthly payments of principal and
interest to $44,375 from $45,355 and extended the maturity date from
September 30, 1996 to March 1, 2002. In August 1995, the first
mortgage at the Downers Grove property was modified, increasing the
interest rate to 9.125% from 8.5%, and extending the maturity date from
September 1, 1995 to August 1, 2005. The mortgage loan on the Vero
Beach property matures in July 1997.
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. Costs of $843,031, reflecting previously
deferred rents receivable, were expensed as a result of the
termination. The net amount of $1,656,969 was recognized as income in
1994. The total principal payments to be received from the annuities
in 1996 aggregate $664,256 and are included in rents and other
receivables; $1,043,374 is included in deferred rents receivable on the
consolidated balance sheet, and is expected to be received in the years
1997 through 2001. During 1995 and 1994, the Building Partnership
recognized $107,031 and $10,301, 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.
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 weakness of the U.S. economy in general and the
problems experienced by the real estate industry in particular, the
Partnership is taking steps to preserve its working capital during the
current economic slowdown. 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 expect 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, 1995,
December 31, 1994 and December 31, 1993 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 1994 to 1995:
In 1994, the Partnership had net income of $1,158,777 as compared
to a net loss of $134,648 in 1995. This significant decrease in net
income is attributable to the termination of the lease with Reichhold
at the Downers Grove property, in 1994. As a result of the lease
termination, the Partnership recognized $1,656,969 in non-recurring
revenue. The venture partners' share of consolidated ventures'
operations decreased $679,165, primarily as a result of recognition of
the termination fee in income in 1994. The $1,293,425 overall decrease
in net income is primarily attributable to the net effect of the lease
termination transaction.
The $364,036 decrease in rental income primarily resulted from the
decrease in rental income at the Downers Grove property. The
Partnership's interest income increased to $125,351 in 1995 from
$21,557 in 1994. The increase is primarily attributable to interest
earned on the annuity contracts relating to the Downers Grove property.
Property operating expenses increased $101,282 (34%) from $295,739
in 1994 to $397,021 in 1995, primarily as a result of a additional
costs incurred at the Downers Grove property related to the replacement
of the building's tenant.
Interest expense decreased $35,576 (4%) from $857,152 in 1994 to
$821,576 in 1995. The decrease is a result of the reduction in
mortgage indebtedness in the amount of $270,882 which occurred
throughout the year.
The Partnership's share of operations of unconsolidated venture
increased $15,829 (31%) from $51,758 in 1994 to $67,587 in 1995. This
increase is attributable to improved operations at Sycamore Mall.
Changes from 1993 to 1994:
In 1994, the Partnership had net income of $1,158,777 as compared
to a net loss of $46,576 in 1993. This significant improvement in net
income is attributable to the termination of the lease with Reichhold
at the Downers Grove property. As a result of the lease termination,
the Partnership recognized $1,656,969 in non-recurring revenue. The
venture partners' share of consolidated ventures' operations increased
$551,711 as a result of the termination fee. The $1,205,353 increase
in net income is primarily attributable to the net effect of the lease
termination transaction.
The $56,855 increase in rental income resulted from increased
revenues at Indian River Plaza in Vero Beach. The Partnership's
interest income increased from $5,982 in 1993 to $21,557 in 1994. The
increase is attributable to an increase in funds available for
investment and interest earned on the annuity contracts.
Property operating expenses increased $20,446 from $275,293 in
1993 to $295,739 in 1994, primarily as a result of a $5,557 increase in
property taxes at Indian River Plaza in Vero Beach and an increase in
operating expenses at the Downers Grove property which are related to
the replacement of the building's tenant. Interest expense decreased
$44,518 as a result of a reduction in long - term debt at the Downers
Grove property.
The Partnership's share of operations of unconsolidated venture
decreased $4,462 from $56,220 in 1993 to $51,758 in 1994. This
decrease is largely attributable to operations at Sycamore Mall.
