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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-32653
JCM PARTNERS, LLC
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 94-3364323
(State or Other Jurisdiction of
Incorporation or Organization) (I.R.S. Employer Identification No.)
2151 SALVIO STREET, SUITE 325 94520
CONCORD, CA
(Address of Principal Executive Offices) (Zip Code)
(925) 676-1966
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON MEMBERSHIP
INTEREST 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 No X (1)
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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. [ ]
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant: Not applicable, since the
registrant has no established trading market.
As of March 31, 2002, the registrant had 90,152,151 common membership
units outstanding.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No X (1)
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Documents Incorporated by Reference:
Portions of the registrant's Definitive Proxy Statement to be held in
conjunction with registrant's annual meeting of members to be held in June 2002
are incorporated by reference into Part III.
(1) The Company did not file a Form 10-Q for the period ending June 30, 2001.
However, the Company's Form 10, filed with the Securities and Exchange
Commission on October 3, 2001 contains certain financial information for the
six-month period ended June 30, 2001.
JCM PROPERTIES, LLC
TABLE OF CONTENTS
ANNUAL REPORT ON FORM 10-K
PART I
Item 1. Business.................................................................................................2
Item 2. Properties..............................................................................................11
Item 3. Legal Proceedings.......................................................................................18
Item 4. Submission of Matters to a Vote of Security Holders.....................................................18
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters...............................18
Item 6. Selected Financial Data.................................................................................22
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................................................24
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..............................................31
Item 8. Financial Statements and Supplementary Data.............................................................33
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure....................................................................................34
PART III
Item 10. Managers and Executive Officers of the Registrant.......................................................34
Item 11. Executive Compensation..................................................................................34
Item 12. Security Ownership of Certain Beneficial Owners and Management..........................................34
Item 13. Certain Relationships and Related Transactions..........................................................34
PART IV
Item 14. Exhibits, Consolidated Financial Statements, Schedules and Reports on Form 8-K..........................34
Signature Page.......................................................................................................37
FORWARD LOOKING STATEMENTS
Certain information included in this Annual Report contains or may
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements are typically identified by words or phrases such as
"believe," "expect," "intend," and variations of such words and similar
expressions, or future or conditional verbs such as "will," "would," "should,"
"could," "might," or similar expressions. Forward-looking statements, including
those relating to our business strategy, capital expenditures, refinancing
activities, occupancy levels, financial performance, and liquidity and capital
resources, are subject to risks and uncertainties. Actual results or outcomes
may differ materially from those described in the forward-looking statements and
will be affected by a variety of risks and factors. Those risks and factors
include unanticipated adverse business developments affecting us or our
properties, adverse changes in the real estate markets, increases in interest
rates, increased competition, changes in general and local economies, and
federal, state and local governmental regulations that affect us.
Forward-looking statements speak only as of the date they are made, and we
assume no duty to update them.
PART I
ITEM 1. BUSINESS
BACKGROUND
JCM Partners, LLC, a Delaware limited liability company ("JCM
Partners"), was organized on May 15, 2000. We are the reorganized entity which
emerged from the bankruptcy proceedings in the United States Bankruptcy Court
for the Eastern District of California entitled In re IRM Corporation, et al.
(the "IRM entities"), Case Number 98-32231-A-11. Pursuant to a plan of
reorganization confirmed on June 5, 2000, all of the assets of the IRM entities
were vested in our company. We commenced operations on June 30, 2000 pursuant to
the confirmation order and the plan. Additional background information about the
bankruptcy proceedings from which we emerged is set forth later in this Item 1 -
Business, under "The IRM Bankruptcy Proceedings."
We adopted "fresh start" accounting rules as of June 30, 2000 in
accordance with AICPA Statement of Position 90-7 "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code." Accordingly, all of the
assets and liabilities of JCM Partners were reflected at their reorganization
value, which approximated fair value at the date of the reorganization, June 30,
2000. As a result, our financial results during the period from June 30, 2000 to
December 31, 2000 serve as benchmark data for future comparisons, but generally
are not comparable to prior periods.
OVERVIEW
JCM Partners is a limited liability company with activities related to
the ownership, development, acquisition, renovation, management, marketing and
strategic disposition of multifamily apartment communities and commercial
properties in California. Through our wholly-owned subsidiaries, we own 56
properties. Management's strategy is to be a regional, highly efficient provider
of quality apartment communities. We seek to be a market leader by operating a
sufficiently sized portfolio of apartments within each of the markets in which
we own properties in order to drive down operating costs through economies of
scale and management efficiencies.
As of December 31, 2001, our real estate portfolio consisted of:
- 46 apartment complexes with an aggregate of 5,341 units;
- two office/retail properties with 38 tenants and approximately 172,200
square feet;
- six industrial properties with 21 tenants and approximately 145,000
square feet;
- one 16.7-acre site held for future development or sale; and
- one single-family residential lot, approximately 1.3 acre, held for
future development or sale.
2
All of our real estate assets are located in Northern California,
primarily in the Sacramento Metropolitan Area, the Central Valley communities of
Tracy, Manteca, Modesto, Turlock and Stockton and the San Francisco Bay Area.
We are subject to the risks inherent in the ownership of real property,
such as fluctuating land values, interest rates, vacancy rates, and rental
values. Further, there could be difficulties in selling the properties as a
result of general and local economic conditions, the condition of the
properties, the demand for the properties, and real property tax rates.
In addition, certain expenditures associated with real estate equity
investments (principally, mortgage payments, real estate taxes, and maintenance
costs) are not necessarily decreased by events adversely affecting our income
from the properties. Thus, the cost of operating and holding the properties, or
certain of them, may exceed the properties' resale value and income producing
ability, and we therefore may have to advance funds in order to protect our
investment or be required to dispose of the properties, or certain of them, at a
loss. Our ability to meet our debt and other obligations, and thereafter to make
distributions to our members in accordance with our limited liability company
agreement, will depend on these and other factors.
Our limited liability company agreement provides that the purposes of
JCM Partners are (a) to own, exchange, manage, sell and dispose of our
properties and distribute the excess proceeds therefrom to the members in an
orderly manner to attain appropriate investment potential and return to the
members or reinvest such excess proceeds in any type of investment determined
appropriate by the board of managers, (b) to invest excess funds in any type of
investment, (c) to engage in any other activities relating to, and compatible
with, the purposes set forth above, and (d) to take such other actions, or do
such other things, as are necessary or appropriate as determined by the board of
managers to carry out the provisions of the limited liability company agreement.
We have focused our activities on those related to the ownership,
development, acquisition, renovation, management, marketing and strategic
disposition of multifamily apartment communities and commercial properties in
California. We currently intend to continue this focus, but our board of
managers could, without member approval, decide to engage in other activities.
Similarly, our board of managers has broad discretion with respect to our
investments and has the power to determine which types of investments are in the
best interests of our company and its members. Although we are not limited by
our limited liability company agreement, we currently intend to continue our
focus in investing in apartment communities and commercial properties in
California. We currently hold these properties primarily for capital
appreciation and income. Although we do not have a policy as to the amount or
percentage of assets which will be invested in any specific property, it is our
intent to maintain a diversified portfolio of properties.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
Except as described below, we have not adopted any formal policies
regarding the extent to which we will engage in specific activities such as
issuing senior securities, borrowing money, making loans, investing in the
securities of other issuers for the purpose of exercising control, underwriting
securities of other issuers, engaging in the purchase and sale (or turnover) of
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investments, offering securities in exchange for property, repurchasing or
otherwise reacquiring our units, or making annual or other reports to our
members.
Under the terms of our limited liability company agreement, we have the
discretion to repurchase or otherwise reacquire Units from our members. In
December 2001, our board of managers authorized us from time to time to
repurchase units from our members, although we are not obligated to do so. In
addition, under guidelines approved by our board of managers, we will provide
information to members that will allow our members to contact each other in
order to facilitate trading of Units among members. In December 2001, we
committed to repurchase 797,093 common units at $0.80 per unit, or $637,674. The
repurchase was completed in January 2002.
THE APARTMENT PROPERTIES
As of December 31, 2001, our apartment properties consisted of 46
apartment complexes located in the following counties: 21 in Sacramento County,
five in Solano County, seven in Stanislaus County, eight in San Joaquin County
and five in Contra Costa County. The majority of these properties are classified
as "second tier," meaning that they are considered to be typically well located,
older properties in average to good condition. Additional information about
these properties can be found under "Item 2 -- Properties."
Revenues from our apartment properties result primarily from rents.
These rents are required to be paid on a monthly basis. Our business strategy
includes seeking to increase the cash flow generated by our apartment properties
through rent increases upon tenant turnover and lease expiration, while
maintaining high occupancy rates and prudent management of our operating
expenses. Our ability to increase rents is subject to market conditions and
general economic conditions and, accordingly, there can be no assurance that we
will be able to implement our operating strategy successfully. Therefore, we do
not institute such increases based on a pre-determined range nor based on
increased services and/or renovations. We will generally make the increased cash
flow available for our operating and capital expenses but may offer some
increased services and/or renovations as determined by market conditions. The
average occupancy rate of our apartment properties was 94.6% at December 31,
2001 and 96.2% at December 31, 2000.
In general, the tenants in our apartment properties enter into our
standard form of lease, as modified, if necessary, to comply with local
ordinances or custom. The term of these leases varies with market conditions,
although six-month leases are most common. Generally, the leases provide that
unless the parties agree in writing to a renewal, the tenancy will convert at
the end of the lease term to a month-to-month tenancy, subject to the terms and
conditions of the lease, unless either party gives the other at least 30 days'
prior notice of termination. All leases are terminable by us for nonpayment of
rent, violation of property rules and regulations, or other defaults specified
in the lease.
Approximately 60% of the tenants in our apartment properties leave each
year, and rents are adjusted to reflect market conditions existing at the time
any new rental relationship commences. As a result of the relatively short-term
stay of the majority of our tenants, our apartment properties tend not to have
long-term leases that lock in current market rates.
4
Our employees are responsible for marketing, maintenance and leasing
activities at our apartment properties. These employees meet with prospective
residents, show models, rent vacant units and strive to maintain contact with
current tenants to monitor their level of satisfaction. From time to time, we
have employed the services of, and paid customary fees to, apartment locator
services and existing tenants for locating prospective tenants.
All of our apartment properties are located in developed areas that
include other apartment properties serving comparable tenant populations. An
increase in the number of competitive apartment properties in a particular area
could have a material adverse effect on our ability to maintain occupancy levels
and on the rent charged at the properties. In addition, we compete with
providers of other forms of multifamily residential properties and single-family
housing. Buying or renting single-family housing was the reason given by 20% of
residents that moved out of our apartment properties during the last six months
of 2001.
THE COMMERCIAL PROPERTIES
Our commercial properties consist of ten sites in Northern California,
including the Concord, California building housing our executive offices. Our
commercial properties are located in the following counties: seven in Napa
County; and one each in San Francisco County, Contra Costa County and Solano
County. Additional information regarding our commercial properties and their
principal tenants can be found in "Item 2 -- Properties."
Except for the vacant lots, revenues from our commercial properties are
derived primarily from commercial tenants' rents and common area maintenance
charges. The rents are payable monthly.
As with our apartment properties, we seek to increase cash flow at our
commercial properties through periodic rent increases for existing tenants
according to the terms of their leases, through rent increases at tenant
turnover and lease expiration, by maintaining high occupancy rates and through
prudent management of our operating expenses. Our ability to increase rents is
subject to market conditions and general economic conditions and, accordingly,
there can be no assurance that we will be able to implement our operating
strategy successfully. Therefore, we do not institute such increases based on a
pre-determined range nor based on increased services and/or renovations. We will
generally make the increased cash flow available for our operating and capital
expenses. The average occupancy rate of our commercial properties was 82.0% as
of December 31, 2001 and 88.1% as of December 31, 2000.
We use a standard lease, modified at each property to the extent
necessary to comply with local law or custom. The term of a lease varies with
local market conditions, although multi-year leases with annual CPI rent
increases are most common. Some of our leases include an option for the tenant
to extend the term of the lease for an additional period. All leases are
terminable by us for nonpayment of rent, violation of property rules and
regulations, or other defaults specified in the lease.
In any given year, 20% to 30% of our existing commercial leases expire.
Some tenants will exercise their option to extend the term of the lease, while
others will sign a new lease and
5
extend their tenancy for an additional multi-year period. Rents are adjusted
to reflect market conditions for spaces that are vacated or when leases are
renewed. Rents are also adjusted to reflect any changes in rental rates
associated with a lessee's option to extend their lease.
Our employees are responsible for marketing, maintenance and leasing
activities at the commercial properties. Prospective tenant leads are generated
through our marketing program, which includes traditional advertising in
newspapers, drive-by traffic and commercial real estate broker referrals. We
strive to maintain contact with our existing commercial tenants to determine
their level of satisfaction with property management and operations. We may
employ the services of, and pay customary fees to, unaffiliated real estate
brokers for leasing services and for locating prospective tenants.
All of our commercial properties are located in developed areas that
include other commercial properties serving comparable tenant profiles. An
increase in the number of competitive commercial properties in a particular area
could have a material adverse effect on our ability to maintain current
occupancy levels and on our ability to maintain or increase the rental rates
applicable to the properties.
INSURANCE
Each of our properties is covered by fire and property insurance
provided by reputable companies and with commercially reasonable deductibles and
limits, with such limits being equal to the replacement value of each property.
Our management exercises its discretion in determining amounts, coverage limits
and deductibility provisions of insurance, with a view to maintaining
appropriate insurance on our investments at a reasonable cost and on suitable
terms. Insurance costs for the apartment industry increased significantly in
2001 after the events of September 11, 2001. In particular, apartment properties
that had a history of property damage or general liability claims saw premium
increases of 100% or more over the prior year.
Where required by our lenders, flood insurance is obtained. However, we
do not maintain earthquake insurance coverage due to the high premium cost.
Accordingly, a loss resulting from earthquake damage could have a material and
adverse effect on our financial condition and our operating results. Even if a
loss is covered by our insurance, our insurance coverage may not be sufficient
to pay the full current market value or replacement cost of our lost investment.
Inflation, changes in building codes and ordinances, environmental
considerations and other factors also might make it infeasible to use insurance
proceeds to replace a property after it has been damaged or destroyed.
POSSIBLE TAX CONSEQUENCES FOR MEMBERS
We are treated as a partnership for federal and state tax reporting
purposes. As a partnership, we are not an income tax-paying entity and all
income and expenses are reported by our members. Because of this, there is a
risk that a member's tax liability may exceed the cash distributions made by us
to that member. In situations where this occurs, the payment of the tax in
excess of cash distributions will be an out-of-pocket expense to the member.
6
Upon a sale or other disposition (such as by gift or inheritance) of an
interest in JCM Partners or upon a sale (including a foreclosure sale) or other
disposition of a JCM Partners' property, a member may be required to report a
taxable gain. In general, this gain will be treated as a capital gain. However,
a portion of the gain may be characterized as unrecaptured Section 1250 gain and
subject to higher capital gain tax rates. In any case, a member's tax
liabilities resulting from the gain may exceed the cash received. In situations
where this occurs, the payment of the tax in excess of cash distributions will
be an out-of-pocket expense to the member.
Our tax returns and the amount of distributable partnership income or
loss are subject to examination by federal and state taxing authorities. If such
examinations result in changes to distributable income or loss for JCM Partners,
the tax liability of the members could be changed accordingly.
