ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial Statements contained in this report. Capitalized terms used herein, but not defined, have the same meanings as used in the Notes.
The registrant, JMB Income Properties, Ltd. - X (the "Partnership"), is a limited partnership formed in 1983 and currently governed by the Revised Uniform Limited Partnership Act of the State of Illinois to invest in improved income-producing commercial and residential real property. The Partnership sold $150,000,000 in limited partnership interests (the "Interests") commencing on June 29, 1983, pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration No. 2-83599). A total of 150,000 Interests were sold to the public at $1,000 per Interest. The offering closed on November 1, 1983. No Limited Partner has made any additional capital contribution after such date. The Limited Partners of the Partnership share in their portion of the benefits of ownership of the Partnership's real property investments according to the number of Interests held.
The Partnership is engaged solely in the business of the acquisition, operation, and sale and disposition of equity real estate investments. Such equity investments are held by fee title and/or through joint venture interests. The Partnership has one remaining real property investment located in North Richland Hills, Texas. A presentation of information about industry segments, geographic regions, raw materials or seasonality is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. Pursuant to the Partnership agreement, the Partnership is required to terminate no later than October 31, 2033. The Partnership is self-liquidating in nature. At sale of a particular property, the net proceeds, if any, are generally distributed or reinvested in existing properties rather than invested in acquiring additional properties. As discussed further in Item 7, the Partnership currently expects to conduct an orderly liquidation of its remaining investment property as quickly as practicable and to wind up its affairs in the near future, barring any unforeseen economic developments.
The Partnership has made the real property investments set forth in the following table:
The Partnership's real property investment is subject to competition from similar types of properties (including, properties owned by affiliates of the General Partners) in the vicinity in which it is located. Such competition is generally for the retention of existing tenants. Additionally, the Partnership is in competition for new tenants. Reference is made to Item 7 below for a discussion of competitive conditions and future renovation and capital improvement plans of the Partnership and its investment property. Approximate occupancy levels for the properties are set forth in the table in Item 2
ITEM 2. PROPERTIES
The Partnership owns or owned directly or through joint venture partnerships the properties or interests in the properties referred to under Item 1 above to which reference is hereby made for a description of said properties.
The following is a listing of principal businesses or occupations carried on in and approximate occupancy levels by quarter during fiscal years 1998 and 1997 for the Partnership's investment properties owned during 1998:
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of holders during fiscal years 1997 or 1998.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1998, there were 13,424 record holders of Interests of the Partnership. There is no public market for Interests and it is not anticipated that a public market for Interests will develop. Upon request, the Managing General Partner may provide information relating to a prospective transfer of Interests to an investor desiring to transfer his Interests. The price to be paid for the Interests, as well as any other economic aspects of the transaction, will be subject to negotiation by the investor. There are certain conditions and restrictions on the transfer of Interests, including, among other things, the requirement that the substitution of a transferee of Interests as a Limited Partner of the Partnership be subject to the written consent of the Managing General Partner, which, may be granted or withheld in its sole and absolute discretion. The rights of a transferee of Interests who does not become a substituted Limited Partner will be limited to the rights to receive his share of profits or losses and cash distributions from the Partnership, and such transferee will not be entitled to vote such Interests or have other rights of a Limited Partner. No transfer will be effective until the first day of the next succeeding calendar quarter after the requisite transfer form satisfactory to the Managing General Partner has been received by the Managing General Partner. The transferee consequently will not be entitled to receive any cash distributions or any allocable share of profits or losses for tax purposes until such next succeeding calendar quarter. Profits or losses from operations of the Partnership for a calendar year in which a transfer occurs will be allocated between the transferor and the transferee based upon the number of quarterly periods in which each was recognized as the holder of the Interests, without regard to the results of the Partnership's operations during particular quarterly periods and without regard to whether cash distributions were made to the transferor or transferee. Profits or losses arising from the sale or other disposition of Partnership properties will be allocated to the recognized holder of the Interests as of the last day of the quarter in which the Partnership recognized such profits or losses. Cash distributions to a holder of Interests arising from the sale or other disposition of Partnership properties will be distributed to the recognized holder of the Interests as of the last day of the quarterly period with respect to which such distribution is made.
Reference is made to Item 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As a result of the public offering of interests as described in Item 1, the Partnership had approximately $135,651,000 after deducting selling expenses and other offering costs with which to make investments in income-producing commercial and residential real property, to pay legal fees and other costs (including acquisition fees) related to such investments and for working capital. A portion of such proceeds was utilized to acquire the properties described in Item 1 above.
The board of directors of JMB Realty Corporation ("JMB"), the Managing General Partner of the Partnership, has established a special committee (the "Special Committee") consisting of certain directors of JMB to deal with all matters relating to tender offers for Interests in the Partnership, including any and all responses to such tender offer. The Special Committee has retained independent counsel to advise it in connection with any potential tender offers for Interests and has retained Lehman Brothers Inc. as financial advisor to assist the Special Committee in evaluating and responding to any additional potential tender offers for Interests.