Inflation:
The Partnership has completed its ninth full year of operations.
During the last nine years the annual inflation rate has ranged from
3.01% to 5.40% with an average of 4.21%. The effect which inflation
has had on income from operations is minimal primarily due to the
weak real estate market.
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.
Asset Impairment:
Under the Partnership's current impairment policy, provisions for
value impairment are recorded with respect to investment properties
pursuant to the basic principles of 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". Therefore,
the Partnership does not anticipate any effect on its consolidated
financial statements upon full adoption of SFAS 121 as required in the
first quarter of 1996.
Certain investment properties are pledged as security for the long-
term debt, for which there is no recourse to the Partnership, as
described in Note 3 of the Notes to Consolidated Financial Statements.
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 14
Consolidated Balance Sheets, December 31, 1995 and 1994 15 - 16
Consolidated Statements of Operations,
Years ended December 31, 1995, 1994 and 1993 17
Consolidated Statements of Partners' Capital Accounts
(Deficits), Years ended December 31, 1995, 1994 and 1993 18
Consolidated Statements of Cash Flows,
Years ended December 31, 1995, 1994 and 1993 19
Notes to Consolidated Financial Statements 20 - 26
Schedule
Consolidated Real Estate and Accumulated Depreciation III
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, 1995 and 1994 and the results of their operations and
their cash flows for each of the years in the year-year period ended
December 31, 1995, 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 Peat Marwick LLP
Chicago, Illinois
March 8, 1996
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Consolidated Balance Sheets
December 31, 1995 and 1994
Assets
1995 1994
Current assets:
Cash and cash equivalents (note 1) $ 394,223 509,641
Rents and other receivables 939,304 940,710
Due from affiliates 2,014 5,037
Prepaid expenses 9,073 9,007
Total current assets 1,344,614 1,464,395
Investment properties, at cost (note 2):
Land 2,273,114 2,273,114
Buildings and improvements 15,594,670 15,585,295
17,867,784 17,858,409
Less accumulated depreciation (4,809,502) (4,316,293)
13,058,282 13,542,116
Investment in unconsolidated venture,
at equity (notes 2 and 7) 915,594 937,948
Deferred rents receivable 1,537,569 1,745,646
Deferred loan costs 103,672 36,835
Total assets $16,959,731 17,726,940
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, 1995 and 1994
Liabilities and Partners' Capital Accounts (Deficits)
1995 1994
Current liabilities:
Accounts payable and accrued expenses 209,208 213,738
Due to affiliates (note 6) 238,190 220,689
Accrued interest 69,274 68,832
Current portion of long-term debt (note 3) 283,213 4,856,937
Total current liabilities 799,885 5,360,196
Long-term liabilities:
Long-term debt (note 3) 8,889,627 4,586,785
Venture partners' equity in
consolidated ventures (note 2) 1,301,012 1,356,596
Deposits 29,924 118,947
Total long-term liabilities 10,220,563 6,062,328
Total liabilities 11,020,448 11,422,524
Partners' capital accounts (notes 1 and 4):
General partners - cumulative net income 489 1,835
Total general partner capital 489 1,835
Limited partners:
Capital contributions 8,800,461 8,800,461
Cumulative net income 55,805 189,107
Cumulative cash distributions (2,917,472) (2,686,987)
Total limited partner capital 5,938,794 6,302,581
Total partners' capital accounts 5,939,283 6,304,416
Commitments and contingencies (notes 2 and 6)
Total Liabilities and Partners' Capital 16,959,731 17,726,940
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, 1995, 1994, and 1993
1995 1994 1993
Revenues:
Rental income 1,362,917 1,726,953 1,670,098
Tenant charges 90,843 90,452 96,754
Termination fee, net of related costs - 1,656,969 -
Interest income 125,351 21,557 5,982
Total revenues 1,579,111 3,495,931 1,772,834
Expenses:
Property operating expenses 397,021 295,739 275,293
Interest 821,576 857,152 901,670