REGULATORY MATTERS
Our commercial properties must comply with Title III of the Americans
with Disabilities Act, commonly referred to as the ADA, to the extent that such
properties are public accommodations or commercial facilities as defined by the
ADA. Compliance with the ADA requirements could require removal of structural
barriers to handicapped access in certain public areas of our commercial
properties where such removal is readily achievable. The ADA does not, however,
consider residential properties, such as our apartment properties, to be public
accommodations or commercial facilities, except to the extent portions of such
facilities, such as the leasing office, are open to the public. We believe that
our properties comply with, or are exempt from, all present requirements under
the ADA and applicable state laws. Noncompliance could result in imposition of
fines or an award of damages to private litigants. If we are required to make
material changes to our properties to comply with the ADA, our operating results
could be materially and adversely affected.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances
and regulations, a current or former owner of real estate may be required to
investigate and clean up hazardous or toxic substances or petroleum product
releases at such property or may be held liable to governmental entities or to
third parties for property or natural resource damage and for investigation,
clean-up and other costs incurred by such parties in connection with the
contamination. Such laws typically impose clean-up responsibility and liability
without regard to whether the owner knew of or caused the presence of the
contamination. The liability under such laws has been interpreted to be joint
and several, unless the harm is capable of apportionment and there is a
reasonable basis for allocation of responsibility. Recently, indoor air quality
issues, including mold, have been highlighted in the media and the industry is
seeing mold claims from apartment residents rising. California state agencies
are attempting to assess this issue.
Our leases generally provide that the tenant is responsible for
compliance with applicable laws and regulations. However, this contractual
arrangement does not eliminate our statutory liability or preclude claims
against us by governmental authorities or persons who are not parties to such
arrangement. The cost of an investigation and clean-up of site contamination can
be
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substantial, and the fact that the property is or has been contaminated, even if
remediated, may adversely affect the value of the property and the owner's
ability to sell or lease the property or to borrow using the property as
collateral. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs that it
incurs in connection with the contamination, and some state laws provide that
such lien has priority over all other encumbrances on the property or that a
lien can be imposed on any other property owned by the liable party. Finally,
the owner of a site may be subject to common law claims by third parties based
on damages and costs resulting from the environmental contamination emanating
from the site.
Other federal, state and local laws, regulations and ordinances govern
the removal or encapsulation of asbestos-containing material when such material
is either in poor condition or in the event of building remodeling, renovation
or demolition. Still other federal, state and local laws, regulations and
ordinances may require the removal or upgrade of underground storage tanks that
are out of service or are out of compliance. In addition, federal, state and
local laws, regulations and ordinances may impose prohibitions, limitations and
operational standards on, or require permits, licenses or approvals in
connection with, the discharge of wastewater and other water pollutants, the
emission of air pollutants, the operation of air or water pollution equipment,
the generation, storage, transportation, disposal and management of materials
classified as hazardous or nonhazardous waste, the use of electrical equipment
containing polychlorinated biphenyls, the storage or release of toxic or
hazardous chemicals and workplace health and safety. Noncompliance with
environmental or health and safety requirements may also result in the need to
cease or alter operations at a property which could affect the financial health
of a tenant and its ability to make lease payments. Furthermore, if there is a
violation of such a requirement in connection with the tenant's operations, it
is possible that we, as the owner of the property, could be held accountable by
governmental authorities for such violation and could be required to correct the
violation.
Such laws and regulations have not historically had a material effect on
the operation of our properties. We are not aware of any environmental condition
on any of our properties which would be likely to have a material adverse effect
on our financial condition and results of operations. There may be, however,
environmental problems that may have developed since our properties were
acquired which remain latent or of which we are otherwise unaware.
COMPETITION
The real estate industry in Northern California is generally fragmented
and characterized by significant competition. Numerous developers, owners of
apartment, industrial, office, and retail properties, and managers compete with
us in seeking properties for acquisition, development or management and in
attracting and retaining tenants. No one competitor owns a majority of the
apartment units in any county in which our properties are located. Competition
for tenants is principally on the basis of location, physical condition,
amenities and rental rates. There are competitors in each area in which we
operate that have greater capital resources than we do. There can be no
assurance that the existence of such competition will not have a material
adverse effect on our business, operations and cash flow.
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THE IRM BANKRUPTCY PROCEEDINGS
As discussed above under "Background," JCM Partners is the reorganized
entity which emerged from the IRM entities bankruptcy proceedings. Pursuant to
the plan of reorganization, the assets of the IRM entities were vested in JCM
Partners on June 30, 2000. The real estate assets of JCM Partners are held
through 55 wholly-owned subsidiaries, all but one of which is a single-asset
limited liability company. The creditors of the IRM entities were divided into
classes, as set forth in the plan of reorganization, with Classes 21 through 25
(representing certain investors in the equity and loan partnerships) receiving
preferred or common membership interests in JCM Partners in satisfaction of
their claims against the IRM entities. The plan of reorganization stated that
100 units (either common or preferred, as applicable) would be issued to these
creditors for every $10,000 of their allowed claims (i.e., one unit for every
$100 of allowed claim). Creditors in other classes were treated as specified in
the plan of reorganization, with many receiving immediate or deferred cash
payment of all or part of their claims. None of the IRM entities received any
payment or consideration for any claim against, or interest in, another IRM
entity.
Under the terms of the plan of reorganization, each preferred membership
unit had an initial redemption value equal to $40 (therefore representing a
return of 40% of the holder's claim), plus or minus that unit's share of the
profits or losses of JCM Partners. In September 2000, the board of managers of
JCM Partners approved a split of units and an adjustment of each unit's
redemption value. Preferred unit holders would receive one unit, with a
redemption value of $1.00, for every $2.50 of their allowed claim. For example,
a preferred unit holder with an allowed claim of $100,000 would receive 40,000
preferred units, with a total redemption value of $40,000. This split simplified
the correlation between the number of preferred units and the dollar amount of a
complete redemption of the preferred units, while still achieving the result
that each preferred unit holder would receive a 40% return of its claim amount
upon redemption. As a result of the split, common unit holders received one unit
for approximately every $1.53 of their allowed claim. The plan of reorganization
and JCM Partners' operating agreement provided for penalties in the event that
JCM Partners did not redeem all of the preferred units by June 30, 2001. JCM
Partners made a series of partial redemptions of preferred units, followed by a
final and complete redemption of the preferred units on June 15, 2001. See "Item
7 -- Management's Discussion and Analysis of Financial Consideration and Results
of Operations - Liquidity and Capital Resources" and "Note 6 to our Consolidated
Financial Statements" for further information regarding the redemption of the
preferred units and information regarding the redemption obligations of JCM
Partners for the common units.
EMPLOYEES
As of December 31, 2001, we had 202 employees. We consider our
relationships with our employees to be good.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of JCM Partners are set forth below:
NAME AGE OFFICES
---- --- -------
Gayle M. Ing................................. 52 Manager, Chief Executive Officer, President, Chief
Financial Officer and Secretary
Michael Vanni................................ 62 Manager and Chairman of the Board
Marvin J. Helder............................. 52 Manager and Vice Chairman of the Board
Brian S. Rein................................ 44 Chief Operating Officer and Director, Property Management
Cornelius Stam............................... 54 Director, Property Management
Gayle M. Ing has been a manager and our President, Chief Executive
Officer, Chief Financial Officer and Secretary since April 11, 2001. From March
15, 2001 until April 11, 2001, Ms. Ing served as a consultant to JCM Partners
through Computer Management Corporation. Prior to that, from December 1996 until
March 2001, Ms. Ing was a management consultant, also through Computer
Management Corporation, and was a volunteer with a child services facility. Ms.
Ing served as the Vice President and Business Manager for Electronic Banking at
Bank of America from January 1994 to November 1996.
Michael W. Vanni has been a manager of JCM Partners and Chairman of our
Board since June 2000. Since 1978, Mr. Vanni has been the President of Computer
Management Corporation, a data processing consulting company.
Marvin J. Helder has been a manager of JCM Partners and Vice Chairman of
our Board since June 2000. Mr. Helder has been the President of Helder
Construction, a commercial and residential construction and property management
company, for the past six years.
Brian S. Rein has been our Chief Operating Officer and Director of
Property Management since June 2000. Mr. Rein was the Chief Operating Officer of
JCM Partners' predecessor, IRM Corporation, from October 1998 through June 2000.
For the ten years prior to his employment with IRM and JCM Partners, Mr. Rein
has had similar operations and management responsibilities serving as Vice
President of John Connolly IV & Company where he directed the management of
multifamily and commercial properties for institutional clients.
Cornelius Stam has been a Director of Property Management since June
2000. Mr. Stam was the Executive Director of Property Management of IRM
Corporation from August 1998 through June 2000. From 1983 to August 1998, Mr.
Stam was the Senior Vice President of Property Management for IRM Corporation.
Mr. Vanni and Ms. Ing are husband and wife. There are no other family
relationships among executive officers, or managers, or persons chosen by us to
be nominated as a manager or appointed as an executive officer of JCM Partners
or any of its subsidiaries.
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ITEM 2. PROPERTIES
Our principal executive offices are located at 2151 Salvio Street, Suite
325, Concord, California, 94520. The facility is comprised of 7,533 square feet
of usable space.
Information regarding our noncancellable tenant operating leases for the
next five years can be found below in Note 4 to our Consolidated Financial
Statements.
The ordinary course of our business operations includes ongoing
renovation projects to our properties, including but not limited to exterior
painting, roof, siding, balcony and decking replacement, landscape upgrades, and
interior unit remodeling. Costs are incorporated in operating budgets and
covered by cash flow from operations.
The table below sets forth general information relating to the
properties owned by our subsidiaries at December 31, 2001. All of the properties
are suitable for the purpose for which they are designed and are being used.
SUMMARY OF REAL ESTATE HOLDINGS
PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL REAL
APARTMENT APARTMENT ESTATE NET NET BOOK
PROPERTIES COMMUNITIES HOMES BOOK VALUE VALUE ENCUMBRANCES
- --------- ------------ ----------- ------------ --------- ---------------
APARTMENTS BY MAJOR GEOGRAPHIC
MARKET
Sacramento, CA ...................... 21 2,785 42.7% $113,244,334 $78,786,259
Stockton, CA ........................ 4 483 6.9% 18,416,069 13,185,196
Modesto/Turlock, CA ................. 7 752 11.2% 29,684,352 19,042,827
Tracy/Manteca, CA ................... 4 454 9.4% 24,866,734 22,170,578
Fairfield/Vacaville, CA ............. 5 634 13.6% 36,212,120 23,598,966
Concord/Antioch, CA ................. 5 233 5.5% 14,717,730 9,313,306
--- ---
Total Apartments ................. 46 5,341 89.3% $237,141,339 $166,097,132
--- ---
COMMERCIAL PROPERTIES(B) ............ N/A N/A 10.7% 28,333,150 13,604,555
--- ---
Total Real Estate Properties Owned 56 5,341 100.0% $265,474,489 $179,701,687
--- ---
AVERAGE
MONTHLY
RENTAL RATES
FOR THE
YEAR ENDED AVERAGE
PHYSICAL DECEMBER 31, UNIT SIZE
PROPERTIES OCCUPANCY 2001(A) (SQUARE FEET)
- ---------- ---------- ------------- -------------
APARTMENTS BY MAJOR GEOGRAPHIC
MARKET
Sacramento, CA ...................... 95.6% $687 734
Stockton, CA ........................ 96.1% 686 813
Modesto/Turlock, CA ................. 94.9% 698 780
Tracy/Manteca, CA ................... 93.0% 862 721
Fairfield/Vacaville, CA ............. 92.0% 904 753
Concord/Antioch, CA ................. 88.8% 1,003 684
---
Total Apartments ................. 94.6% $743 747
---
COMMERCIAL PROPERTIES(B) ............ 82.0% N/A N/A
---
Total Real Estate Properties Owned 92.2% $743 747
---
(A) Average monthly rent is calculated as the contract rent plus market rent
for vacant apartment homes, divided by the number of apartment homes.
(B) Includes eight commercial properties and two parcels of land.
11
None of our residential tenants occupy 10% or more of any individual
property's rentable square footage. The following table sets forth tenant
information regarding our commercial properties as of December 31, 2001:
NUMBER OF
TENANTS
OCCUPYING 10% PRINCIPAL
OR MORE OF OCCUPATION
RENTABLE OF 10% PRINCIPAL BUSINESSES IN
PROPERTY SQUARE FOOTAGE TENANTS PRINCIPAL LEASE PROVISIONS BUILDING
- --------------------- -------------- ---------- ------------------------------- -------------------------------
Salvio Pacheco Square... 3 Technology Lease expires 7/31/02 with no Accounting, financial,
Concord, CA renewal option; annual lease insurance, technology, health
payments of $402,183.60 care, retail and food services
Technology Lease expires 9/30/04 with no
renewal option; annual lease
payments of $242,617.20
Health care 25% of lease expires 8/31/02 with
5 year option; remainder of lease
expires 9/30/06 with two 5-year
options; annual lease payments of
$268,101.84
Wilson Building......... 2 Health care Lease expires 9/31/03 with 5-year Nonprofit health care
San Francisco, CA option to renew; annual lease
payments of $137,587.08
Month-to-month; annual lease
payments of $115,500
860 Kaiser Road......... 5 Dry cleaning Lease expires 8/9/03 with two Insurance, wine industry, dry
Napa, CA 5-year options to renew; annual cleaning
lease payments of $32,742.24
Magazine Lease expires 6/19/07 with no
Publisher renewal option; annual lease
payments of $56,800.44
Insurance Lease expires 4/8/04 with two
5-year options to renew; annual
lease payments of $60,355.92
Wine bottle Lease expires 3/31/06 with no
etching options to renew; annual lease
payments of $34,362
Wine Industry Lease expires 6/30/06 with no
renewal option;annual lease payments
of $40,639.20
900 Business Park....... 0 N/A N/A Food service, architectural
Napa, CA signs, golf supply and storage
908 Enterprise Way...... 3 Wine industry Lease expires 12/31/04 with no Building supply, wine industry
Napa, CA options to renew; annual lease
payments of $61,563.60
12
NUMBER OF
TENANTS
OCCUPYING 10% PRINCIPAL
OR MORE OF OCCUPATION
RENTABLE OF 10% PRINCIPAL BUSINESSES IN
PROPERTY SQUARE FOOTAGE TENANTS PRINCIPAL LEASE PROVISIONS BUILDING
- --------------------- -------------- ---------- ------------------------------- -------------------------------
Heating Lease expires 3/30/07 with 5
Contractor year option; annual lease payments of
38,883.00
Building Lease expires 11/30/05 with no
supply options to renew; annual lease
payments of $85,260
910 Enterprise Way...... 1 Food Lease expires 1/31/09 with two Food processing
Napa, CA processing 5-year options to renew; annual
lease payments of $228,648.12
988 Enterprise Way...... 1 Wholesale Lease expires 9/25/04 with no Wholesale plumbing supplies
Napa, CA plumbing option to renew; annual lease
supplies payments of $101,906.64
938 Kaiser Road......... 1 Wine bottle Lease expires 3/31/06 with no Wine bottle etching
Napa, CA etching option to renew; annual lease
payments of $142,560.00
The following table sets forth occupancy information for the past five
years for the properties owned by our subsidiaries at December 31, 2001. Our
subsidiaries have owned such properties since June 2000. Accordingly,
information for the periods prior to such date are based on records we obtained
from the IRM entities as part of the IRM bankruptcy proceedings.