During 1996, 1997 and 1998, some of the Limited Partners in the Partnership received unsolicited tender offers from unaffiliated third parties to purchase up to 4.9% of the Interests in the Partnership at prices ranging from $100 to $225 per Interest. The Partnership recommended against acceptance of these offers on the basis that, among other things, the offer prices were inadequate. Such offers have expired. As of the date of this report, the Partnership is aware that approximately 6.84% of the Interests in the Partnership have been purchased by such unaffiliated third parties either pursuant to such tender offers or through negotiated purchases. It is possible that other offers for Interests may be made by unaffiliated third parties in the future, although there is no assurance that any other third party will commence an offer for Interests, the terms of any such offer or whether any such offer, if made, will be consummated, amended or withdrawn.
At December 31, 1998, the Partnership had cash and cash equivalents of approximately $7,108,000. Such funds are available for distributions to partners, and for working capital requirements including tenant and capital improvements, to the extent not funded from future operations. The Partnership has currently budgeted in 1999 approximately $12,000 for tenant improvements and other capital expenditures. Actual amounts expended in 1999 may vary depending on a number of factors including actual leasing activity, results of property operations, liquidity considerations and other market conditions over the course of the year. The source of capital for such items and for both short-term and long-term future liquidity and distributions is expected to be through existing working capital, net cash generated by the Partnership's investment property and through the sale of such investment. The Partnership's mortgage obligation for North Hills Mall is a separate non-recourse loan secured individually by the property and the Partnership is not personally liable for the payment of the mortgage indebtedness.
Commencing in 1996, in an effort to reduce partnership operating expenses, the Partnership elected to make semi-annual, rather than quarterly, distributions of available operating cash flow in May and November of each year. In May and November 1998, the Partnership paid an operating distribution of $900,030 ($6 per Interest) to the Limited Partners. In February 1998, the Partnership made a distribution of sale proceeds related to the sale of Royal Executive Park I and 40 Broad Street office buildings of $28,500,950 ($190 per Interest) to the Limited Partners. In December 1998, the Partnership made an additional distribution of sales proceeds of $16,500,550 ($110 per Interest) to the Limited Partners. Future distributions from sales or property operations will depend upon a combination of operating cash flow from the remaining investment property and the longer term capital requirements of the Partnership.
NORTH HILLS MALL
Occupancy of the center at the end of the year was 76%. Included in this occupancy are temporary tenants that occupy approximately 26% of the center's leasable square footage. The Partnership has been seeking a replacement anchor department store for the existing Stripling & Cox store.
Based upon discussions with most major department store owners and given the market and property operating conditions discussed more fully below, it does not appear that the Partnership will be able to attract a traditional department store anchor to the center in the near term. Additionally, as a result of poor sales a major tenant in the mall, who operated the cinema, was able to terminate its lease. For this right, the tenant was required to pay a termination fee of approximately $797,000. The tenant ceased operations in September 1998, and the Partnership received the fee early in the fourth quarter of 1998.
North Hills Mall's major competition, Northeast Mall (located within a mile from the center), has begun construction on a major redevelopment which would increase its mall space as well as add two new anchor department stores. Completion is expected sometime in 2000. Nordstrom's department store and Saks Fifth Avenue Department Store have committed to be those anchor stores. Northeast Mall already has four anchor department store tenants.
In addition to the increased competition from Northeast Mall, over the last several years a significant number of strip center developments have been opened within a close proximity to the center. Many of these centers include large retail "Big Box" tenants that have adversely affected the center's tenant sales.
North Hills Mall has three anchor department stores, none of which are owned by the Partnership. The operating agreements which require these stores to remain open expire in 1999 and 2000. There is no certainty that any of these stores will continue operations beyond the operating agreement expiration dates.
The effect of all these conditions is that mall sales have decreased in recent years and the manager has had difficulty retaining and attracting typical national or regional tenants. As indicated above, while the occupancy of the center is 76%, only 50% is occupied by permanent tenants. The center's operating cash flow has been and will continue to be reduced due to increased vacancy and lower effective rental rates achieved on re- leasing vacant space. If the Foley's store were to close in 1999 without some form of replacement, it would be very difficult to lease space in the center.
The Partnership had considered various alternatives for the redevelopment of the property to co-exist with the increased competition. Due to competitive pressures in the marketplace, the Partnership has been unable to finalize a redevelopment plan. Given the complexity of a redevelopment, the lengthy time span likely needed to complete the project and the Partnership's desire to wind up its affairs in the near term, it was determined that it would be better for a buyer with a longer-term ownership perspective to undertake a redevelopment.
As previously reported, the Partnership had entered into, in November 1998, a non-binding letter of intent to sell the North Hills Mall. The prospective purchaser and the Partnership were unable to complete negotiations on a definitive sales agreement and terminated further discussions. Although the Partnership continues to market the property for sale, there can be no assurance that any satisfactory sales transaction will be completed. If the Partnership is unsuccessful in its efforts to sell the property, it is unlikely that the Partnership will commit any funds for operating deficits. This could result in the Partnership no longer having an ownership interest in the Property. Such action would result in the Partnership recognizing a loss for Federal income tax purposes and little if any gain for financial reporting purposes with no distributable proceeds.
GENERAL
Due to the factors outlined above, the Partnership has held certain of its investment properties longer than originally anticipated in an effort to maximize the return to the Limited Partners. Nonetheless, the affairs of the Partnership are expected to be wound up no later than December 31, 1999, barring unforeseen economic developments.