Depreciation 493,209 494,491 501,660
Amortization 21,908 20,893 21,245
General and administrative expenses 112,686 106,526 113,362
Total expenses 1,846,400 1,774,801 1,813,230
Operating income (loss) (267,289) 1,721,130 (40,396)
Partnership's share of operations
of unconsolidated venture 67,587 51,758 56,220
Venture partners' share of consolidated
ventures' operations (note 1) 65,054 (614,111) (62,400)
Net income (loss) (134,648) 1,158,777 (46,576)
Net income (loss)
per limited partnership unit (note 1) (6.51) 56.05 (2.25)
Cash distribution
per limited partnership unit 11.26 14.96 13.54
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, 1995, 1994 and 1993
General Partners Limited Partners (20,468.5 Units)
Contributions, Cash
Net income net of Net income distrib-
(loss) Total costs (loss) utions Total
Balance (deficit)
at December 31, 1992 (9,287) (9,287) 8,800,461 (911,972) (2,103,551) 5,784,938
Net loss (466) (466) - (46,110) - (46,110)
Cash distributions - - - - (277,220) (277,220)
Balance (deficit)
at December 31, 1993 (9,753) (9,753) 8,800,461 (958,082) (2,380,771) 5,461,608
Net income 11,588 11,588 - 1,147,189 - 1,147,189
Cash distributions - - - - (306,216) (306,216)
Balance (deficit)
at December 31, 1994 1,835 1,835 8,800,461 189,107 (2,686,987) 6,302,581
Net loss (1,346) (1,346) - (133,302) - (133,302)
Cash distributions - - - - (230,485) (230,485)
Balance (deficit)
at December 31, 1995 489 489 8,800,461 55,805 (2,917,472) 5,938,794
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, 1995, 1994 and 1993
1995 1994 1993
Cash flows from operating activities:
Net income (loss) (134,648) 1,158,777 (46,576)
Items not requiring cash or cash equivalents:
Depreciation 493,209 494,491 501,660
Amortization 21,908 20,893 21,245
Partnership's share of operations of
unconsolidated venture 22,354 64,504 28,113
Venture partners' share of consolidated
ventures' operations (65,054) 614,111 62,400
Changes in:
Rents and other receivables 1,406 (750,431) (10,804)
Due from affiliates 3,023 (1,785) (720)
Prepaid expense (66) 1,153 (386)
Deferred rents receivable 208,077 (948,166) (58,803)
Accounts payable and accrued expenses (4,530) (616) 8,178
Due to affiliates 17,501 15,945 18,910
Accrued interest 442 (6,111) (420)
Unearned revenues - (71,245) 9,277
Deposits (89,023) 106,770 3,680
Net cash provided by operating activitie 474,599 698,290 535,754
Cash flows from investing activities-
additions to investment property (9,375) (9,026) (11,899)
Net cash used in investing activities (9,375) (9,026) (11,899)
Cash flows from financing activities:
Payment of deferred loan costs (88,745) (10,138) -
Venture partners' distributions
from consolidated ventures 9,470 (44,998) (110,008)
Distributions to limited partners (230,485) (306,216) (277,220)
Principal payments on long-term debt (270,882) (271,034) (55,918)
Net cash used in financing activities (580,642) (632,386) (443,146)
Net increase (decrease) in cash
and cash equivalents (115,418) 56,878 80,709
Cash and cash equivalents at
beginning of year 509,641 452,763 372,054
Cash and cash equivalents at end of year 394,223 509,641 452,763
Supplemental disclosure of cash flow information-
cash paid for mortgage and other interest 821,134 863,263 902,090
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, 1995, 1994 and 1993
(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, 1995, 1994 and 1993, 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 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)
1995 1995 1994 1994
GAAP Tax GAAP Tax
Basis Basis Basis Basis
Total assets 16,959,731 5,460,474 17,726,940 5,655,998
Partners' capital accounts (deficits):
General partners 489 (22,697) 1,835 (21,456)
Limited partners 5,938,794 5,300,701 6,302,581 5,456,767
Net income (loss):
General partners (1,346) (1,241) 11,588 (2,026)
Limited partners (133,302) 18,709 1,147,189 (84,725)
Net income (loss) per limited
partnership unit (6.51) 0.91 56.05 (4.14)
The net income (loss) per limited partnership unit presented is
based on the limited partnership units outstanding at the end of each
period (20,468.5).