HISTORICAL OCCUPANCY
TOTAL PHYSICAL OCCUPANCY END OF YEAR(A)
RENTABLE ------------------------------------------
SQUARE FEET 2001 2000 1999 1998 1997
-------------- -------- -------- -------- -------- ------
APARTMENTS:
Sacramento Region
Antelope Woods.................................. 100,520 95.2% 96.0% 99.2% 97.6% 96.0%
Rose Glen....................................... 59,790 93.2% 90.9% 92.0% 88.6% 100.0%
Carmichael Gardens.............................. 75,456 98.8% 89.3% 96.4% 98.8% 91.7%
Country Glen.................................... 57,774 100.0% 98.7% 95.0% 92.5% 100.0%
Fair Oaks Meadows............................... 72,175 96.9% 95.8% 97.9% 100.0% 99.0%
Foxworth........................................ 53,680 100.0% 95.3% 92.2% 98.4% 96.9%
Glenbrook....................................... 145,240 93.2% 91.7% 92.2% 96.1% 94.2%
Hidden Creek.................................... 93,720 93.0% 95.0% 92.0% 100.0% 98.0%
La Riviera...................................... 151,000 95.2% 96.2% 95.2% 92.4% 95.7%
La Riviera Commons.............................. 118,480 96.5% 96.5% 92.4% 91.0% 91.7%
Lincoln Place................................... 150,165 96.7% 98.7% 92.5% 94.2% 93.7%
Meadow Gardens I................................ 97,640 93.4% 99.3% 96.1% 99.3% 96.7%
Meadow Gardens II............................... 59,280 98.1% 99.0% 96.2% 98.1% 97.1%
Morningside Creek............................... 72,628 98.9% 100.0% 92.1% 98.9% 97.8%
North Country Vista............................. 131,224 96.3% 98.4% 93.1% 96.3% 96.8%
Orangewood East................................. 91,680 95.2% 96.6% 96.6% 95.9% 97.3%
Orangewood West................................. 125,700 94.7% 97.4% 93.4% 94.0% 92.7%
Riverside Commons............................... 76,296 99.0% 93.0% 95.0% 94.0% 94.0%
Sterling Pointe I............................... 85,024 92.5% 93.3% 91.7% 92.5% 90.8%
Sterling Pointe II.............................. 93,364 93.1% 96.2% 91.5% 91.5% 96.9%
13
TOTAL PHYSICAL OCCUPANCY END OF YEAR(A)
RENTABLE ------------------------------------------
SQUARE FEET 2001 2000 1999 1998 1997
-------------- -------- -------- -------- -------- ------
APARTMENTS:
Sunrise Commons................................. 133,300 94.6% 97.6% 97.6% 93.5% 97.6%
Stockton Region
Inglewood Oaks.................................. 43,742 98.4% 95.3% 98.4% 100.0% 98.4%
La Espana....................................... 15,436 100.0% 92.9% 100.0% 100.0% 100.0%
Mariners Cove................................... 82,072 97.7% 97.7% 97.7% 100.0% 95.4%
Oakwood......................................... 251,264 95.0% 98.7% 93.1% 93.4% 91.2%
Modesto/Turlock Region
Greenbriar...................................... 79,363 99.2% 97.6% 98.4% 95.2% 87.9%
Meadow Lakes.................................... 151,696 89.8% 98.0% 87.2% 91.3% 92.3%
Northwood Place................................. 42,356 94.3% 90.6% 100.0% 98.1% 98.1%
Park Lakewood................................... 94,696 98.3% 96.6% 96.6% 98.3% 96.6%
Villa Verde North............................... 84,144 95.7% 97.4% 95.7% 95.7% 87.8%
Walnut Woods.................................... 92,544 94.0% 97.0% 96.0% 99.0% 99.0%
Northlake Gardens............................... 41,760 97.9% 95.8% 100.0% 95.8% 95.8%
Tracy/Manteca Region
Driftwood....................................... 63,380 91.5% 91.5% 94.7% 91.5% 90.4%
Fairway Estates................................. 96,012 93.5% 96.8% 98.4% 99.2% 93.5%
Granville....................................... 55,368 88.1% 89.3% 95.2% 88.1% 91.7%
Laurel Glen..................................... 112,799 96.1% 98.0% 95.4% 98.0% 90.8%
Fairfield/Vacaville Region
Creekside Gardens............................... 153,480 93.3% 95.4% 95.4% 96.9% 92.8%
Parkwood........................................ 72,936 92.5% 98.1% 93.5% 98.1% 89.7%
Peach Tree Villa................................ 35,468 93.0% 93.0% 90.7% 97.7% 86.0%
Peachwood....................................... 44,086 89.4% 93.9% 93.9% 97.0% 86.4%
Village Green................................... 171,384 91.1% 94.6% 95.5% 90.6% 93.3%
Concord/Antioch Region
Crestview Pines................................. 61,481 89.3% 97.6% 89.3% 97.6% 94.0%
Diablo View..................................... 47,824 86.3% 94.5% 97.3% 93.2% 91.8%
Meadowlark...................................... 16,902 88.0% 100.0% 100.0% 100.0% 100.0%
Oakview......................................... 22,904 94.3% 91.4% 97.1% 100.0% 94.3%
Villa Diablo.................................... 10,312 87.5% 87.5% 93.7% 100.0% 87.5%
COMMERCIAL:
Bay Area Region
860 Kaiser Road................................. 22,560 91.1% 65.9% 100.0% 90.9% 69.3%
900 Business Park............................... 40,380 50.0% 85.8% 98.1% 90.7% 56.2%
908 Enterprise Way.............................. 22,135 77.3% 77.3% 86.4% 39.8% 67.0%
910 Enterprise Way.............................. 26,894 100.0% 100.0% 100.0% 100.0% 100.0%
988 Enterprise Way.............................. 14,920 100.0% 100.0% 100.0% 100.0% 100.0%
938 Kaiser Road................................. 18,000 100.0% 100.0% 100.0% 100.0% 100.0%
Salvio Pacheco Square........................... 120,212 86.9% 92.3% 89.4% 97.1% 88.6%
Wilson Building................................. 52,000 72.6% 80.3% 95.7% 95.7% 87.5%
Total real estate owned.................... 4,304,646 92.2% 94.6% 94.5% 94.7% 92.0%
- ------------
(A) Physical occupancy as of the last Monday of the year.
14
The following table sets forth the average rent per square foot for the
past five years for the properties owned by our subsidiaries at December 31,
2001. Our subsidiaries have owned such properties since June 2000. Accordingly,
information for the periods prior to such date are based on records we obtained
from the IRM entities as part of the IRM bankruptcy proceedings.
AVERAGE UNIT RENT
AVERAGE MONTHLY RENTAL RATES IN
RENTABLE SQUARE FEET AT THE
YEAR ENDED DECEMBER 31,(A)
------------------------------------------
2001 2000 1999 1998 1997
------- ------- ------- ------- ------
APARTMENTS:
Sacramento Region
Antelope Woods........................................... $0.87 $ 0.79 $ 0.72 $ 0.69 $ 0.66
Rose Glen................................................ 0.83 0.73 0.66 0.64 0.64
Carmichael Gardens....................................... 0.89 0.78 0.71 0.66 0.62
Country Glen............................................. 1.01 0.94 0.86 0.84 0.82
Fair Oaks Meadows........................................ 1.00 0.93 0.88 0.82 0.80
Foxworth................................................. 0.95 0.89 0.81 0.71 0.67
Glenbrook................................................ 0.98 0.90 0.82 0.77 0.73
Hidden Creek............................................. 0.80 0.73 0.66 0.60 0.57
La Riviera............................................... 0.98 0.87 0.80 0.76 0.72
La Riviera Commons....................................... 0.95 0.85 0.78 0.73 0.72
Lincoln Place............................................ 1.06 0.95 0.88 0.84 0.81
Meadow Gardens I......................................... 0.99 0.89 0.79 0.74 0.70
Meadow Gardens II........................................ 1.05 0.93 0.83 0.79 0.75
Morningside Creek........................................ 0.94 0.86 0.77 0.74 0.72
North Country Vista...................................... 0.95 0.87 0.80 0.78 0.75
Orangewood East.......................................... 0.86 0.77 0.68 0.64 0.62
Orangewood West.......................................... 0.73 0.65 0.59 0.55 0.53
Riverside Commons........................................ 0.88 0.81 0.71 0.66 0.64
Sterling Pointe I........................................ 0.98 0.91 0.80 0.74 0.71
Sterling Pointe II....................................... 0.97 0.90 0.79 0.74 0.71
Sunrise Commons.......................................... 0.96 0.89 0.81 0.77 0.74
Stockton Region
Inglewood Oaks........................................... 0.90 0.79 0.74 0.72 0.70
La Espana................................................ 0.65 0.58 0.54 0.55 0.55
Mariners Cove............................................ 0.87 0.80 0.71 0.69 0.67
Oakwood.................................................. 0.84 0.75 0.68 0.66 0.64
Modesto/Turlock Region
Greenbriar............................................... 0.86 0.76 0.68 0.67 0.65
Meadow Lakes............................................. 0.93 0.82 0.71 0.70 0.68
Northwood Place.......................................... 0.99 0.91 0.77 0.75 0.73
Park Lakewood............................................ 0.91 0.81 0.72 0.68 0.67
Villa Verde North........................................ 0.90 0.80 0.72 0.68 0.67
Walnut Woods............................................. 0.82 0.74 0.69 0.66 0.65
Northlake Gardens........................................ 0.86 0.77 0.69 0.33 0.32
Tracy/Manteca Region
Driftwood................................................ 1.38 1.33 1.15 1.08 1.03
Fairway Estates.......................................... 1.04 0.95 0.86 0.80 0.75
Granville................................................ 1.38 1.34 1.16 1.10 1.04
Laurel Glen.............................................. 1.12 1.03 0.93 0.87 0.83
Fairfield/Vacaville Region
Creekside Gardens........................................ 1.10 1.03 0.93 0.85 0.85
Parkwood................................................. 1.29 1.19 1.05 0.96 0.95
Peach Tree Villa......................................... 1.09 1.02 0.92 0.83 0.77
15
AVERAGE MONTHLY RENTAL RATES IN
RENTABLE SQUARE FEET AT THE
YEAR ENDED DECEMBER 31,(A)
------------------------------------------
2001 2000 1999 1998 1997
------- ------- ------- ------- ------
APARTMENTS:
Peachwood................................................ 1.25 1.17 1.03 0.98 0.95
Village Green............................................ 1.26 1.17 0.96 0.90 0.88
Concord/Antioch Region
Crestview Pines.......................................... 1.22 1.16 0.97 0.91 0.86
Diablo View.............................................. 1.64 1.54 1.30 1.24 1.15
Meadowlark............................................... 1.44 1.33 1.07 1.01 0.95
Oakview.................................................. 1.69 1.49 1.27 1.22 1.14
Villa Diablo............................................. 1.66 1.53 1.31 1.26 1.16
COMMERCIAL:
Bay Area Region
860 Kaiser Road.......................................... 1.00 0.90 0.74 0.74 0.58
900 Business Park........................................ 0.82 0.79 0.73 0.74 0.70
908 Enterprise Way....................................... 0.72 0.70 0.60 0.58 0.56
910 Enterprise Way....................................... 0.68 0.65 0.62 0.64 0.61
988 Enterprise Way....................................... 0.57 0.54 0.52 0.45 0.45
938 Kaiser Road.......................................... 0.66 0.55 0.55 0.52 0.51
Salvio Pacheco Square.................................... 1.60 1.46 1.35 1.27 1.23
Wilson Building.......................................... 1.54 1.43 1.18 1.01 0.87
Starlight Estates........................................ N/A N/A N/A N/A N/A
Total real estate owned............................. $1.01 $ 0.92 $ 0.82 $ 0.78 $ 0.75
- ----------
(A) Average monthly rent per square foot is contract rent for occupied units
plus market rent for vacant units divided by total rentable square feet.
16
The following table sets forth certain tax information for our
properties, including federal tax basis, realty tax rate and annual realty
taxes. See Item 8 for depreciation information regarding these properties.
TAX INFORMATION
ADJUSTED FEDERAL REAL ESTATE ANNUAL REALTY
TAX BASIS TAX RATE TAXES(A)
------------- ----------- -----------
APARTMENTS:
Sacramento Region
Antelope Woods ............. $ 3,602,493 1.042 $ 62,852
Rose Glen .................. 1,111,239 1.023 19,294
Carmichael Gardens ......... 853,283 1.042 38,908
Country Glen ............... 2,366,511 1.007 43,633
Fair Oaks Meadows .......... 3,339,782 1.051 49,474
Foxworth ................... 1,910,262 1.042 35,011
Glenbrook .................. 4,849,375 1.063 85,271
Hidden Creek ............... 1,642,381 1.042 41,803
La Riviera ................. 773,397 1.063 98,944
La Riviera Commons ......... 1,808,139 1.063 71,893
Lincoln Place .............. 724,864 1.042 106,235
Meadow Gardens I ........... 1,577,570 1.051 63,992
Meadow Gardens II .......... 1,027,437 1.051 43,978
Morningside Creek .......... 2,768,860 1.067 55,098
North Country Vista ........ 4,823,221 1.066 87,183
Orangewood East ............ 1,488,353 1.007 48,614
Orangewood West ............ 525,285 1.007 63,615
Riverside Commons .......... 983,881 1.063 55,385
Sterling Pointe I .......... 1,302,716 1.042 53,737
Sterling Pointe II ......... 920,997 1.042 65,347
Sunrise Commons ............ 6,596,267 1.051 94,067
Stockton Region
Inglewood Oaks ............. 602,614 1.000 24,548
La Espana .................. 559,715 1.027 6,720
Mariners Cove .............. 2,478,293 1.000 47,315
Oakwood .................... 9,500,621 1.027 99,443
Modesto/Turlock Region
Greenbriar ................. 1,117,524 1.077 32,677
Meadow Lakes ............... 4,949,187 1.030 86,881
Northwood Place ............ 1,946,677 1.062 25,181
Park Lakewood .............. 3,447,245 1.030 53,642
Villa Verde North .......... 970,540 1.077 39,128
Walnut Woods ............... 3,252,799 1.068 46,409
Northlake Gardens .......... 368,428 1.077 29,732
Tracy/Manteca Region
Driftwood .................. 2,617,014 1.000 54,378
Fairway Estates ............ 2,981,525 1.000 62,257
Granville .................. 948,222 1.000 42,717
Laurel Glen ................ 4,938,461 1.000 85,490
Fairfield/Vacaville Region
Creekside Gardens .......... 1,720,458 1.051 122,208
Parkwood ................... 1,704,644 1.030 71,594
Peach Tree Villa ........... 1,822,864 1.030 23,789
Peachwood .................. 459,287 1.030 41,537
Village Green .............. 7,828,196 1.056 168,919
17
ADJUSTED FEDERAL REAL ESTATE ANNUAL REALTY
TAX BASIS TAX RATE TAXES(A)
------------- ----------- -----------
Concord/Antioch Region
Crestview Pines ............ 4,210,329 1.007 64,890
Diablo View ................ 826,404 1.007 67,207
Meadowlark ................. 389,911 1.007 22,599
Oakview .................... 1,846,170 1.007 32,859
Villa Diablo ............... 263,679 1.007 16,074
COMMERCIAL:
Bay Area Region
860 Kaiser Road ............ 1,560,268 1.027 20,638
900 Business Park .......... 2,335,651 1.027 33,519
908 Enterprise Way ......... 775,844 1.027 15,483
910 Enterprise Way ......... 999,899 1.027 32,101
988 Enterprise Way ......... 592,214 1.027 9,078
938 Kaiser Road ............ 642,382 1.027 13,372
Salvio Pacheco Square ...... 10,882,983 1.007 110,768
Wilson Building ............ 4,757,109 1.124 67,816
Starlight Estates .......... 2,427,966 1.027 15,534
Total Real Estate Owned $131,721,436 $2,925,924
- ----------
(A) For the period from July 1, 2001 to June 30, 2002, as invoiced and including
direct levies.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
MARKET INFORMATION
There is no public trading market for our common units and there
can be no assurance that a market will ever develop for the units.