In connection with the planned liquidation and termination of the Partnership, the Managing General Partner may cause the formation of a liquidating trust on or before December 31, 1999, in which all of the Partnership's remaining assets, subject to liabilities, will be transferred. The initial trustees of the liquidating trust are expected to be individuals who are officers of the Managing General Partner. Each Holder of Interests in the Partnership would, upon the establishment of the liquidating trust, be deemed to be the beneficial owner of a comparable share of the aggregate beneficial interests in the liquidating trust. It is anticipated that the liquidating trust would permit the realization of substantial cost savings in administrative and other expenses until any residual liabilities (including contingent liabilities) of the Partnership are paid or otherwise determined to be extinguished and any remaining funds are distributed to the beneficial owners of the liquidating trust. The liquidating trust is expected to be in existence for approximately one year, subject to extension under certain circumstances.
RESULTS OF OPERATIONS
The decrease in escrow deposits at December 31, 1998 as compared to December 31, 1997 is primarily due to a refund received in 1998 of excess amounts that had been escrowed for real estate taxes at the North Hills Mall.
The decrease in investment property held for sale or disposition at December 31, 1998 as compared to December 31, 1997 is primarily due to the recording of provisions to reduce the carrying value of the North Hills Mall. Such provisions aggregated $5,037,000.
The decrease in the Partnership's investment in unconsolidated ventures at December 31, 1998 as compared to December 31, 1997 is primarily due to the sale in 1997 of the Royal Executive Park and 40 Broad Street investment properties. The balance at December 31, 1997 consisted primarily of undistributed sale proceeds relating to the sale of the 40 Broad Street investment property, which were distributed to the venture partners in January 1998.
The decrease in accounts payable at December 31, 1998 as compared to December 31, 1997 is primarily due to the timing of payments for certain recurring professional fees by the Partnership.
The decrease in rental income for the year ended December 31, 1998 as compared to the year ended December 31, 1997 and the year ended December 31, 1997 as compared to the year ended December 31, 1996 is primarily due to a decrease in occupancy and the re-negotiation of tenant leases that provide for a percent of tenant sales paid in lieu of base rent and recoverable charges. Additionally, the decrease in rental income for the year ended December 31, 1998 as compared to the year ended December 31, 1997 is partially offset by a lease termination fee of approximately $797,000 received from a major tenant at the North Hills Mall in the fourth quarter of 1998.
The increase in interest income for the year ended December 31, 1998 as compared to the year ended December 31, 1997 is primarily due to the temporary investment of sale proceeds relating to the sales in December 1997 of the Royal Executive Park and 40 Broad St. investment properties. Substantially all of such proceeds were distributed by the Partnership to the Limited Partners in February 1998.
The decrease in depreciation for the year ended December 31, 1998 as compared to the year ended December 31, 1997 and the year ended December 31, 1997 as compared to December 31, 1996 is primarily due to the North Hills Mall investment property being identified as held for sale or disposition as of September 30, 1997 and, therefore, not longer subject to depreciation beyond such date.
The decrease in property operating expenses for the year ended December 31, 1998 as compared to December 31, 1997 is primarily due to the cancellation of a maintenance contract and a decrease in real estate taxes resulting from a lower assessed value of the North Hills Mall. This decrease and the decrease for the year ended December 31, 1997 as compared to December 31, 1996 is also the result of the property incurring lower expenses as a result of lower tenant occupancies.
The decrease in general and administrative expenses for the year ended December 31, 1998 as compared to the year ended December 31, 1997 is primarily due to a decrease in administrative costs being incurred by the Partnership due to the sale of Royal Executive Park I and 40 Broad St investment properties. The increase in general and administrative expenses for the year ended December 31, 1997 as compared to December 31, 1996 is primarily due to an increase in reimbursable expenses to affiliates of the General Partners in 1997 and an increase in administrative expenses incurred in 1997 in connection with tender offer matters.
The provision for value impairment of $5,037,000 for the year ended December 31, 1998 and $5,700,000 for the year ended December 31, 1996 is due to the reduction of the net carrying value of the North Hills Mall as of December 31, 1998 and December 31, 1996, respectively.
The decrease in Partnership's share of operations of unconsolidated ventures for the year ended December 31, 1998 as compared to the year ended December 31, 1997 is primarily due to the sale of Royal Executive Park and 40 Broad Street Investment properties in 1997. The increase in Partnership's share of operations of unconsolidated ventures for the year ended December 31, 1997 as compared to the years ended December 31, 1996 is primarily due to the Royal Executive Park investment property being identified as held for sale or disposition as of December 31, 1996, and the 40 Broad Street investment property being identified as held for sale or disposition as of July 1, 1997, and therefore, no longer subject to depreciation beyond such dates. In addition, the increase is due to higher tenant occupancies in 1997 at the Royal Executive Park and 40 Broad Street investment properties.
The Partnership's share of gain on sale of investment properties of unconsolidated ventures of $13,684,709 during 1997 is the result of the sale of the Royal Executive Park and 40 Broad Street office buildings in December 1997. The gain of $50,826 on sale of investment properties during 1996 is the result of the sale of the Partnership's remaining unencumbered land outparcel at Pasadena Town Square in October 1996.
INFLATION
Due to the decrease in the level of inflation in recent years, inflation generally has not had a material effect on rental income or property operating expenses.