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 operating earnings before
depreciation and non-cash items. In addition, the Partnership records
amounts held in U.S. Government obligations, commercial paper and
certificates of deposit at cost which approximates market. For the
purposes of these statements, the Partnership's policy is to consider
all such investments, with an original maturity of three months or less
($237,206 and $187,663 at December 31, 1995 and 1994, respectively), as
cash equivalents.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
Deferred offering costs were charged to the partners' capital
accounts upon consummation of the offering. Deferred loan costs are
amortized over the terms of the related agreements using the straight-
line method.
Depreciation on the investment properties acquired has been
provided over the estimated useful lives of 5 to 30 years using the
straight-line method.
No provision for Federal income taxes has been made as any
liability for such taxes would be that of the partners rather than the
Partnership.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management 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.
(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, 1995. 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, 1995, the Partnership had made capital
contributions aggregating $4,710,642 to the Operating Partnership.
The property is managed by an affiliate of the seller under a
management agreement that provided for a fee equal to 3% of effective
gross income and deferral of such fee, without interest through 1995,
in the event scheduled cash flow requirements are not achieved. During
1991, the management agreement was amended to provide for a fee equal
to 3% of operating income, payable on a monthly basis. Management fees
deferred pursuant to the original management agreement aggregate
$105,952 at December 31, 1995 and 1994.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
(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"). 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, 1995, 1994 and
1993.
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. Costs of $843,031, reflecting previously
deferred rents receivable, were expensed as a result of the
termination. The net amount of $1,656,969 was recognized as income in
1994. The total principal payments to be received from the annuities
in 1996 aggregate $664,256 and are included in rents and other
receivables; $1,043,374 is included in deferred rents receivable on the
consolidated balance sheet, and is expected to be received in the years
1997 through 2001. During 1995 and 1994, the Building Partnership
recognized $107,031 and $10,301, respectively, of interest income
relating to the annuity contracts.
The Downers Grove Building is managed by an unaffiliated entity
under an initial five year management agreement which provided for
fixed management fees of $9,000 per year through 1990 and $11,000 per
year through 1993. Thereafter the management agreement 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.
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 partner's
ownership interests.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
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 1995,
1994 and 1993 the property incurred management fees of $97,270, $88,306
and $87,325, respectively.
(3) Long-Term Debt
Long-term debt consists of the following at December 31, 1995 and
1994:
1995 1994
$5,000,000 mortgage note, bearing interest
at 9%, amortized over 30 years payable in
monthly installments of principal and interest
of $40,250 until maturity on July 1, 1997 when
the remaining principal balance of $4,474,527
is payable; secured by the real and personal
property of Indian River Plaza. 4,586,796 4,653,680
$5,000,000 mortgage note, bearing interest
at 8.5%, payable in monthly installments of
principal and interest of $64,768 until
March 1, 1995, then $67,951 until
September 1, 1995 when the remaining principal
balance is due; secured by the real and personal
property of the Downers Grove Building. - 4,790,042
$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 $58,405 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 4,586,044 -
Total debt 9,172,840 9,443,722
Less current portion of long-term debt 283,213 4,856,937
Total long-term debt 8,889,627 4,586,785
Five year maturities of long-term debt are as follows:
1996 $ 283,213
1997 4,787,641
1998 313,164
1999 370,362
2000 405,608
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
(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, 1995, 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.