HOLDERS
As of March 31, 2002, there were approximately 850 holders of our
common units.
DISTRIBUTIONS
DISTRIBUTIONS FOR THE PAST TWO YEARS
In 2000 and 2001, the board of managers of JCM Partners declared
the following distributions on a per unit basis:
18
YEAR 2000
In 2000, the board of managers did not declare any distributions for
either the preferred membership units or the common membership units.
YEAR 2001
Amount Per Amount Per Common
Date Declared Record Date Date Paid Preferred Unit Unit
------------- ----------- --------- -------------- ----
January 17, 2001 (A) February 1, 2001 February 28, 2001 $0.00254 $0.00254
January 17, 2001 (B) April 1, 2001 April 19, 2001 0.00021 $0.00021
January 17, 2001 (B) April 1, 2001 April 27, 2001 0.00012 $0.00012
June 18, 2001 (C) October 1, 2001 November 2, 2001 N/A $0.01667
November 9, 2001 November 1, 2001 November 26, 2001 N/A $0.00417
December 12, 2001 (D) December 1, 2001 December 24, 2001 N/A $0.00458
TOTAL $0.00287 $0.02829
(A) This distribution, in the aggregate amount of $260,000, was paid to
both common and preferred unit holders. As disclosed under "Item 7 -
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources," we completed
the redemption of the preferred units in June 2001.
(B) The distributions in April, in the aggregate amount of $33,401, were
payments made to the California Franchise Tax Board. These payments
were made from cash from operations and were intended to offset
certain federal and/or state income tax liabilities incurred by our
members in 2000 due to their ownership of JCM Partners' units.
(C) On June 18, 2001, the board of managers approved the institution of
monthly distributions on or about August 25, 2001. On August 28, 2001,
the board of managers delayed the commencement of the monthly
distributions while we explored making a cash tender offer for some of
our common units. We did not ultimately make a cash tender offer and,
accordingly, on November 1, 2001, monthly distributions were sent to
members of record as of October 1, 2001 in an amount equal to four
regular monthly distributions that would have been distributed to
holders of records as of the first day of July, August, September and
October 2001. On November 9, 2001, the board of managers ratified the
payment of these distributions. Each monthly distribution represented
1/12 of $0.05 per unit ($0.00417).
(D) On December 12, 2001, the board of managers approved an increase in
monthly distributions to 1/12 of $0.055 per unit ($0.00458).
DISTRIBUTIONS REQUIRED BY OUR LLC AGREEMENT
If the board of managers declares a distribution of cash from
operations or from sales, then the members as of the record date are
entitled to receive all such distributions which the board has declared,
with each member entitled to receive a pro-rata portion of such available
distributions.
We were prohibited from paying any distributions from sales until
we redeemed the preferred units on June 15, 2001.
On or before June 30, 2002, we are required to make a pro-rata
distribution to our common unit holders in a minimum amount of the lesser
of:
- $10,000,000 or
19
- the "mandatory distribution amount," which our limited liability
company agreement defines as the amount, if any, by which:
(a) $20,000,000 plus the amount, if any, by which $15,000,000 exceeds the
aggregate initial capital account balances of our preferred unit holders on June
30, 2000 ($15,058,030),
exceeds
(b) the total aggregate distributions to all common unit holders from our
cash from operations and cash from sales on or before June 30, 2002.
Any remaining amounts, if any, of the "mandatory distribution amount" must be
distributed pro rata to the common unit holders on or before June 30, 2003.
If we fail, for any reason, to distribute cash to our common unit holders
as provided above, we must liquidate our properties as quickly as is
commercially reasonable so that we will have sufficient liquidity to make the
distributions to common unit holders.
REDEMPTION RIGHTS
On June 15, 2001, we completed the redemption of all of the outstanding
preferred units of JCM Partners. The holders of preferred units received a
redemption price of $1 per unit.
Our limited liability company agreement provides that, except as set
forth below, each holder of common units as of June 30, 2005 will have the right
to require us to redeem all or, if so elected by the holder, a portion, of his
or her units no later than June 30, 2007. The redemption price for each common
unit will be calculated by dividing the value of our assets as of June 30, 2005
by the total number of common units outstanding, subject to adjustment as set
forth in our limited liability company agreement. If a sufficient number of
common unit holders exercise their right to have their units redeemed, the
continued operation of JCM Partners beyond June 30, 2007 may not be reasonably
feasible. Accordingly, our limited liability company agreement requires the
board of managers to meet no later than June 30, 2006 to determine whether JCM
Partners should continue operations beyond June 30, 2007. If the board of
managers determines in its sole discretion that the company's operations should
not continue beyond June 30, 2007, then we must inform all owners of common
units of this decision within 30 days after June 30, 2006 and the following will
occur:
- the common unit holders' rights to be redeemed as described above
on June 30, 2007 will become null and void;
- all of JCM Partners's properties will be sold as soon as
practicable, but in no event later than June 30, 2007; and
- all owners of common units will receive the liquidation
distributions to which they are entitled under our limited liability company
agreement.
20
RECENT SALES OF UNREGISTERED SECURITIES
We did not sell any equity securities that were not registered under the
Securities Act of 1933, as amended, during the year ended December 31, 2001.
CERTAIN PROVISIONS OF OUR RESTATED BYLAWS
On November 9, 2001, pursuant to its authority under our limited
liability company agreement, our board of managers adopted certain amendments to
our bylaws. These amendments were adopted to ensure that our members have
adequate information available to them about the potential adverse tax
consequences of any sale of their units and to limit the ability of any person
to gain control of JCM Partners without the approval of our board of managers.
Some of these amendments may be deemed to have an anti-takeover effect
and may discourage, delay or prevent a tender offer or takeover attempt that a
unit holder might consider in his or her best interest.
One group of amendments to our bylaws provides for certain restrictions
on the transfer of our units. The transfer restrictions generally provide that:
- except with respect to transfers of units made by a tax-exempt
organization or by virtue of the laws of descent and distribution, any transfer
of units will not be effective until the expiration of the 30-day period
following our receipt of a fully completed and duly executed Application for
Transfer; and
- no transfer may be made to any individual or entity if such
individual or entity would become the beneficial owner of 10% or more of our
outstanding units through such transfer (the "Ownership Limit").
Any transfer in violation of this Ownership Limit shall be void ab
initio, except that a holder whose beneficial ownership exceeds the Ownership
Limit solely by reason of our own unit repurchases will not be deemed to have
violated the Ownership Limit so long as the unit holder makes no acquisition of
any additional units.
If the Ownership Limit is judicially found to be invalid or unenforceable
for any reason, any units transferred in excess of the Ownership Limit shall
then be deemed to have been transferred to us or our designee in trust for the
benefit of the disqualified holder and any beneficiary to whom an interest in
the trust may be later transferred. In such circumstance, the disqualified
holder shall be treated as the beneficial owner of the units and will have the
right to receive allocations and distributions with respect to the units, but
will not be accorded any voting rights with respect to the units. On any
proposition upon which unit holders are entitled to vote, such units will then
be voted by the trust in the same proportion as all other units are voted on the
matter.
Other amendments to our bylaws passed by the board of managers involve
procedures relating to the removal of managers, the use of written consent by
unit holders, requests for special
21
meetings, and the presentation at unit holder meetings of unit holder
nominations or proposals. The amendments generally provide:
- any manager, other than the CEO-manager, may be removed only for
cause with the consent of either a majority of managers holding office or a
two-thirds majority of all units outstanding at an annual or special meeting;
- unless the board of managers determines in its discretion that a
proposal should be submitted to the unit holders by the board of managers for
action by written consent, all actions of unit holders shall be taken at an
annual or special meeting of unit holders, and unit holders shall not have the
right to act by written consent;
- any request for a special meeting of unit holders made by unit
holders in accordance with the requirements outlined in our limited liability
company agreement must be accompanied by the resolution to be presented to unit
holders, a list of all unit holders and beneficial owners who were solicited to
support the request for a special meeting, any correspondence or agreements with
unit holders and any other material used in such solicitation, and any other
information we request in order to determine whether such consents were properly
obtained; and
- in order for any unit holder nomination or proposal to be acted
upon, the nominating or proposing unit holder must give advance written notice
of such nomination or proposal, with such notice containing information
regarding the nominating unit holder, nominee and/or proposal as set forth in
our Restated Bylaws.
ITEM 6. SELECTED FINANCIAL DATA
We were organized as a Delaware limited liability company on May 15, 2000
and commenced operations as JCM Partners, LLC, the successor company to the IRM
entities, on June 30, 2000. All references in this Form 10-K to our six months
ended December 31, 2000 are to the period from June 30, 2000 (inception) to
December 31, 2000.
The following table sets forth selected financial data for JCM Partners
(a) for the year ended December 31, 2001 and the six months ended December 31,
2000, and (b) as of December 31, 2001, December 31, 2000 and June 30, 2000
(inception).
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
Rental revenue .............. $50,330,881 $23,397,831
Net income .................. $ 1,068,103 $ 167,795
Net income per unit ......... $ 0.01 $ 0.00
Distributions to unit holders $ 2,584,870 $ 0
DECEMBER 31, 2001 DECEMBER 31, 2000 JUNE 30, 2000 (INCEPTION)
----------------- ----------------- -------------------------
Total assets ................................ $274,444,850 $271,154,585 $274,239,344
Total long-term debt ........................ $179,701,686 $163,153,082 $163,848,647
Mandatory distributions payable to redeemable
common unit holders ....................... $ 17,449,769 0 0
Redeemable preferred units .................. 0 12,067,539 15,067,539
Redeemable common units ..................... 90,152,151 0 0
22
The following table sets forth selected financial data for the properties
owned by the IRM entities for the period from January 1, 2000 to June 29, 2000
and for the years ended December 31, 1999 and 1998.
PERIOD FROM
JANUARY 1,
2000 YEAR ENDED YEAR ENDED
TO JUNE 29, DECEMBER 31, DECEMBER 31,
2000 1999 1998
-------------- -------------- --------------
Rental revenue................................................... $ 21,221,841 $ 40,038,261 $ 36,467,497
Direct operating expenses:
Operating and maintenance...................................... 7,041,143 11,019,924 8,159,394
Real estate taxes and insurance................................ 1,712,210 2,916,950 3,031,597
Utilities...................................................... 1,822,209 3,279,110 3,109,478
-------------- -------------- --------------
Total direct operating expenses............................. 10,575,562 17,215,984 14,300,469
-------------- -------------- --------------
Rental revenue in excess of direct operating expenses............ $ 10,646,279 $ 22,822,277 $ 22,167,028
============== ============== ==============
BASIS OF PRESENTATION OF IRM ENTITIES' OPERATIONS
The foregoing combined statement of operations data presents operating
results of the properties owned by the IRM entities for the period from January
1, 2000 to June 29, 2000 and the years ended December 31, 1999 and 1998. These
data were prepared pursuant to SEC Regulation S-X, Rule 3-14, "Special
instructions for real estate operations to be acquired." Accordingly, the
presentation excludes certain items not comparable to the future operations of
the property, such as mortgage interest, leasehold rental, depreciation and
corporate expenses.
We are not aware of any material factors relating to the properties
transferred by the IRM entities to us that would cause the reported results of
operations not to be necessarily indicative of future operating results.
23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion contains forward-looking statements. See our
statement that is set forth after the Table of Contents regarding Forward
Looking Statements.
The following discussion should be read in conjunction with the
Consolidated Financial Statements and notes set forth in Item 8 below.
We adopted "fresh start" accounting rules as of June 30, 2000. As a
result, our financial results during the six months ended December 31, 2000
serve as benchmark data for future comparisons, but generally are not comparable
to prior periods.
Because we commenced operations on June 30, 2000, there is no
corresponding period in 2000 for comparison to the year ended December 31, 2001.
RESULTS OF OPERATIONS
FUNDS FROM OPERATIONS
We use a supplemental performance measure, Funds from Operations (FFO),
along with net income, to report operating results. FFO is calculated by making
various adjustments to net income. Depreciation and amortization are added back
to net income as they represent non-cash charges. In addition, gains on sale of
real estate investments and extraordinary items are excluded from the FFO
calculation.
FFO is not a measure of operating results or cash flows from operating
activities as defined by GAAP. Further, FFO is not necessarily indicative of
cash available to fund cash needs and should not be considered as an alternative
to cash flows as a measure of liquidity. We believe, however, that FFO provides
relevant information about operations and is useful, along with net income, for
an understanding of our operating results.
24
FFO data is as follows:
Year Ending December 31, 2001:
Net income ....................... $ 1,068,103
Deduct unusual gains:
Sale of property ............... (5,183)
Add extraordinary item:
Early extinguishment of debt .. 594,543
Add depreciation and amortization:
Real property .................. 8,112,579
Capitalized leasing expenses ... 62,168
-------------
Funds from operations ............ $ 9,832,210
=============
Funds from operations per unit ... $ 0.10
=============
Weighted average units ........... 94,951,736
=============
Six months ended December 31, 2001:
Net income ....................... $ (870,732)
Add extraordinary item:
Early extinguishment of debt .. 234,877
Add depreciation and amortization:
Real property .................. 4,109,001
Capitalized leasing expenses ... 28,781
Funds from operations ............ $ 3,501,927
=============
Funds from operations per unit ... $ 0.04
=============
Weighted average units ........... 90,747,252
=============
Six months ended December 31, 2000:
Net income ....................... $ 167,795
Add extraordinary item:
Early extinguishment of debt .. --
Add depreciation and amortization:
Real property .................. 3,947,458
Capitalized leasing expenses ... 23,718
-------------
Funds from operations ............ $ 4,138,971
=============
Funds from operations per unit ... $ 0.04
=============
Weighted average units ........... 104,960,221
=============
PROPERTY OCCUPANCY
The table below sets forth the overall weighted average occupancy levels
for our properties, by type of property, at December 31 of the last three years.
The weighted average occupancy is calculated by multiplying the occupancy of
each property by its square footage and dividing by the total square footage in
the portfolio.
25
OCCUPANCY AT
DECEMBER 31,
--------------------------
PROPERTY TYPE 2001 2000 1999
------------- ------- ------- ------
Apartment Communities........................ 94.6% 96.2% 94.6%
Commercial Properties........................ 82.0% 88.1% 94.1%
The overall weighted average occupancy level for our entire property
portfolio as of December 31, 2001 was 92.2%, compared to 94.6% at December 31,
2000, and 94.5% at December 31, 1999.