Inflation is not expected to significantly impact future operations due to the expected liquidation of the Partnership by 1999. However, to the extent that inflation in future periods would have an adverse impact on property operating expenses, the effect would generally be offset by amounts recovered from tenants as many of the long-term leases at the Partnership's remaining commercial property have escalation clauses covering increases in the cost of operating and maintaining the property as well as real estate taxes. Therefore, there should be little effect on operating earnings if the properties remain substantially occupied. In addition, substantially all of the leases at the Partnership's remaining investment contain provisions which entitle the Partnership to participate in gross receipts of tenants above fixed minimum amounts.
YEAR 2000
The Corporate General Partner has determined that it does not expect that the consequences of the Partnership's Year 2000 issues would have a material effect on the Partnership's business, results of operations or financial condition.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership has identified interest rate changes as a potential market risk. However, as the Partnership's long-term debt bears interest at a fixed rate and is due to mature subsequent to the Partnership's expected liquidation and termination date, the Partnership does not believe that it is exposed to market risk relating to interest rate changes.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JMB INCOME PROPERTIES, LTD. - X (A LIMITED PARTNERSHIP)
INDEX
Independent Auditors' Report Balance Sheets, December 31, 1998 and 1997 Statements of Operations, years ended December 31, 1998, 1997 and 1996 Statements of Partners' Capital Accounts, years ended December 31, 1998, 1997 and 1996 Statements of Cash Flows, years ended December 31, 1998, 1997 and 1996 Notes to Financial Statements
SCHEDULE --------
Real Estate and Accumulated Depreciation III
SCHEDULES NOT FILED:
All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Partners JMB INCOME PROPERTIES, LTD. - X:
We have audited the financial statements of JMB Income Properties, Ltd. - X (a limited partnership) as listed in the accompanying index. In connection with our audits of the financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These financial statements and financial statement schedule are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of JMB Income Properties, Ltd. - X as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in the Notes to the financial statements, in 1996, the Partnership changed its method of accounting for long-lived assets and long-lived assets to be disposed of to conform with Statement of Financial Accounting Standards No. 121.
KPMG LLP
Chicago, Illinois March 15, 1999
JMB INCOME PROPERTIES, LTD. - X (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
OPERATIONS AND BASIS OF ACCOUNTING
GENERAL
The Partnership owns a shopping center in North Richland Hills, Texas.
Business activities consist of rentals to a variety of retail companies, and the ultimate sale or disposition of such real estate. The Partnership currently expects to conduct an orderly liquidation of its remaining investment portfolio and wind up its affairs in the near future, barring unforeseen economic circumstances.
The accompanying financial statements include only the accounts of the Partnership. The equity method of accounting has been applied in the accompanying financial statements with respect to the Partnership's venture interests in Royal Executive Park - I ("Royal Executive Park") and JMB-40 Broad Street Associates ("Broad Street"). Accordingly, the accompanying financial statements do not include the accounts of Royal Executive Park or of Broad Street.
The Partnership records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying financial statements have been prepared from such records after making appropriate adjustments to present the Partnership's accounts in accordance with generally accepted accounting principles ("GAAP"). Such GAAP adjustments are not recorded on the records of the Partnership. The net effect of these adjustments for the years ended December 31, 1998 and 1997 is summarized as follows:
The net earnings (loss) per limited partnership interest is based upon the number of limited partnership interests outstanding at the end of each period (150,005).
Certain reclassifications have been made to the 1996 and 1997 consolidated financial statements to conform with the 1998 presentation.
The preparation of financial statements in accordance with GAAP requires the Partnership to make estimates and assumptions that affect the reported or disclosed amount of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Statement of Financial Accounting Standards No. 95 requires the Partnership to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. Partnership distributions from unconsolidated ventures are considered cash flow from operating activities only to the extent of the Partnership's cumulative share of net earnings. The Partnership records amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($6,866,571 and $39,141,201 at December 31, 1998 and 1997, respectively) as cash equivalents, which includes investments in an institutional mutual fund which holds U.S. Government obligations, with any remaining amounts (generally with original maturities of one year or less) reflected as short-term investments being held to maturity.
Deferred loan fees are amortized over the term of the respective loan agreement.
Although certain leases of the Partnership provide for tenant occupancy during periods for which no rent is due and/or increases in minimum lease payments over the term of the lease, the Partnership accrues rental income for the full period of occupancy on a straight-line basis.
No provision for State or Federal income taxes has been made as the liability for such taxes is that of the Partners rather than the Partnership. However, in certain instances, the Partnership may be required under applicable law to remit directly to the tax authorities amounts representing withholding from distributions paid to partners.
The Partnership had acquired, either directly or through joint venture arrangements, interests in three office buildings and five shopping centers. Seven investment properties have been sold or disposed of by the Partnership. The remaining investment property owned at December 31, 1998 is in operation. The cost of the investment property represents the total cost to the Partnership plus miscellaneous acquisition costs.
Depreciation on the investment properties has been provided over the estimated useful lives of the various components as follows:
YEARS -----
Improvements--straight line. . . . 30 Personal property--straight line . 5 ==
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and depreciated over their estimated useful lives.