Cost and accumulated depreciation of the leased assets are
summarized as follows at December 31, 1995:
Shopping center:
Cost $ 9,816,222
Accumulated depreciation (2,907,282)
6,908,940
Office building:
Cost 8,051,562
Accumulated depreciation (1,902,220)
6,149,342
Total $13,058,282
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
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:
1996 768,101
1997 1,071,263
1998 1,076,204
1999 1,031,183
2000 894,761
Thereafter 3,954,465
$ 8,795,977
Percentage rents (based on tenants' sales volume) included in
rental income were $274,615, $227,875 and $166,879 for the years ended
December 31, 1995, 1994 and 1993, respectively.
(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, 1995, 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, 1995, 1994 and 1993 are as follows:
Unpaid at
1995 1994 1993 Dec.31, 1995
Non-accountable expense
reimbursement 25,588 25,588 25,588 228,524
Reimbursement (at cost)
for administrative services 17,233 17,236 27,057 9,666
42,821 42,824 52,645 238,190
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
Notes to Consolidated Financial Statements - Continued
(7) Investment in Unconsolidated Venture
Summary financial information for Sycamore Mall Associates as of
December 31, 1995 and 1994 is as follows:
1995 1994
Current assets 476,386 371,246
Current liabilities (382,479) (295,701)
Working capital 93,907 75,545
Deferred expenses 68,472 35,623
Ventures partners' equity (2,420,956) (2,487,228)
Investment property, net 8,043,994 8,265,853
Long-term debt (4,870,823) (4,951,845)
Partnership's capital 915,594 937,948
Represented by:
Invested capital 1,150,913 1,150,913
Cumulative cash distributions (569,643) (479,702)
Cumulative income 334,324 266,737
915,594 937,948
Total revenues 1,957,849 1,784,231
Total expenses 1,690,073 1,579,166
Net income 267,776 205,065
The total revenues, expenses and net income for the above venture for
the year ended December 31, 1993 were $1,767,166, $1,535,205 and
$231,961, respectively.
(8) Fair Value of Financial Instruments
The Partnership believes the carrying amount of its financial
instruments included in cash and cash equivalents, rents and other
receivables and accounts payable and accrued expenses approximates fair
value because of the relatively short maturity of these instruments.
In addition, the estimated fair values of deferred rents receivable and
long-term debt are not significantly different from the respective
carrying values in the accompanying consolidated financial statements.
(9) Subsequent Event
In March 1996, the Partnership paid cash distributions of $38,681
to the Limited Partners.
FIRST DEARBORN INCOME PROPERTIES L.P.
(a limited partnership)
and Consolidated Ventures
December 31, 1995
Schedule III
Consolidated Real Estate and Accumulated Depreciation
(a)
Initial Cost to Partnership Additions Gross amount of asset at period end
Building & Building & Building & Accumulated Date of Date Depreciable
Encumbrance Land Improvements Improvements Land Improvements Total Depreciation Construction Acquired Lives
Shopping Center 5/21/87
Vero Beach,
Florida 4,586,797 931,905 8,532,052 333,864 960,953 8,855,269 9,816,222 2,907,282 1979 11/30/86 5-30 yrs
Office Building 1983
Downers Grove,
Illinois 4,586,043 1,312,161 6,728,640 10,761 1,312,161 6,739,401 8,051,562 1,902,220 1987 2/1/88 5-30 yrs
Total 9,172,840 2,244,066 15,260,692 344,625 2,273,114 15,594,670 17,867,784 4,809,502
(a) The initial cost represents the original purchase price of the properties.
(b) The aggregate cost of the above real estate at December 31, 1995 for
Federal income tax purposes is $16,523,918.
1995 1994 1993
(c) Reconciliation of real estate owned
Balance at beginning
of period 17,858,409 17,849,383 17,837,484
Additions 9,375 9,026 11,899
Balance at end of period 17,867,784 17,858,409 17,849,383
(d) Reconciliation of accumulated depreciation
Balance at beginning
of period 4,316,293 3,821,802 3,320,142
Depreciation expense 493,209 494,491 501,660
Balance at end of period 4,809,502 4,316,293 3,821,802
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
Hampshire Funding, Inc., a New Hampshire corporation, which is a wholly-
owned subsidiary of Chubb Life Insurance Company of America. The
officers and directors of Hampshire Syndications, Inc. are Ronald R.