Although we expected a drop off in rental activity after September 11,
2001, occupancy at our apartment communities has remained relatively stable. We
believe this stability has been a result of the favorable general economic
conditions of the markets where our apartment communities are located. However,
we are currently seeing reduced demand in our markets closest to the San
Francisco Bay Area due to the technology industry slowdown, resulting in lower
occupancy rates than the rest of our portfolio.
Fluctuations in occupancy at our commercial properties have been
attributable to the leasing and vacating by tenants in the normal course of
their leases.
Market conditions for leased space in commercial buildings have weakened
considerably in the San Francisco Bay Area. The general economic decline and job
loss in the technology industry have reduced demand for commercial buildings in
most San Francisco Bay Area sub-markets. Vacancy rates have gone up and rents
have stabilized and come down from the peaks reached in early 2000. Additional
information about our commercial properties can be found under "Item 2 --
Properties."
Our future occupancy rates will be subject to numerous factors, many of
which are outside of our control. Accordingly, there can be no assurance that
our future occupancy rates will not be significantly less than our occupancy
rates at December 2001.
In January 2001, we sold two condominiums for aggregate net proceeds of
$232,000 and recorded a gain of $5,183 from the transaction. We did not dispose
of any properties during the six months ended December 31, 2000.
REVENUE
Total rental revenue for the year ended December 31, 2001 was
$50,330,881. Total rental revenue for the six months ended December 31, 2001 was
$25,846,774, up approximately 10.5% from $23,397,831 for the six months ended
December 31, 2000.
During the year ended December 31, 2001, our apartment communities
generated $46,400,611 of rental revenue. During the six months ended December
31, 2001, rental revenue generated by our apartment communities was $23,857,748,
up approximately 11.1% from $21,478,479 for the six months ended December 31,
2000. The increase is primarily attributable to the increases in rental rates.
26
During the year ended December 31, 2001, our commercial properties
generated $3,930,270 of rental revenue. During the six months ended December 31,
2001, rental revenue generated by our commercial properties was $1,989,026, up
approximately 3.6% from $1,919,352 in the six months ended December 31, 2000.
The increase is primarily attributable to the increases in rental rates,
partially offset by the decrease in occupancy rates.
During the year ended December 31, 2001, rental rates for our apartment
communities and commercial properties on a combined basis increased by 9.6%,
reflecting our strategy of seeking to increase cash flow through rent increases.
In 2000 and 1999, the increases were 11.8% and 5.9% on a full-year basis,
respectively.
At December 31, 2001, the average monthly rental rate per square foot of
our apartment communities was $0.99 compared to $0.91 at December 31, 2000,
$0.81 at December 31, 1999, and $0.76 at December 31, 1998.
At December 31, 2001, the average monthly rental rate per square foot of
our commercial properties was $1.21 compared to $1.11 at December 31, 2000,
$1.00 at December 31, 1999, and $0.94 at December 31, 1998.
Our ability to continue to increase rent rates will materially depend on
the changes in the real estate market or in general economic conditions in the
areas in which we own properties.
EXPENSES
Total expenses. Our total expenses were $49,044,118 for the year ended
December 31, 2001. Our total expenses were $26,663,590 for the six months ended
December 31, 2001, as compared to $23,413,722 for the six months ended December
31, 2000, an increase of approximately 13.9%. The increase was due to
significant increases in operating and maintenance costs, general and
administrative expense, and somewhat smaller increases in utilities,
depreciation, and real estate taxes in the six months ended December 31, 2001.
Interest expense. In the year ended December 31, 2001, interest expense
was $13,314,059. In the six months ended December 31, 2001, interest expense was
$6,818,725, down from $6,827,294 for the six months ended December 31, 2000, a
decrease of approximately 0.1%. The decrease was attributable to a decline in
interest rates on our variable interest rate loans and the lower fixed rate on
the refinanaced mortgage loans, partially offset by the increase in mortgages'
payable as a result of refinancing certain mortgage loans during the six months
ended December 31, 2001.
Operating and maintenance expenses. During the year ended December 31,
2001, operating and maintenance expenses were $14,732,863. During the six months
ended December 31, 2001, operating and maintenance expenses were $8,833,922, up
from $6,378,529 for the six months ended December 31, 2000, an increase of
approximately 38.5%. The increase was primarily attributable to the increased
expenditures for our ongoing apartment rehabilitation program, additional
expenditures on deferred maintenance projects, additional hiring to fill vacant
positions, increases in staff wages, increased costs for services provided by
vendors and increased advertising costs due to competitive leasing market
conditions.
27
Depreciation and amortization expenses. During the year ended December
31, 2001, depreciation and amortization expenses were $8,360,869. During the six
months ended December 31, 2001, depreciation and amortization expenses were
$4,252,391, as compared to $4,072,488 for the six months ended December 31,
2000, an increase of approximately 4.4%. This increase was primarily
attributable to the increase in real estate investments due to capitalization of
property improvements.
General and administrative expenses. General and administrative expenses
were $4,948,210 for the year ended December 31, 2001. General and administrative
expenses were $2,515,139 for the six months ended December 31, 2001, up from
$2,379,563 for the six months ended December 31, 2000, a 5.7% increase. The
increase was primarily due to higher legal and outside service costs.
Real estate taxes and insurance expenses. In the year ended December 31,
2001, real estate taxes and insurance expenses were $3,608,105. In the six
months ended December 31, 2001, real estate taxes and insurance expenses were
$2,220,784, up from $1,914,166 for the six months ended December 31, 2000, an
increase of approximately 16.0%. The increase was primarily due to higher
insurance costs.
Utility expenses. Utility expenses were $4,080,011 for the year ended
December 31, 2001. Utility expenses were $2,022,356 for the six months ended
December 31, 2001, as compared to $1,841,681 for the six months ended December
31, 2000, an increase of approximately 9.8%. The increase was primarily
attributable to higher energy costs in California.
Extraordinary item. During the year ended December 31, 2001, we recorded
an extraordinary loss of $594,543 to reflect the write-off of certain deferred
loan costs related to debt which was retired in 2001 through the refinancing of
certain of our mortgages.
EFFECTS OF INFLATION ON OPERATIONS
We believe that the direct effects of inflation on our operations have
been inconsequential.
DISTRIBUTION TO UNIT HOLDERS
We made the following cash distributions to our unit holders in the year
ended 2001: $260,000 in February, $1,878,190 in November, and $413,197 in
December. In addition, we paid to the California Franchise Tax Board $33,401 on
behalf of our unit holders during the year ended December 31, 2001. The
distribution in February and the payments to the California Franchise Tax Board
were made from our cash from operations and were intended to offset certain
federal and/or state income tax liabilities incurred by our members in 2000 due
to their ownership of JCM Partners' units. The distributions in November and
December were made from cash from operations ($2,291,387). We did not make cash
distributions to unit holders during the six months ended December 31, 2000.
28
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2001, our short-term liquidity needs included normal
operating requirements, ongoing capital improvements, monthly principal
amortization of our debt and certain mandatory distributions required to be made
to our common unit holders, as described at "Item 5 -- Market for Registrant's
Common Equity and Related Security Holder Matters - Distributions Required by
Our LLC Agreement." We expect to meet these requirements through net cash
provided by operations and refinancing of certain of our mortgage obligations.
Rent increases upon tenant turnover and lease expiration, subject to market
conditions and general economic conditions, will not have a significant impact
on our short-term liquidity.
In March 2001, we made our second redemption of preferred units in the
amount of $3,015,405 and in June 2001, we redeemed all remaining outstanding
preferred units for $9,052,132. The March 2001 redemption was made from
operating cash flows. The June 2001 redemption was financed in part by loans
from four of the members of our board of managers which totaled $1,250,000 and
cash proceeds totaling $7,404,000 from the refinancing of four of our properties
in June 2001. The loans from the board members were repaid in July 2001 out of
the proceeds of the refinancing of three additional properties. In addition, in
December 2001, through a wholly-owned limited liability company, we committed to
repurchase 797,093 common units, totaling $637,674. This was completed in
January 2002.
Our long-term liquidity requirements include scheduled debt maturities,
significant capital improvements and certain mandatory distributions required to
be made to our common unit holders, as described at "Item 5 -- Market for
Registrant's Common Equity and Related Security Holder Matters - Distributions
Required by Our LLC Agreement." We anticipate that cash flows from operations,
including the effects of any rent increases, may not be sufficient to meet these
long-term requirements, and that it may be necessary for us to refinance the
mortgages on certain of our properties. There can be no assurance that we will
be able to refinance on terms advantageous to JCM Partners, however, especially
if interest rates rise in the future.
As described at "Item 5 -- Market for Registrant's Common Equity and
Related Security Holder Matters - Redemption Rights," our common unit holders
will have the right to require us to redeem some or all of their common units in
June 2007. In order to fund those redemptions, we will use cash from operations
and loan refinancing proceeds and, if necessary, we may be required to liquidate
some or all of our assets.
At December 31, 2001, we had unrestricted cash totaling $14,248,262
compared to $7,161,000 at December 31, 2000. The terms of certain of our
mortgages require impound accounts for the payment of insurance, property taxes
and capital improvements as well as scheduled principal payments on the debt. We
classify these impound accounts as restricted cash on our balance sheet. At
December 31, 2001, such restricted cash totaled $2,721,560, compared to
$1,782,000 at December 31, 2000.
29
Net cash provided by operating activities during the year ended December
31, 2001 was $9,302,076 , which reflects net income of $1,068,103, non-cash
depreciation charges of $8,360,869, a non-cash extraordinary item loss on early
extinguishment of debt in the amount of $594,543 and gain on disposal of assets
in the amount of $5,183, and the net effect of changes in operating assets and
liabilities of $(716,255).
Net cash used in investing activities during the year ended December 31,
2001 was $1,774,573, which reflects capital expenditures on real estate
investments of $2,008,933 and the proceeds from disposal of assets of $234,360.
Net cash used in financing activities during the year ended December 31,
2001 was $440,213. During this period, cash provided by the refinancing of
certain of our mortgage loans was $18,296,764. Cash used in redemption of
preferred units was $12,068,000. Cash used to repurchase common units was
$637,674. Payments on mortgage notes were $1,748,160. Distributions to members
during the year totaled $2,584,870.
During the six months ended December 31, 2000, cash provided by operating
activities was $4,334,000, which reflects net income of $168,000, non-cash
depreciation charges of $4,072,000 and the net effect of changes in operating
assets and liabilities of $94,000.
Principal uses of cash during the six months ended December 31, 2000 were
improvements to real estate investments of $1,043,000, redemptions of preferred
units totaling $3,000,000, and principal payments on mortgage notes of $696,000.
We capitalize those expenditures related to acquiring new assets,
materially enhancing the value of an existing asset, or substantially extending
the useful life of an existing asset. Expenditures necessary to maintain an
existing property in ordinary operating condition are expensed as incurred.
We have made significant progress in the upgrade program, which is part
of our strategic plan to improve the overall quality of our real estate
portfolio. This program involves recurring expenditures, such as floor
coverings, HVAC equipment, roofs, appliances, landscaping, siding and parking
lots, and non-recurring expenditures, such as gating and access systems, the
additions of microwaves, washer-dryers, interior upgrades and new business and
fitness centers.
Our long-term debt consists of real estate mortgages totaling
$179,701,686 at December 31, 2001 and $163,153,000 at December 31, 2000. This
debt generally requires monthly payments of principal and interest. The range of
interest rates of our real estate mortgages was from 4.1% to 10.5% at December
31, 2001 and from 5.8% to 11.2% at December 31, 2000. The average monthly
principal and interest payments made for these mortgages was $1,252,000 for the
six months ended December 31, 2001 and $1,255,000 for the six months ended
December 31, 2000. We expect the average monthly principal and interest payments
for our mortgages for 2002 to be relatively consistent with those of 2001. See
Note 5 of our Consolidated Financial Statements for additional information on
scheduled debt maturities.
30
During the year ended December 31, 2001, we completed the refinancing of
twelve mortgage loans. The balance of the mortgage loans retired was
$45,900,734, and we received net proceeds, including funds held by the lender
for required repairs, from the issuance of the new mortgage loans of
approximately $18,297,000. Subsequent to December 31, 2001, we completed the
refinancing of 16 additional mortgage loans. The balance of the mortgage loans
retired was $31,942,000, and we received net proceeds, including funds held by
the lender for required repairs, from the issuance of the new mortgage loans of
approximately $14,079,000.
CHANGES IN MEMBERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2001
The following schedule reflects the changes in our members' equity during
2001 for financial reporting purposes:
Balance, January 1, 2001 $102,387,485
Distribution(1) (293,472)
Redemption of Preferred Units(2) (12,067,539)
Reclassification of common units
to Redeemable common units(3) (90,152,151)
2001 Net Income 1,068,103
------------
Balance, December 31, 2001 $ 942,426
============
(1) Distributions to members' between January 1, 2001 to May 31, 2001.
(2) June 2001, JCM redeemed all the remaining outstanding preferred
units.
(3) In accordance with Generally Accepted Accounting Principles
("GAAP"), all of the company's common units were reclassified from
equity to redeemable common units once all preferred units were
redeemed. Further, the company recorded a liability equal to the
remaining amount of mandatory distributions due to common unit
holders on June 15, 2001 of $19,741,174. The adjustment for the
mandatory distribution left a balance in redeemable common units
of $70,410,977.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk exposure results from changes in interest
rates on our debt obligations. We are vulnerable to increases in the interest
rates on our variable rate mortgage notes. We are also vulnerable to significant
increases in interest rates to the extent we refinance our fixed rate mortgage
notes or incur additional debt in the future.
The following table presents information about our debt obligations
at December 31, 2001. The table presents principal cash flows and related
weighted average interest rate by expected maturity dates.
31
2002 2003 2004 2005 2006 THEREAFTER
------------ ------------- ------------- ------------- ------------- -------------
Mortgage loans with fixed rates ranging
from 6.59% to 8.23% maturing through
October 31,
2031 ................................ $ 616,753 $ 662,296 $ 711,224 $ 763,789 $ 822,243 $ 53,576,114
Average interest rate ................. 7.13% 7.13% 7.13% 7.13% 7.13% 7.13%
Mortgage loans with fixed rates
ranging from 8.27% to 8.69% that
increase to between 8.77% and 9.19% at
stated dates between February and
May 2004 which mature through
September 2007 ...................... $ 456,788 $ 497,019 $ 540,446 $ 587,858 $ 640,220 $ 49,281,511
Average interest rate ................. 8.41% 8.41% 8.91% 8.91% 8.91% 8.91%
Mortgage loans with variable
rates ranging from 4.19% to
10.50% which mature through
September 2031 ...................... $ 898,857 $ 943,636 $ 991,826 $ 1,044,202 $ 1,099,571 $ 65,567,333
Average interest rate(1) .............. 7.47% 7.47% 7.47% 7.47% 7.47% 7.47%
- ----------
(1) The rates for variable rate mortgage loans have been held constant during
each period presented based on the actual variable rates at December 31,
2001.