Statement of Financial Accounting Standards No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" was issued in March 1995. The Partnership adopted SFAS 121 as required in the first quarter of 1996. SFAS 121 requires that the Partnership record an impairment loss on its properties to be held for investment whenever their carrying value cannot be fully recovered through estimated undiscounted future cash flows from their operations and sale. The amount of the impairment loss to be recognized would be the difference between the property's carrying value and the property's estimated fair value. The Partnership's policy is to consider a property to be held for sale or disposition when the Partnership has committed to a plan to sell or dispose of such property and active marketing activity has commenced or is expected to commence in the near term or the Partnership has concluded that it may dispose of the property by no longer funding operating deficits or debt service requirements of the property thus allowing the lender to realize upon its security. In accordance with SFAS 121, any properties identified as "held for sale or disposition" are no longer depreciated. Adjustments for impairment loss for such properties (subsequent to the date of adoption of SFAS 121) are made in each period as necessary to report these properties at the lower of carrying value or fair value less costs to sell. In certain situations, such estimated fair value could be less than the existing non-recourse debt which is secured by the property. There can be no assurance that any estimated fair value of these properties would ultimately be realized by the Partnership in any future sale or disposition transaction.
Under the prior accounting policy, provisions for value impairment were recorded with respect to investment properties whenever the estimated future cash flows from a property's operations and projected sale were less than the property's carrying value. The amount of any such impairment loss recognized by the Partnership was limited to the excess, if any, of the property's carrying value over the outstanding balance of the property's non-recourse indebtedness. An impairment loss under SFAS 121 is determined without regard to the nature or the balance of such non-recourse indebtedness. Upon the disposition of a property with the related extinguishment of the long-term debt for which an impairment loss has been recognized under SFAS 121, the Partnership would recognize, at a minimum, a net gain for financial reporting purposes (comprised of gain on extinguishment of debt and gain or loss on the sale or disposition of property) to the extent of any excess of the then outstanding balance of the property's non-recourse indebtedness over the then carrying value of the property, including the effect of any reduction for impairment loss under SFAS 121.
In addition, upon the disposition of any impaired property, the Partnership will generally recognize more net gain for financial reporting purposes under SFAS 121 than it would have under the Partnership's prior impairment policy, without regard to the amount, if any, of cash proceeds received by the Partnership in connection with the disposition. Although implementation of this accounting statement could significantly impact the Partnership's reported earnings, there would be no impact on cash flows. Further, any such impairment loss is not recognized for Federal income tax purposes.
The results of operations for the investment property held for sale or disposition as of December 31, 1998 were ($3,136,462), $939,683 and ($4,779,938), respectively, for the years ended December 31, 1998, 1997 and 1996. In addition, the accompanying financial statements include $118,234, $1,933,290 and $582,581, respectively, of the Partnership's share of total property operations of $313,262, $4,004,974 and $1,382,349 of unconsolidated properties sold or disposed of in the past three years.
INVESTMENT PROPERTIES
NORTH HILLS MALL
During October 1983, the Partnership acquired an existing enclosed mall regional shopping center in North Richland Hills (Fort Worth), Texas. In 1985, the Partnership obtained a permanent loan in the amount of $8,000,000, secured by the property. The Partnership's aggregate cash investment, including additional capital improvements and other expenditures, is approximately $14,690,000.
In November 1995, the Partnership refinanced the mortgage loan (with a then outstanding balance of $6,972,974) with a new lender. The new mortgage loan had an original principal balance of $8,000,000 and monthly principal and interest payments of $57,182, which are based upon an interest rate per annum of 7.125% and a 25-year amortization schedule, through January 1, 2001 when the remaining principal balance of $7,318,330 is due and payable.
The Partnership has been seeking a replacement anchor department store for the existing Stripling & Cox store. Based upon discussions with most major department store owners and given the market and property operating conditions discussed more fully below, it does not appear that the Partnership will be able to attract a traditional department store anchor to the center in the near term. Additionally, as a result of poor sales a major tenant in the mall, who operated the cinema, was able to terminate its lease. For this right, the tenant was required to pay a termination fee of approximately $797,000. The tenant ceased operations in September 1998, and the Partnership received the fee early in the fourth quarter of 1998.
North Hills Mall's major competition, Northeast Mall (located within a mile from the center) has begun construction on a major redevelopment which would increase its mall space as well as add two new anchor department stores. Completion is expected sometime in 2000. Nordstrom's department store and Saks Fifth Avenue Department Store have committed to be those anchor stores. Northeast already has four anchor department store tenants.
In addition to the increased competition from Northeast Mall, over the last several years a significant number of strip center developments have been opened within a close proximity to the center. Many of these centers include large retail "Big Box" tenants that have adversely affected the center's tenant sales.
North Hills Mall has three anchor department stores, none of which are owned by the Partnership. The operating agreements that require these stores to remain open expire in 1999 and 2000. There is no certainty that any of these stores will continue operations beyond the operating agreement expiration dates.