Angarella, President and Director, Charles C. Cornelio, Vice President,
Counsel, Secretary and Director, Frederick H. Condon, Vice President
and Director, John A. Weston, Treasurer.
Messrs. Block and Ross are not affiliated with Chubb 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 58, 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 58, 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 are for
over 22 years and is a shareholder in the Chicago law firm of Ross &
Block P.C.
Mr. Ronald R. Angarella, age 38, currently serves as President,
Chairman and Director of Chubb Securities Corporation and Hampshire
Funding, Inc. and President and Director of Hampshire Syndications,
Inc. Mr. Angarella is also President and Director of Chubb America
Fund, Inc., Senior Vice President and Director of Chubb Investment
Funds, Inc., President and Trustee of Chubb Series Trust and Senior
Vice President, Sales of Chubb Life Insurance Company of America. Mr.
Angarella is a graduate of Providence College and Brown University.
Mr. Charles C. Cornelio, age 36, is Vice President, General
Counsel and Secretary of Chubb Securities Corporation, Hampshire
Syndications, Inc. and Hampshire Funding, Inc. He is also Senior Vice
President and Chief Administrative Officer of Chubb Life Insurance
Company of America, Vice President and General Counsel of Chubb America
Fund, Inc. and Chubb Investment Funds, Inc. and Vice President, Counsel
and Assistant Secretary of Chubb Series Trust.
Mr. Frederick H. Condon, age 61, is a Director of Hampshire
Funding, Inc. and Chubb Securities Corporation. Mr. Condon also serves
as Senior Vice President, General Counsel and Secretary of Chubb Life
Insurance Company of America, Colonial Life Insurance Company of
America and Chubb Sovereign Life Insurance Company.
John Weston, age 36, Treasurer of Hampshire Funding, Inc., Chubb
Securities Corporation, Hampshire Syndications, Inc., Chubb Investment
Funds, Inc., Chubb America Fund, Inc., Chubb Series Trust and Chubb
Investment Advisory Corporation. Mr. Weston also serves as Assistant
Vice President of Chubb Life Insurance Company of America.
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, 1995, 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, 1995, 1994 and 1993 are as follows:
Unpaid at
1995 1994 1993 Dec.31, 1995
Non-accountable
expense reimbursement 25,588 25,588 25,588 228,524
Reimbursement (at cost)
for administrative services 17,233 17,236 27,057 9,666
42,821 42,824 52,645 238,190
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, 1995 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 Chubb Securities 280 Units(1) 1.4%
Partnership Corporation
Units One Granite Place
Concord, NH
Limited All officers 299 Units (2) 1.4%
Partnership directors, and
Units general partners
as a group
(1) During 1993, Chubb Securities Corporation, an affiliate of
Hampshire Syndications, Inc., acquired 280 Units pursuant to an
agreement with the Partnership. Hampshire Syndications, Inc. is a
General Partner of the Partnership and because it is an affiliate of
Chubb 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 13.
(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.
(13) Annual Report to the limited partners consists
substantially of the financial statements contained in Item 8.
(b) No reports on Form 8-K were filed in the last quarter of
1995.
(c) An annual report for the fiscal year 1995 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 13.
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: March 29, 1996 BY: _______ Robert S. Ross
Its: President
BY: FDIP Associates
(Associate General Partner)
BY: First Dearborn Partners, a Partner
Date: March 29, 1996 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 March 29, 1996
Robert S. Ross of FDIP, Inc. (Principal
Executive Officer)
/s/ Bruce H. Block Secretary and Director March 29, 1996
Bruce H. Block of FDIP, Inc. (Principal
Financial Officer)