32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JCM PARTNERS, LLC
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 2001
and December 31, 2000 F-2
Consolidated Statements of Operations for the Year Ended December 31, 2001
and the Period from June 30, 2000 (Inception) to December 31, 2000 F-3
Consolidated Statements of Changes in Members' Equity for the Year Ended
December 31, 2001 and for the Period from June 30, 2000
(Inception) to December 31, 2000 F-4
Consolidated Statements of Cash Flows for the Year Ended December 31, 2001
and for the Period from June 30, 2000 (Inception) to December 31, 2000 F-5
Notes to Consolidated Financial Statements F-6
FINANCIAL STATEMENT SCHEDULES:
Schedule III - Real Estate and Accumulated Depreciation F-15
33
INDEPENDENT AUDITORS' REPORT
To the Board of Managers of JCM Partners, LLC:
We have audited the accompanying consolidated balance sheets of JCM Partners,
LLC and its subsidiaries (the "Company"), as of December 31, 2001 and 2000, and
the related consolidated statements of operations, members' equity and cash
flows for the year ended December 31, 2001 and the period from June 30, 2000
(inception) to December 31, 2000. Our audits also include the consolidated
financial schedule listed in the foregoing table of contents. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 management, 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 JCM Partners, LLC
and its subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for the year ended December 31, 2001 and the
period from June 30, 2000 (inception) to December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such 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 therein.
February 22, 2002
/s/ Deloitte & Touche LLP
Sacramento, California
F-1
JCM PARTNERS, LLC
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
December 31,
---------------------------
2001 2000
------------ ------------
ASSETS
INVESTMENTS:
Real estate, net $253,268,853 $259,565,095
Notes receivable, net -- 367,095
------------ ------------
Total investments 253,268,853 259,932,190
Cash 14,248,362 7,161,072
Restricted cash 2,721,560 1,781,627
Rents receivable 143,884 151,753
Prepaid expenses 324,048 301,202
Deferred costs, net 1,825,509 1,702,324
Other assets 1,912,633 124,417
------------ ------------
TOTAL ASSETS $274,444,850 $271,154,585
============ ============
LIABILITIES, REDEEMABLE COMMON UNITS
AND MEMBERS' EQUITY
LIABILITIES:
Mortgages payable $179,701,686 $163,153,082
Tenants' security deposits 2,665,163 2,459,832
Accounts payable and accrued expenses 2,048,514 1,521,785
Accrued interest 1,115,160 1,138,823
Unearned rental revenue 109,614 256,791
Accrued real estate taxes 1,542 236,787
Mandatory distribution payable to
redeemable common unit holders ( See Note 7) 17,449,769
------------ ------------
Total liabilities 203,091,448 168,767,100
------------ ------------
REDEEMABLE COMMON UNITS:
Redeemable common units, $1 par value, 125,000,000,
authorized; 90,152,151 outstanding at
December 31, 2001 (See Note 7) 70,410,977
MEMBERS' EQUITY:
Redeemable preferred units, $1 par value,25,000,000,
authorized; 12,067,539 outstanding at December 31, 2000 -- 12,067,539
Common units, $1 par value, 125,000,000 authorized;
90,152,151 outstanding at December 31, 2000 (See Note 7) -- 90,152,151
Retained earnings 942,426 167,795
------------ ------------
Total members' equity (See Note 7) 942,426 102,387,485
------------ ------------
TOTAL LIABILITIES, REDEEMABLE COMMON
UNITS AND MEMBERS' EQUITY $274,444,850 $271,154,585
============ ============
See notes to consolidated financial statements
F-2
JCM PARTNERS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
PERIOD FROM
JUNE 30, 2000
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
2001 2000
REVENUES:
Rental $ 50,330,881 $ 23,397,831
Interest 375,883 183,686
------------ ------------
Total revenues 50,706,763 23,581,517
------------ ------------
OPERATING EXPENSES:
Interest expense 13,314,059 6,827,294
Operating and maintenance 14,732,863 6,378,529
Depreciation and amortization 8,360,869 4,072,488
General and administrative 4,948,210 2,379,563
Real estate taxes and insurance 3,608,105 1,914,166
Utilities 4,080,011 1,841,681
------------ ------------
Total expenses 49,044,118 23,413,722
------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 1,662,646 167,795
EXTRAORDINARY ITEM - early extinguishment of debt (594,543) --
------------ ------------
NET INCOME $ 1,068,103 $ 167,795
============ ============
EARNINGS PER UNIT BEFORE EXTRAORDINARY
ITEM - Basic and diluted $ 0.02 $ 0.00
EXTRAORDINARY ITEM PER UNIT - Basic and diluted . (0.01)
------------ ------------
EARNINGS PER UNIT - Basic and diluted $ 0.01 $ 0.00
============ ============
WEIGHTED AVERAGE UNITS - Basic and diluted 94,951,736 104,960,231
============ ============
See notes to consolidated financial statements.
F-3
JCM PARTNERS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
- --------------------------------------------------------------------------------
PREFERRED UNITS COMMON UNITS
--------------------------- ------------------------- RETAINED
UNITS AMOUNT UNITS AMOUNT EARNINGS TOTAL
ISSUANCE OF UNITS ON
JUNE 30, 2000 (INCEPTION) ...... 15,067,539 $ 15,067,539 90,152,151 $ 90,152,151 $105,219,690
Redemption of preferred units .. (3,000,000) (3,000,000) (3,000,000)
Net income ..................... $ 167,795 167,795
---------- ---------- ---------- ---------- ------------ -----------
BALANCE, DECEMBER 31, 2000 ....... 12,067,539 12,067,539 90,152,151 90,152,151 167,795 102,387,485
Redemption of preferred units .. (12,067,539) (12,067,539) (12,067,539)
Distribution ................... (293,472) (293,472)
Reclassification of common units
to redeemable common units ... (90,152,151) (90,152,151) (90,152,151)
Net income ..................... 1,068,103 1,068,103
---------- ---------- ---------- ---------- ------------- ------------
BALANCE, DECEMBER 31, 2001 ....... -- $ -- -- $ -- $ 942,426 $ 942,426
========== ========== ========== ========== ============= ============
See notes to consolidated financial statements.
F-4
JCM PARTNERS, LLC
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
PERIOD FROM
JUNE 30, 2000
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,068,103 $ 167,795
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 8,360,869 4,072,488
Extraordinary item - early extinguishment of debt 594,543
Gain on disposal of assets (5,183)
Effect of changes in:
Restricted cash (939,933) (218,747)
Rent receivables 7,869 (38,307)
Prepaid expenses (22,846) (180,530)
Deferred costs (87,319) (8,178)
Accounts payable and accrued expenses 526,738 (373,532)
Accrued interest (23,673) 347,792
Accrued real estate taxes (235,245) 236,787
Unearned rental revenue (147,177) 7,321
Tenants' security deposits 205,331 224,643
------------ ------------
Net cash provided by operating activities 9,302,076 4,333,617
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate investments (2,008,933) (1,043,437)
Proceeds from disposal of assets 234,360
------------ ------------
Net cash used in investing activities (1,774,573) (1,043,437)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of preferred units (12,067,539) (3,000,000)
Payments on mortgages payable (1,748,160) (695,565)
Deferred financing costs (878,699) (39,415)
Net proceeds from refinance of mortgages payable 18,296,764
Distributions to members (2,584,870)
Other assets (1,457,702) 96,085
------------ ------------
Net cash used in financing activities (440,213) (3,734,980)
------------ ------------
NET INCREASE (DECREASE) IN CASH 7,087,292 (444,800)
CASH, beginning of period 7,161,072 7,605,872
------------ ------------
See notes to consolidated financial statements
F-5
JCM PARTNERS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2001 AND PERIOD FROM
JUNE 30, 2000 (INCEPTION) TO DECEMBER 31, 2000
- --------------------------------------------------------------------------------
1. FORMATION AND DESCRIPTION OF BUSINESS
JCM Partners, LLC (the "Company"), a Delaware limited liability company,
was organized on May 15, 2000. The Company is the reorganized entity
which emerged from the bankruptcy proceedings in the United States
Bankruptcy Court for the Eastern District of California of IRM
Corporation et al. ("the IRM entities"), Case Number 98-32231-A-11.
Pursuant to a plan of reorganization confirmed on June 5, 2000 (the
"Plan"), all assets of the IRM entities were vested in the Company. The
Company commenced operations on June 30, 2000 pursuant to the
confirmation order and the plan of reorganization.
The Company owns, operates and manages forty-six apartment complexes and
eight commercial income properties. The Company also owns two parcels of
land which are available for development. All of the properties are
located in northern California. The Company holds its real estate assets
through 55 wholly-owned subsidiaries, each of which is a single-asset
limited liability company.
2. SIGNIFICANT ACCOUNTING POLICIES
FRESH START ACCOUNTING - In accounting for the effects of the
reorganization, the Company implemented fresh start accounting in
accordance with AICPA Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code." Accordingly, all
of the Company's assets and liabilities were restated to reflect their
reorganization value, which approximated fair value at the date of the
reorganization, June 30, 2000.
BASIS OF CONSOLIDATION - The financial statements include the accounts of
the Company and its subsidiaries on a consolidated basis. All significant
intercompany balances have been eliminated in consolidation.
RESTRICTED CASH consists of lender impound accounts (see Note 5).
REAL ESTATE INVESTMENTS consist principally of rental properties which
are carried at reorganization value less accumulated depreciation, which
is calculated using the straight-line method. The estimated useful lives
for the properties range from 20 to 40 years for buildings and from 5 to
15 years for improvements.
The estimated fair value of the properties as of the date of
reorganization was determined based on appraisal reports prepared by
independent M.A.I. ("Member of the Appraisal Institute") appraisers.
Determination of estimated fair values involves subjective judgment
because the actual fair value of the real estate can be determined only
by negotiation between the parties in a sales transaction.
The Company records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might
be impaired and the expected undiscounted cash flows expected to be
generated by those assets are less than the related carrying amounts. If
a rental property is determined to be impaired, the impairment would be
measured based upon the excess of the asset's carrying value over the
fair value. The Company reports
F-6
assets to be disposed of at the lower of carrying amount or fair value
less cost to sell. No impairment losses have been reflected in the
accompanying statements of operations.
Expenditures for ordinary maintenance and repairs are expensed as
incurred. Significant renovations and improvements that enhance and/or
extend the useful life of a property are capitalized and depreciated over
its estimated useful life.
DEFERRED COSTS include financing costs which are amortized over the term
of the related debt using the straight-line method and leasing
commissions which are amortized over the term of the related leases using
the straight-line method.
OTHER ASSETS consist primarily of refundable deposits in connection with
debt refinancings in process at year-end and other deposits.
RENTS RECEIVABLE are carried net of any allowance for uncollectible
amounts.
RENTAL INCOME RECOGNITION - Apartment communities are generally leased
under operating leases with terms of six months. Rental income is
recognized according to the terms of the underlying leases, which
approximates the revenue which would be recognized if recognized evenly
over the lease term. Rental revenue on commercial properties is
recognized over the term of the related lease.
USE OF ESTIMATES - 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, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
INCOME TAXES - Federal and state income taxes are the responsibility of
the members. Accordingly, no provision for federal and state income taxes
is included in the Company's financial statements.
SEGMENT REPORTING - The Company has two separable segments: residential
real estate and commercial real estate. Residential real estate includes
the Company's 46 apartment communities. Commercial real estate includes
the Company's eight commercial properties and land held for development.
NEW ACCOUNTING STANDARDS - In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 as amended by SFAS Nos.
137 and 138 requires companies to record derivatives on the balance sheet
as assets or liabilities, measured at fair value. Under SFAS No. 133,
certain contracts that were not formerly considered derivatives may now
meet the definition of a derivative. SFAS No. 133 was adopted by the
Company on January 1, 2001 and did not have any effect on the Company's
financial statements.
In June 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standard (SFAS) No. 141,
Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires that all business combinations initiated
after June 30, 2001 be accounted for under the purchase method of
accounting and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination.
SFAS No. 142 addresses the initial recognition and measurement of
intangible assets acquired outside of a business combination and the
accounting for goodwill and other intangible assets subsequent to their
acquisition. SFAS No. 142 provides that intangible assets with finite
useful lives will be amortized and that goodwill and intangible assets
with indefinite lives will not be amortized, but will be required to be
tested at least annually for impairment. The Company adopted SFAS No. 142
effective January 1, 2002. The Company expects that the adoption of SFAS
No. 142 will not have an impact on its financial statements.
F-7
3. INVESTMENTS
Real estate investments are comprised of the following at December 31,
2001 and 2000:
DECEMBER 31, DECEMBER 31,
2001 2000
Apartment communities $ 237,141,337 $ 235,260,318
Commercial properties 28,154,662 28,245,969
------------- -------------
265,295,999 263,506,287
Less: accumulated depreciation (12,027,147) (3,941,192)
------------- -------------
$ 253,268,853 $ 259,565,095
============= =============
The Company holds a note receivable bearing interest at an annual rate of
10.5% secured by a first deed of trust on two parcels of land. The
original note was dated December 19, 1994 in the amount of $1.3 million.
The outstanding principal balance was $367,095 and interest and related
rent receivable due under the terms of the note totaled $83,405 at
December 31, 2001 and 2000. No interest has been accrued for the year
ended December 31, 2001 or for the period from June 30, 2000 to December
31, 2000. In the fourth quarter of 2001, the Company fully reserved the
outstanding balance and all accrued interests and rents on the note.
4. TENANT OPERATING LEASES
Minimum future rental revenues to be received on noncancellable tenant
operating leases in effect at December 31, 2001 are as follows:
2002 $ 3,205,158
2003 2,532,075
2004 1,985,066
2005 1,345,432
2006 642,704
Thereafter 555,109
-----------
Total $10,265,545
===========
F-8
5. MORTGAGES PAYABLE
The Company's mortgages payable generally require monthly interest and
principal payments. The obligations include ten fixed rate loans and
forty-three variable rate loans which are secured by deeds of trust on
the Company's real estate investments. The Company is required by the
terms of certain of the mortgage loans to maintain lender impound
accounts for insurance, property taxes, reserves for property
improvements and a bond account which are recorded as restricted cash. A
summary of the Company's mortgages payable outstanding is as follows:
December 31, December 31,
2001 2000
Mortgage loans with fixed rates ranging
from 6.59% to 8.23% maturing through
October 2031 $ 57,152,419 $ 2,213,160
Mortgage loans with fixed rates ranging
from 8.27% to 8.69% that increase to
between 8.77% and 9.19% at stated dates
between February and May 2004 and
which mature through September 2007 52,003,842 53,997,009
Mortgage loans with variable rates
ranging from 4.1% to 10.5% at December 31,2001
which mature through 2031 70,545,425 106,942,913
------------ ------------
Total $179,701,686 $163,153,082
============ ============
Aggregate maturities of mortgage loans payable subsequent to December 31,
2001 are as follows:
2002 $ 1,972,398
2003 2,102,951
2004 2,243,496
2005 2,395,848
2006 2,562,034
Thereafter 168,424,959
-----------
Total $179,701,686
============
During the year ended December 31, 2001, the Company completed the
refinancing of twelve mortgage loans. The balance of the mortgage loans
retired was $45,900,734, and the Company received net proceeds, including
funds held by the lender for required repairs, from the issuance of the
new mortgage loans of approximately $18,297,000. In connection with the
early retirement of the old mortgage loans, the Company recorded an
extraordinary loss of $594,543 in its statement of operations for the
year ended December 31, 2001. The loss resulted in primarily from the
write-off of debt issuance costs associated with the retired mortgage
loans.