The effect of all these conditions is that mall sales have decreased in recent years and the manager has had difficulty retaining and attracting typical national or regional tenants. As indicated above, while the occupancy of the center is 76%, only 50% is occupied by permanent tenants. The center's operating cash flow has been and will continue to be reduced due to increased vacancy and lower effective rental rates achieved on re- leasing vacant space. If the Foley's store were to close in 1999 without some form of replacement, it would be very difficult to lease space in the
center. The Partnership had considered various alternatives for the redevelopment of the property to co-exist with the increased competition. Due to competitive pressures in the marketplace, the Partnership has been unable to finalize a redevelopment plan. Given the complexity of a redevelopment, the lengthy time span likely needed to complete the project and the Partnership's desire to wind up its affairs in the near term, it was determined that it would be better for a buyer with a longer-term ownership perspective to undertake a redevelopment.
In November 1998, the Partnership had entered into a non-binding letter of intent to sell the North Hills Mall. The prospective purchaser and the Partnership were unable to complete negotiations on a definitive sales agreement and terminated further discussions. Although the Partnership continues to market the property for sale, there can be no assurance that any satisfactory sales transaction will be completed. If the Partnership is unsuccessful in its efforts to sell the property, it is unlikely that the Partnership will commit any funds for operating deficits.
This could result in the Partnership no longer having an ownership interest in the Property. Such action would result in the Partnership recognizing a loss for Federal income tax purposes and little if any gain for financial reporting purposes with no distributable proceeds.
Due to the property and anticipated market conditions outlined above, there was uncertainty about the Partnerships ability to recover the net carrying value of the North Hills Mall investment property through future operations and sale. Therefore, as of December 31, 1996, the Partnership recorded, as a matter of prudent accounting practice, a provision for value impairment of such investment of $5,700,000. Such provision was recorded to reflect the then estimated fair value of the property based upon an analysis of the property's discounted estimated future cash flows over the projected holding period. Additionally, in 1998, the Partnership recorded value impairments of $2,095,000 and $2,942,000 at September 30, and December 31, respectively. Such provisions were recorded to reduce the net basis of the investment property to the estimated fair value, less costs of sale. There can be no assurance that the estimated fair value of the property would ultimately be realized by the Partnership in any future sale or disposition transaction.
As the Partnership had committed to a plan to sell or dispose of the property, North Hills Mall was classified as held for sale or disposition as of September 30, 1997, and therefore has not been subject to continued depreciation beyond such date.
PASADENA TOWN SQUARE MALL
During October 1996, a sale was finalized for an approximate two acre unencumbered, unimproved out-parcel of land at a price of $550,000, before closing costs and prorations, which was paid in cash at closing. The Partnership recognized a gain of approximately $51,000 for both financial reporting and Federal income tax purposes in 1996.
VENTURE AGREEMENTS - GENERAL
The Partnership at December 31, 1998 is no longer a party to the Royal Executive Park and 40 Broad Street joint venture agreements.
ROYAL EXECUTIVE PARK
In December 1983, the Partnership acquired through a joint venture with the developer, an interest in a completed three-building office complex in Rye Brook, New York known as Royal Executive Park.
The Partnership contributed the sum of $25,948,000 to the joint venture which was used to repay an interim construction loan secured by the property. The developer was obligated to contribute to the joint venture amounts required to complete construction including tenant improvements. The acquisition of the venture interest resulted in an excess of the Partnership's basis in the property over its proportionate share of the venture's assets of approximately $10,000,000. Such excess was being amortized over the remaining useful life of the joint venture's property through an adjustment of the Partnership's share of the joint venture's operations.
Annual cash flow was distributed 49.9% to the Partnership and 50.1% to the joint venture partner. However, since the joint venture partner did not receive $2,605,200 of cash flow for each of the initial five years, the joint venture partner was entitled to receive such deficiency, up to $400,000 from annual cash flow, if any, available for distribution to the partners after the Partnership and the joint venture partners had received $2,594,800 and $2,605,200, respectively, per annum. Operating profits and losses were generally allocated to the joint venture partners in the same ratio that annual cash flow was distributed to the partners.
The joint venture agreement further provided that proceeds from sale or refinancing of the complex would be distributed 49.9% to the Partnership and 50.1% to the joint venture partner.
The property was managed by an affiliate of the joint venture partner under an agreement which provided for fees equal to 2% of the base rent paid by tenants. Effective July 1, 1994, an affiliate of the General Partner of the Partnership assumed the property management responsibilities for the joint venture on essentially the same terms. In addition, effective July 1, 1994, the same affiliate of the General Partner assumed certain leasing responsibilities for the property. In December 1994, such affiliate further assigned such property management and leasing responsibilities to an unaffiliated third party.
In response to the uncertainty of the Partnership's ability to recover the next carrying value of the Royal Executive Park joint venture investment through future operations and sale during the estimated holding period, as of September 30, 1995, the Partnership recorded as a matter of prudent accounting practice, a provision for value impairment of such investment of $9,300,000. Such provisions were recorded to reduce the net carrying value of the joint venture investment to its then estimated fair value. As the joint venture had committed to a plan to sell or dispose of the property, the Royal Executive Park office building was classified as held for sale as of December 31, 1996 and, therefore, had not been subject to continued depreciation beyond that date.
On December 19, 1997, the Partnership, through the Royal Executive Park joint venture, sold the land, buildings, related improvements and personal property of the Royal Executive Park office complex to an unaffiliated third party for a sale price of $37,000,000 (before selling expenses and prorations). The sale resulted in a gain in 1997 of $10,736,881 and $28,437,135 for financial reporting and Federal income tax purposes, respectively, of which $7,252,278 and $12,360,718 of gain was allocated to the Partnership, respectively. In addition, in connection with the sale of the property, as is customary in such transactions, the joint venture agreed to certain representations, warranties and covenants with a stipulated survival period which expired on November 15, 1998 with no liability to the Partnership.