F-9
Subsequent to December 31, 2001, the Company completed the refinancing of
16 additional mortgage loans. The balance of the mortgage loans retired
was $31,942,000, and the Company received net proceeds, including funds
held by the lender for required repairs, from the issuance of the new
mortgage loans of approximately $14,079,000. All of the 16 new mortgage
loans have fixed rates ranging from 6.20% to 6.73%. Seven of the 16 will
mature in 2009, while the remaining nine mortgage loans will mature in
2012.
6. MEMBERS' EQUITY
PREFERRED UNITS
A pro rata redemption in the amount of $3,000,000 was made in December
2000 to redeem 3,000,000 preferred units. In March 2001, a pro rata
redemption in the amount of $3,013,507 was made to redeem 3,013,507
preferred units. In June 2001, a pro rata redemption in the amount of
$9,054,032 was made to redeem the remaining outstanding 9,054,032
preferred units.
DISTRIBUTIONS TO MEMBERS
If the Board of Managers declares a distribution of cash from operations,
then the members as of the record date are entitled to receive all such
distributions which the Board has declared, with each member entitled to
receive a pro-rata portion of such available distributions.
If the Board of Managers declares a distribution of cash from sales, then
the members as of the record date are entitled to receive all such
distributions which the Board of Managers has declared, with each unit
holder entitled to receive a pro rata portion of such available
distributions. Notwithstanding the foregoing, no cash from sales may be
distributed to holders of common units until such time as the Company has
redeemed and completely liquidated all of the preferred units.
On January 17, 2001, the Board of Managers approved a distribution of cash
from operations in the aggregate amount of up to $300,000 payable to
common and preferred unit holders recorded as of December 31, 2000. This
distribution, in the amount of $260,071, was paid on February 28, 2001. In
addition, the Company paid $33,401 to the California Franchise Tax Board
on behalf of its unit holders.
VOTING
Holders of units are entitled to one vote per outstanding unit with
respect to a particular matter, only after such matter has been approved
by the Board of Managers, except with regard to the removal of a manager
(other than the CEO-Manager) for cause, the amendment of the limited
liability company agreement, and any matter presented at a special meeting
of members called upon the written request of holders of at least ten
percent (10%) of the outstanding units. Except in connection with certain
issues specified in the Company's limited liability company agreement,
common units and preferred units shall consent together as one class. The
Company's Units are subject to certain restrictions on transfers.
MANDATORY DISTRIBUTIONS TO COMMON UNIT HOLDERS
On or before June 30, 2002, the Company is required to make a pro rata
distribution to common unit holders in an amount not less than the lesser
of (i) $10,000,000 or (ii) an amount equal to the excess, if any, of (a)
the sum of $20,000,000 and the excess, if any, of $15,000,000 over the
aggregate initial capital account balances of preferred unit holders on
June 30, 2000, over (b) the total aggregate distributions to all common
unit holders from operations payable or sales payable on or before
June 30, 2002, with the remaining amount, if any, to be distributed pro
rata to the common unit holders on or before
F-10
June 30, 2003. If the Company fails, for any reason, to distribute cash
to common unit holders as provided above, the Company must liquidate
properties as quickly as is commercially reasonable so that the Company
will have sufficient liquidity to make the distributions to common unit
holders. Notwithstanding the foregoing, no distribution could be made to
any common unit holder pursuant to this paragraph until all preferred
units were redeemed and completely liquidated.
At December 31, 2001, the Company's balance sheet includes a liability for
"Mandatory Distribution Payable to Redeemable Common Unit Holders" in the
amount of $17,449,769. This balance represents the $20,000,000 mandatory
distribution minus $2,550,231 distributed to common unit holders in 2001.
Such distributions consisted of $258,826 made prior to the redemption of
the outstanding preferred units on June 15, 2001 and $2,291,405 subsequent
to the redemption of the preferred units.
REDEMPTION RIGHTS OF COMMON UNIT HOLDERS
Each common unit holder owning common units as of June 30, 2005 will have
the right to require the Company to redeem some or all of such member's
common units on June 30, 2007. The redemption price for each common unit
will be calculated by dividing the fair market value of the Company's net
assets as of June 30, 2005 by the total number of common units
outstanding, subject to adjustment as set forth in the Company's operating
agreement. If a sufficient number of common unit holders exercise their
right to have their units redeemed, the continued operation of the Company
beyond June 30, 2007 may not be reasonably feasible. Accordingly, the
Company's operating agreement requires the board of managers to meet no
later than June 30, 2006 to determine whether the Company should continue
operations beyond June 30, 2007. If the board of managers determines in
its sole discretion that the Company's operations should not continue
beyond June 30, 2007, then the Company must inform all owners of common
units of this decision within 30 days after June 30, 2006 and the
following will occur:
- the common unit holders' right to be redeemed as described
above on June 30, 2007 will become null and void;
- all of the Company's properties will be sold as soon as
practicable, but in no event later than June 30, 2007; and
- all owners of common units will receive the liquidation
distributions to which they are entitled under the Company's
operating agreement.
7. RECLASSIFICATION OF REDEEMABLE COMMON UNITS
The Company reported common units in the members' equity section of its
balance sheet as of December 31, 2000. Upon the final redemption of the
outstanding preferred units on June 15, 2001, the common units became
redeemable (see Note 6). Therefore, the Company reclassified the common
units from members' equity to redeemable common units on its balance
sheet. Further, the Company recorded a liability equal to the remaining
amount of mandatory distributions due to common unit holders at June 15,
2001 against the balance of redeemable common units. (see Note 6).
Because it is uncertain whether the common units will be redeemed, the
redeemable common units have not been adjusted for any changes in the
redemption value of the units. Such an adjustment will be recorded if and
when redemption is probable.
8. RELATED PARTY TRANSACTIONS
In the normal course of business, the Company enters into transactions
with related parties on substantially the same terms as comparable
transactions with unaffiliated persons. During the year ending December
31, 2001 and the period from June 30, 2000 to December 31, 2000, the
Company paid approximately $36,300 and $188,000, respectively, for
landscaping services to a company that is owned by a relative of the chief
operating officer of JCM Partners, LLC.
F-11
The Company entered into a management services agreement, dated as of July
1, 2000, with JCIV, LLC, a California limited liability company of which
the Company's then CEO/President is the sole member. Pursuant to the terms
of the management services agreement, the Company agreed to retain JCIV,
LLC through April 30, 2001 for a fee of $41,666 per month. On March 15,
2001, the Company entered into a Transition Services Agreement and
Amendment to Management Services Agreement with JCIV, LLC. Pursuant to
this agreement, the termination date of the management services agreement
was accelerated from April 30, 2001 to March 15, 2001 and the Company
agreed to engage the former CEO/President as an independent consultant to
provide transition management services for the period of March 19, 2001
through March 30, 2001 with compensation totaling $62,499.
Effective March 8 2001, the Company retained Computer Management
Corporation ("CMC") to provide management services to the Company. The
Company's Chairman of the Board and his wife, who is the CEO/President of
the Company, own CMC. Pursuant to the terms of the agreement, the Company
agreed to retain CMC through April 30, 2002 for a fee of $25,000 per
month. During the period from March 8, 2001 to December 31, 2001, the
Company paid $225,000 for such services to CMC.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the carrying amounts of its mortgages payable
approximate their fair value as of December 31, 2001 and 2000 because
interest rates and yields for these instruments are consistent with rates
currently available to the Company.
F-12
10. SEGMENT DATA
The Company defines each of its real estate investments as an individual
operating segment. Based on the criteria for aggregation of segments with
similar economic characteristics, the Company has two reportable segments:
apartment communities and commercial properties. The accounting policies
of the segments are the same as those described in the summary of
significant accounting policies. Property administration and corporate
overhead expenses, along with interest, other income, capital
expenditures, and assets have been allocated on a relative revenue basis
to each segment. Segment data is as follows:
APARTMENT COMMERCIAL
COMMUNITIES PROPERTIES TOTAL
From June 30, 2000 (Inception)
to December 31, 2000:
Rental revenue $ 21,478,479 $ 1,919,352 $ 23,397,831
Interest revenue 168,618 15,068 183,686
Interest expense 6,163,730 663,564 6,827,294
Depreciation and amortization 3,713,762 358,726 4,072,488
Net operating income 9,766,125 1,117,766 10,883,891
Net income (loss) 57,251 110,544 167,795
Capital expenditures 1,012,111 44,173 1,056,284
As of December 31, 2000 -
Total assets $241,343,791 $ 29,810,794 $271,154,585
For the Year Ended December 31, 2001:
Rental revenue $ 46,400,611 $ 3,930,270 $ 50,330,881
Interest revenue 346,531 29,352 375,883
Interest expense 12,071,414 1,242,646 13,314,059
Depreciation and amortization 7,689,321 673,513 8,362,834
Net operating income 21,323,476 1,640,183 22,963,658
Net income (loss) 1,314,729 (246,624) 1,068,105
Extraordinary item 594,543 594,543
Capital expenditures 2,006,068 148,464 2,154,532
As of December 31, 2001 -
Total assets $245,357,491 $ 29,087,360 $274,444,850
11. SELECTED QUARTERLY DATA (UNAUDITED)
F-13
Results of operations data for the quarters ended September 30 and
December 31, 2000, and March 31, June 30, September 30, and December 31,
2001 are as follows:
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
QUARTERS ENDED 2000 2000 2001 2001 2001 2001
Rental revenue $ 11,610,441 $ 11,787,390 $ 12,000,788 $ 12,483,319 $ 12,613,297 $ 13,231,672
Net income
(loss) $ 333,017 $ (165,222) $ 779,478 $ 1,159,357 $ 22,185 $ (892,917)
Net income
(loss) per unit $ 0.00 $ (0.00) $ 0.01 $ 0.01 $ -- $ (0.01)
12. SUBSEQUENT EVENT
In January 2002, the Company completed the repurchase of 797,093
redeemable common units at a price of 80 cents per unit.
F-14
JCM PARTNERS, LLC
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
- --------------------------------------------------------------------------------
INITIAL COSTS COST OF
----------------------------- TOTAL IMPROVEMENTS
LAND AND BUILDINGS INITIAL CAPITALIZED
LAND AND ACQUISITION SUBSEQUENT
ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COST TO ACQUISTION
Apartments:
Sacramento Region
Antelope Woods $ 3,277,859 $ 900,886 $ 4,719,114 $ 5,620,000 $ 40,755
Rose Glen 1,460,332 777,260 1,422,740 2,200,000 62,812
Carmichael Gardens 2,047,800 590,408 3,049,592 3,640,000 75,078
Country Glen 2,594,815 481,041 3,388,959 3,870,000 23,415
Fair Oaks Meadows 3,857,934 1,267,530 3,742,470 5,010,000 40,039
Foxworth 2,045,915 676,550 2,823,450 3,500,000 33,176
Glenbrook 6,031,785 1,784,510 7,315,490 9,100,000 72,614
Hidden Creek 2,307,811 506,463 3,703,537 4,210,000 76,991
La Riviera 8,461,799 1,619,968 7,340,032 8,960,000 80,145
La Riviera Commons 5,923,022 1,706,184 4,773,816 6,480,000 105,703
Lincoln Place 8,122,778 1,486,140 7,813,860 9,300,000 79,355
Meadow Gardens I 4,309,097 1,137,394 4,432,606 5,570,000 51,335
Meadow Gardens II 1,713,161 762,696 2,447,304 3,210,000 33,713
Morningside Creek 2,476,326 891,588 2,998,412 3,890,000 61,930
North Country Vista 5,341,710 1,862,010 5,787,990 7,650,000 126,887
Orangewood East 2,745,748 494,856 2,985,144 3,480,000 73,038
Orangewood West 3,377,916 582,084 3,787,916 4,370,000 122,287
Riverside Commons 1,560,536 520,380 2,429,620 2,950,000 71,512
Sterling Pointe I 2,911,990 969,617 3,900,383 4,870,000 130,100
Sterling Pointe II 2,816,212 983,496 4,176,504 5,160,000 69,352
Sunrise Commons 5,401,713 1,906,170 6,793,830 8,700,000 74,097
Stockton Region
Inglewood Oaks 1,474,370 477,086 1,782,914 2,260,000 30,394
La Espana 360,478 91,616 468,384 560,000 1,149
Mariners Cove 2,613,179 633,360 3,266,640 3,900,000 38,189
Oakwood 8,737,169 3,829,617 7,660,383 11,490,000 136,337
Modesto/Turlock Region
Greenbriar 2,192,614 924,792 2,485,208 3,410,000 81,776
Meadow Lakes 5,297,982 {a} 1,357,884 6,262,116 7,620,000 67,590
Northwood Place 1,434,275 677,588 1,762,412 2,440,000 30,424
Park Lakewood 2,813,930 930,248 3,909,752 4,840,000 128,684
Villa Verde North 3,865,056 1,200,600 2,939,400 4,140,000 38,560
Walnut Woods 3,438,970 963,236 4,176,764 5,140,000 43,366
Northlake Gardens 501,144 1,178,856 1,680,000 23,952
Tracy/Manteca Region
Driftwood 3,506,725 940,032 4,499,968 5,440,000 42,908
Fairway Estates 5,923,558 1,234,440 5,115,560 6,350,000 48,793
Granville 4,847,272 918,000 4,082,000 5,000,000 42,729
Laurel Glen 7,893,023 1,574,000 6,296,000 7,870,000 72,304
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
----------------------------- DEPRECIABLE
LAND AND BUILDINGS GAAP LIFE OF
LAND AND CARRYING ACCUMULATED DATE OF DATE BUILDING
IMPROVEMENTS IMPROVEMENTS VALUE DEPRECIATION CONSTRUCTION ACQUIRED COMPONENT
Apartments:
Sacramento Region
Antelope Woods $ 900,886 $ 4,759,869 $ 5,660,755 $ 214,597 1986 07/01/2000 35
Rose Glen 777,260 1,485,552 2,262,812 114,545 1973 07/01/2000 20
Carmichael Gardens 590,408 3,124,670 3,715,078 189,202 1977 07/01/2000 25
Country Glen 481,041 3,412,374 3,893,415 136,592 1991 07/01/2000 40
Fair Oaks Meadows 1,267,530 3,782,509 5,050,039 144,676 1987 07/01/2000 40
Foxworth 676,550 2,856,626 3,533,176 108,455 1986 07/01/2000 40
Glenbrook 1,784,510 7,388,104 9,172,614 556,422 1972 07/01/2000 20
Hidden Creek 506,463 3,780,528 4,286,991 232,040 1978 07/01/2000 25
La Riviera 1,619,968 7,420,177 9,040,145 558,857 1971 07/01/2000 20
La Riviera Commons 1,706,184 4,879,519 6,585,703 295,280 1976 07/01/2000 25
Lincoln Place 1,486,140 7,893,215 9,379,355 596,277 1973 07/01/2000 20
Meadow Gardens I 1,137,394 4,483,941 5,621,335 269,628 1975 07/01/2000 25
Meadow Gardens II 762,696 2,481,017 3,243,713 150,924 1975 07/01/2000 25
Morningside Creek 891,588 3,060,342 3,951,930 134,494 1990 07/01/2000 40
North Country Vista 1,862,010 5,914,877 7,776,887 230,808 1986 07/01/2000 40
Orangewood East 494,856 3,058,182 3,553,038 230,969 1974 07/01/2000 20
Orangewood West 582,084 3,910,203 4,492,287 292,910 1974 07/01/2000 20
Riverside Commons 520,380 2,501,132 3,021,512 187,620 1968 07/01/2000 20
Sterling Pointe I 969,617 4,030,483 5,000,100 304,927 1972 07/01/2000 20
Sterling Pointe II 983,496 4,245,856 5,229,352 325,006 1972 07/01/2000 20
Sunrise Commons 1,906,170 6,867,927 8,774,097 347,774 1984 07/01/2000 30
Stockton Region
Inglewood Oaks 477,086 1,813,308 2,290,394 140,030 1970 07/01/2000 20
La Espana 91,616 469,533 561,149 35,828 1966 07/01/2000 20
Mariners Cove 633,360 3,304,829 3,938,189 173,339 1984 07/01/2000 30
Oakwood 3,829,617 7,796,720 11,626,337 614,749 1971 07/01/2000 20
Modesto/Turlock Region
Greenbriar 924,792 2,566,984 3,491,776 198,343 1971 07/01/2000 20
Meadow Lakes 1,357,884 6,329,706 7,687,590 285,587 1985 07/01/2000 35
Northwood Place 677,588 1,792,836 2,470,424 73,212 1988 07/01/2000 40
Park Lakewood 930,248 4,038,436 4,968,684 192,878 1985 07/01/2000 35
Villa Verde North 1,200,600 2,977,960 4,178,560 226,493 1971 07/01/2000 20
Walnut Woods 963,236 4,220,130 5,183,366 169,873 1987 07/01/2000 40
Northlake Gardens 501,144 1,202,808 1,703,952 73,706 1977 07/01/2000 25
Tracy/Manteca Region
Driftwood 940,032 4,542,876 5,482,908 279,980 1974 07/01/2000 25
Fairway Estates 1,234,440 5,164,353 6,398,793 396,652 1973 07/01/2000 20
Granville 918,000 4,124,729 5,042,729 314,542 1972 07/01/2000 20
Laurel Glen 1,574,000 6,368,304 7,942,304 300,112 1985 07/01/2000 35
(Continued)
F-15
JCM PARTNERS, LLC
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
- --------------------------------------------------------------------------------
INITIAL COSTS COST OF
---------------------------- TOTAL IMPROVEMENTS
LAND AND BUILDINGS INITIAL CAPITALIZED
LAND AND ACQUISITION SUBSEQUENT
ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COST TO ACQUISTION
Apartments:
Fairfield/Vacaville Region
Creekside Gardens $ 7,300,608 $ 1,550,920 $ 10,049,080 $ 11,600,000 $ 90,258
Parkwood 3,805,578 950,880 4,649,120 5,600,000 47,080
Peach Tree Villa 1,494,982 336,755 2,013,245 2,350,000 54,649
Peachwood 2,164,993 584,082 2,745,918 3,330,000 24,166
Village Green 8,832,805 1,562,190 11,337,810 12,900,000 215,967
Concord/Antioch Region
Crestview Pines 4,020,512 1,443,189 2,886,811 4,330,000 45,179
Diablo View 2,975,553 1,276,560 4,123,440 5,400,000 15,189
Meadowlark 779,404 463,130 986,870 1,450,000 33,266
Oakview 910,152 720,360 1,579,640 2,300,000 21,340
Villa Diablo 627,685 380,800 739,200 1,120,000 2,756
$ 166,097,131 $ 47,429,740 $ 186,830,260 $234,260,000 $ 2,881,337
Commercial:
Bay Area Region
860 Kaiser Road 1,070,096 331,450 1,418,550 1,750,000 106,337
900 Business Park 1,597,249 831,875 1,918,125 2,750,000
908 Enterprise Way 215,574 1,004,426 1,220,000 8,456
910 Enterprise Way 955,550 314,060 1,735,940 2,050,000
988 Enterprise Way 460,938 205,995 724,005 930,000
938 Kaiser Road 655,887 286,485 778,515 1,065,000
Salvio Pacheco Square 7,439,205 2,107,840 9,092,160 11,200,000 23,079
Wilson Building 1,425,630 2,365,830 2,484,170 4,850,000
Starlight Estates 2,133,940 24,731 2,158,671
------------- ------------ ------------- ------------ -----------
$ 13,604,555 $ 8,793,049 $ 19,180,622 $ 27,973,671 $ 137,872
============= ============ ============= ============= ===========
Total real estate owned $ 179,701,686 $ 56,222,789 $ 206,010,882 $ 262,233,671 $ 3,019,209
============= ============ ============= ============= ===========
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
-------------------------------- DEPRECIABLE
LAND AND BUILDINGS GAAP LIFE OF
LAND AND CARRYING ACCUMULATED DATE OF DATE BUILDING
IMPROVEMENTS IMPROVEMENTS VALUE DEPRECIATION CONSTRUCTION ACQUIRED COMPONENT
Apartments:
Fairfield/Vacaville Region
Creekside Gardens $ 1,550,920 $ 10,139,338 $ 11,690,258 $ 622,717 1977 07/01/2000 25
Parkwood 950,880 4,696,200 5,647,080 182,023 1985 07/01/2000 40
Peach Tree Villa 336,755 2,067,894 2,404,649 88,988 1982 07/01/2000 35
Peachwood 584,082 2,770,084 3,354,166 106,044 1985 07/01/2000 40
Village Green 1,562,190 11,553,777 13,115,967 529,372 1986 07/01/2000 35
Concord/Antioch Region
Crestview Pines 1,443,189 2,931,990 4,375,179 179,560 1970 07/01/2000 25
Diablo View 1,276,560 4,138,629 5,415,189 179,362 1984 07/01/2000 35
Meadowlark 463,130 1,020,136 1,483,266 51,557 1982 07/01/2000 30
Oakview 720,360 1,600,980 2,321,340 81,002 1983 07/01/2000 30
Villa Diablo 380,800 741,956 1,122,756 32,796 1985 07/01/2000 35
$ 47,429,740 $ 189,711,597 $ 237,141,337 $ 11,150,748
Commercial:
Bay Area Region
860 Kaiser Road 331,450 1,524,887 1,856,337 63,542 1996 07/01/2000 40
900 Business Park 831,875 1,918,125 2,750,000 71,930 1990 07/01/2000 40
908 Enterprise Way 215,574 1,012,882 1,228,456 43,470 1987 07/01/2000 35
910 Enterprise Way 314,060 1,735,940 2,050,000 74,397 1987 07/01/2000 35
988 Enterprise Way 205,995 724,005 930,000 36,201 1980 07/01/2000 30
938 Kaiser Road 286,485 778,515 1,065,000 38,926 1984 07/01/2000 30
Salvio Pacheco Square 2,107,840 9,115,239 11,223,079 454,777 1983 07/01/2000 30
Wilson Building 2,365,830 2,484,170 4,850,000 93,156 1908(A) 07/01/2000 40
Starlight Estates 2,201,790 2,201,790 07/01/2000
------------ ------------- ------------- ------------
$ 8,860,899 $ 19,293,763 $ 28,154,662 $ 876,399
============ ============ ============= ============
Total real estate owned $ 56,290,639 $209,005,360 $ 265,295,999 $ 12,027,147
============ ============ ============= ============
(A) Seismic renovations about 1990
(Concluded)
F-16
JCM PARTNERS, LLC
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
- --------------------------------------------------------------------------------
Year Ended Year Ended
ASSET RECONCILIATION December 31, 2001 DEPRECIATION RECONCILIATION December 31, 2001
Balance at beginning of period $ 263,549,134 Balance at beginning of period $ 3,941,192
Additions during period: Additions during period:
Acquisitions through foreclosure - Acquisitions through foreclosure -
Other acquisitions - Other acquisitions -
Improvements 1,976,044 Depreciation 8,085,955
Purchase of assets - Purchase of assets -
Deductions during period: - Deductions during period: -
Cost of real estate sold (229,179) Cost of real estate sold -
Other - Other -
------------- ------------
Balance at close of period $ 265,295,999 Balance at close of period $ 12,027,147
============= ============
F-17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to the managers
and compliance with Section 16(a) of the Securities Exchange Act is incorporated
by reference from the information provided under the headings "Proposal 1--
Election of Managers" and "Section 16(a) Beneficial Ownership Reporting
Compliance," respectively, contained in our Proxy Statement to be filed with the
Securities and Exchange Commission in connection with the solicitation of
proxies for our Annual Meeting of Members to be held June 2002 (the "Proxy
Statement"). The information required by this item with respect to our executive
officers is contained in Item 1 of Part I of this Form 10-K under the heading
"Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference
from the information provided under the heading "Executive Compensation" of the
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference from the information provided under the heading "Unit Ownership of
Certain Beneficial Owners and Management" of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference from the information provided under the heading "Transactions
Involving Management" of the Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Consolidated Financial Statements
Report of Independent Certified Public Accountants
Consolidated Balance Sheets -December 31, 2000 and
December 31, 2001
34
Consolidated Statements of Operations - the Period from June 30,
2000 (inception) to December 31, 2000, and for the Year Ended
December 31, 2001
Consolidated Statements of Changes in Members' Equity - the Period
from June 30, 2000 (inception) to December 31, 2000, and for the
Year Ended December 31, 2001
Consolidated Statements of Cash Flows - the Period from June 30,
2000 (inception) to December 31, 2000, and for the Year Ended
December 31, 2001
Notes to Consolidated Financial Statements
2. Financial Statement
Schedule III - Real Estate and Accumulated Depreciation
All other schedules are omitted because they are not applicable or
because the required information is shown in the Consolidated Financial
Statements or the Notes thereto.
3. Exhibits
The following documents are filed as Exhibits to this Report:
EXHIBIT
NO. DESCRIPTION
--------- ------------
2.1(1) -- Order Confirming Second Amended Plan of Reorganization
2.2(1) -- Amended Joint Plan of Reorganization (May 9, 2000)
3.1(1) -- JCM Partners, LLC Certificate of Formation
3.2(1) -- JCM Partners, LLC Limited Liability Company Agreement dated as of June 30, 2000, and as amended
on September 13, 2000
3.3(3) -- Restated Bylaws of JCM Partners, LLC
4.1(2) -- Restrictions on Transfer of Membership Units
10.1(1) * -- Management Services Agreement dated July 1, 2000 between JCM Partners, LLC and JCIV, LLC
10.2(1) * -- Transition Services Agreement and Amendment to Management Services Agreement dated March 15,
2001 among JCIV, LLC, John Connolly IV and JCM Partners, LLC
10.3(1)* -- Management Services Agreement dated April 11, 2001 between JCM Partners, LLC and Computer
Management Corporation
10.4(1) * -- Form of Indemnification Agreement between JCM Partners, LLC and JCM Partners, LLC's Managers
and Executive Officers
10.5(1) -- Lease for JCM Partners, LLC's executive offices located at 2151 Salvio Street, Concord,
California
10.6(1) -- Form of Promissory Note between JCM Partners, LLC and each of Frank Deppe, Marvin Helder, Lois
Mol and Computer Management Corporation Money Purchase Pension Trust
21.1 -- Subsidiaries of JCM Partners, LLC
* Indicates management contract or compensation plan or arrangement.
35
(1) Incorporated by reference to the exhibit with the same exhibit number
attached to our Registration Statement on Form 10 (File No. 000-32653)
filed on October 3, 2001 with the Securities and Exchange Commission.
(2) Incorporated by reference to the exhibit with the same exhibit number
attached to our Current Report on Form 8-K filed on November 16, 2001
with the Securities and Exchange Commission.
(3) Incorporated by reference to Exhibit 3 to our Quarterly Report on Form
10-Q filed on November 19, 2001 with the Securities and Exchange
Commission.
(b) Reports on Form 8-K.
On November 16, 2001 (November 9, 2001 event date), we filed a
Form 8-K to report under Item 5, the adoption by our board of managers of
certain restrictions on transfers of units and amendments to our bylaws.
36
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 26, 2002.
JCM PARTNERS, LLC,
A Delaware limited liability company
By: /s/ Gayle M. Ing
-----------------
Gayle M. Ing, President and
Chief Executive Officer
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.
NAME TITLE DATE
- ---- ----- ----
/s/ Gayle M. Ing President, Chief Executive Officer, Chief March 26, 2002
- ------------------------------------ Financial Officer, Secretary and Manager
Gayle M. Ing (Principal Executive and Financial Officer)
/s/ Dennis Rimac Corporate Controller March 26, 2002
- ------------------------------------ (Principal Accounting Officer)
Dennis Rimac
/s/ Michael Vanni Manager; Chairman of the Board March 16, 2002
------------------------------------
Michael Vanni
/s/ Henry Conversano Manager March 26, 2002
- ------------------------------------
Henry Conversano
/s/ Arthur G. den Dulk Manager March 26, 2002
- ------------------------------------
Arthur G. den Dulk
/s/ Frank Deppe Manager March 26, 2002
- ------------------------------------
Frank Deppe
/s/ Henry Doorn, Jr. Manager March 26, 2002
- ------------------------------------
Henry Doorn, Jr.
/s/ Marvin J. Helder Manager; Vice Chairman of the Board March 26, 2002
- ------------------------------------
Marvin J. Helder
37
/s/ Kenneth J. Horjus Manager March 26, 2002
- ------------------------------------
Kenneth J. Horjus
/s/ Lois B. Mol Manager March 26, 2002
- ------------------------------------
Lois B. Mol
/s/ Neal Nieuwenhuis Manager March 26, 2002
- ------------------------------------
Neal Nieuwenhuis
38
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
--------- -------------
2.1(1) -- Order Confirming Second Amended Plan of Reorganization
2.2(1) -- Amended Joint Plan of Reorganization (May 9, 2000)
3.1(1) -- JCM Partners, LLC Certificate of Formation
3.2(1) -- JCM Partners, LLC Limited Liability Company Agreement dated as of June 30, 2000, and as amended
on September 13, 2000
3.3(3) -- Restated Bylaws of JCM Partners, LLC
4.1(2) -- Restrictions on Transfer of Membership Units
10.1(1) * -- Management Services Agreement dated July 1, 2000 between JCM Partners, LLC and JCIV, LLC
10.2(1) * -- Transition Services Agreement and Amendment to Management Services Agreement dated March 15,
2001 among JCIV, LLC, John Connolly IV and JCM Partners, LLC
10.3(1) * -- Management Services Agreement dated April 11, 2001 between JCM Partners, LLC and Computer
Management Corporation
10.4(1) * -- Form of Indemnification Agreement between JCM Partners, LLC and JCM Partners, LLC's Managers
and Executive Officers
10.5(1) -- Lease for JCM Partners, LLC's executive offices located at 2151 Salvio Street, Concord,
California
10.6(1) -- Form of Promissory Note between JCM Partners, LLC and each of Frank Deppe, Marvin Helder, Lois
Mol and Computer Management Corporation Money Purchase Pension Trust
21.1 -- Subsidiaries of JCM Partners, LLC
* Indicates management contract or compensation plan or arrangement.
(1) Incorporated by reference to the exhibit with the same exhibit number
attached to our Registration Statement on Form 10 (File No. 000-32653)
filed on October 3, 2001 with the Securities and Exchange Commission.
(2) Incorporated by reference to the exhibit with the same exhibit number
attached to our Current Report on Form 8-K filed on November 16, 2001
with the Securities and Exchange Commission.
(3) Incorporated by reference to Exhibit 3 to our Quarterly Report on Form
10-Q filed on November 19, 2001 with the Securities and Exchange
Commission.
39