Concurrently with the sale of Royal Executive Park-I, two other office parks, Royal Executive Park II ("Royal II") and Royal Executive Park III ("Royal III") were sold. Royal II was owned by a joint venture between JMB Income Properties-XI (a partnership sponsored by the Partnership's General Partner) and the Partnership's unaffiliated venture partner in Royal Executive Park-I. Royal III was owned entirely by the unaffiliated venture partner in Royal Executive Park-I and Royal II. The purchase price for each office park was separately negotiated with the buyer.
The joint venture determined that one of the property's underground storage tanks had discharged an amount of fuel oil into the ground. The joint venture believed that such discharge had been the result of normal operations of the property and not the result of actions of tenants or other third parties. The joint venture received a cost estimate of approximately $200,000 for remediation of the contaminated soil, of which approximately $87,000 was incurred through the date of sale. As part of the sale agreement discussed above, the purchaser is required to hold the joint venture harmless for any future clean-up costs or claims resulting from the contaminated soil.
40 BROAD STREET
During December 1985, the Partnership acquired, through a joint venture partnership (the "Affiliated Joint Venture") with JMB Income Properties, Ltd.-XII ("JMB Income-XII", a partnership sponsored by the Managing General Partner of the Partnership) a 31.44% interest in an existing 24-story office building located at 40 Broad Street in New York, New York. The Affiliated Joint Venture's purchase price for the building was $65,100,000 (net of prorations and miscellaneous closing costs), of which the Partnership provided approximately $20,470,000, which was paid in cash at closing.
The Partnership was allocated or distributed profits and losses, cash flow from operations and sale or refinancing proceeds in the ratio of its capital contributions to the Affiliated Joint Venture which is 31.44%. The Partnership and JMB Income - XII were current with respect to their required capital contributions to 40 Broad Street.
The property was managed by an unaffiliated third party for a fee calculated as 2% of gross receipts of the property.
On December 30, 1997, the Partnership, through the Affiliated Joint Venture, sold the land, building, related improvements and personal property of the 40 Broad Street office building to an unaffiliated third party for a sale price of $34,735,000 (before selling expenses and prorations). The sale resulted in a gain of $20,532,803 (predominantly due to provisions for value impairment totaling approximately $52,000,000 recorded in 1990 and 1991, of which the Partnership's share was approximately $16,349,000) and a loss of $9,703,264 in 1997 for financial reporting and Federal income tax purposes, respectively, of which $6,432,431 of gain and $3,050,706 of loss was allocated to the Partnership, respectively. In addition, in connection with the sale of the property, as is customary in such transactions, the Affiliated Joint Venture agreed to certain representations, warranties and covenants which expired on December 1, 1998 with no liability to the Partnership.
LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998 and 1997: 1998 1997 ---------- --------- 7-1/8% mortgage note, secured by the North Hills Mall in North Richland Hills (Fort Worth), Texas; payable in monthly installments of $57,182 (including interest) until January 1, 2001 when the outstanding balance of $7,318,330 is due and payable . . . . . . . . . . . . . . . . . $7,624,587 7,762,150 ---------- ---------- Total debt. . . . . . . . . . . . . . 7,624,587 7,762,150 Less current portion of long-term debt. . . . . . . . . . . 147,692 137,564 ---------- ---------- Total long-term debt . . . . . . $7,476,895 7,624,586 ========== ==========
Five year maturities of long-term debt are summarized as follows:
1999. . . . . . . . . $ 147,692 2000. . . . . . . . . 158,565 2001. . . . . . . . . 7,318,330 2002. . . . . . . . . -- 2003. . . . . . . . . -- ==========
PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or losses of the Partnership from operations are allocated 96% to the Limited Partners and 4% to the General Partners. Profits from the sale or refinancing of investment properties are to be allocated to the General Partners to the greater of 1% of such profits or the amount of cash distributable to the General Partners from any such sale or refinancing (as described below). Losses from the sale or refinancing of investment properties are to be allocated 1% to the General Partners. The remaining sale or refinancing profits and losses will be allocated to the Limited Partners.
The General Partners are not required to make any capital contribu- tions except under certain limited circumstances upon termination of the Partnership. Distributions of "cash flows" of the Partnership are allocated 90% to the Limited Partners and 10% to the General Partners. However, such distributions to the General Partners are subordinated to the Limited Partners' receipt of a stipulated return on capital. Through December 31, 1998, $10,553,193 of distributable cash has been deferred by the General Partners. The Partnership does not expect that the subordination requirements of the Partnership Agreement will be satisfied over the expected remaining term of the Partnership to permit payment of the majority of these amounts.
The Partnership Agreement provides that the General Partners shall receive as a distribution from the sale of a real property by the Partnership 3% of the selling price and any cumulative deferrals of their 10% distribution of disbursable cash, subject to certain limitations. Any remaining proceeds (net after expenses and retained working capital) will be distributed 85% to the Limited Partners and 15% to the General Partners. However, the Limited Partners shall receive 100% of such net sale proceeds until the Limited Partners (i) have received cash distributions of sale or refinancing proceeds in an amount equal to the Limited Partners' aggregate initial capital investment in the Partnership, and (ii) have received cumulative cash distributions from the Partnership's operations which, when combined with sale or refinancing proceeds previously distributed, equal a 10% annual return on the Limited Partners' average capital investment for each year (their initial capital investment as reduced by sale or refinancing proceeds previously distributed) commencing with the first fiscal quarter of 1984. As the above levels of return are not expected to be achieved, the General Partners have waved their right to receive any portion of the proceeds from the sales of property by the Partnership.
MANAGEMENT AGREEMENTS
The North Hills Mall is managed by an affiliate of the General Partners pursuant to a management agreement that provides for leasing commissions and an annual fee based upon a percentage of rental income of the property, the aggregate of such commission and fee not to exceed 6% of the gross receipts of the property. The Royal Executive Park office building had been managed and leased by an affiliate of the General Partner of the Partnership under an agreement that provided for fees equal to 2% of the base rent paid by tenants, a portion of which was paid to the previous manager annually by such affiliated manager as compensation to the previous manager for relinquishing management of the property.
LEASES - AS PROPERTY LESSOR
At December 31, 1998, the Partnership's principal asset is one shopping center. The Partnership has determined that all leases relating to this property are properly classified as operating leases; therefore, rental income is reported when earned. Leases with tenants range in term from one to thirty years and provide for fixed minimum rent and partial reimbursement of operating costs. In addition, leases provide for additional rent based upon percentages of tenants' sales volumes. A substantial portion of the ability of retail tenants to honor their leases is dependent upon the retail economic sector.
Minimum lease payments, including amounts representing executory costs (e.g. taxes, maintenance, insurance) and any related profit, to be received in the future under the operating leases are as follows:
1999. . . . . . . . . . . $ 1,553,180 2000. . . . . . . . . . . 1,337,528 2001. . . . . . . . . . . 1,193,258 2002. . . . . . . . . . . 1,044,320 2003. . . . . . . . . . . 894,876 Thereafter. . . . . . . . 1,446,765 ----------- Total. . . . . . . . $ 7,469,927 ===========
Contingent rent (based on sales by property tenants) included in consolidated rental income was as follows for the years ended December 31, 1998, 1997 and 1996:
1996. . . . . . . . . . . $276,538 1997. . . . . . . . . . . 229,640 1998. . . . . . . . . . . 359,705
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted to engage in various transactions involving the Managing General Partner and its affiliates including the reimbursement for salaries and salary- related expenses of its employees, certain of its officers, and other direct expenses relating to the administration of the Partnership and the operation of the Partnership's investments. Fees, commissions and other expenses required to be paid by the Partnership to the General Partners and their affiliates as of December 31, 1998, 1997 and 1996 are as follows:
UNPAID AT DECEMBER 31, 1998 1997 1996 1998 -------- -------- -------- ------------ Property management and leasing fees. . . . . .$145,226 113,526 146,329 -- Insurance commissions. . . . 12,477 11,351 3,546 -- Reimbursement (at cost) for accounting services. . . . . . . . . . 13,021 15,212 10,145 1,943 Reimbursement (at cost) for portfolio manage- ment services . . . . . . . 59,893 78,283 44,567 14,427 Reimbursement (at cost) for legal services. . . . . 4,948 5,935 3,910 1,710 Reimbursement (at cost) for administrative charges and other out-of-pocket expenses. . . 6,632 20,762 8,824 -- -------- ------- ------- ------ $242,197 245,069 217,321 18,080 ======== ======= ======= ======
The General Partners have deferred (in accordance with the Partnership agreement) payment of certain of their distributions of net cash flow from the Partnership. Accordingly, $10,553,193 (approximately $70 per interest) of distributable cash has been deferred by the General Partners. These amounts, together with the unpaid fees and expenses set forth in the table above, do not bear interest and may be paid in future periods in accordance with the Partnership agreement to the extent of sufficient distributable proceeds from property operations, sales or refinancings. The Partnership does not expect that the subordination requirements of the Partnership agreement will be satisfied over the expected remaining term of the Partnership to permit payment of the majority of these amounts.
INVESTMENTS IN UNCONSOLIDATED VENTURES
Summary financial information for Royal Executive Park and 40 Broad Street as of and for the years ended December 31, 1998 and 1997 are as follows: 1998 1997 ------------ ----------- Current assets . . . . . . . . . . $ -- 37,275,270 Current liabilities. . . . . . . . -- (231,710) ----------- ----------- Working capital . . . . . . . -- 37,043,560 ----------- ----------- Venture partners' equity . . . . . -- (24,974,587) ----------- ----------- Partners' capital . . . . . . $ -- 12,068,973 =========== =========== Represented by: Invested capital. . . . . . . $50,389,914 50,335,311 Cumulative cash distributions . . . . . . . (67,507,438) (55,266,333) Cumulative net earnings . . . 17,117,524 16,999,995 ----------- ----------- $ -- 12,068,973 =========== ===========
Total income . . . . . . . . . . . $ 528,469 11,512,114 =========== =========== Expenses applicable to operations. . . . . . . . . . $ 215,207 7,507,140 =========== =========== Gain on disposition of investment properties . . . . $ -- 24,814,170 =========== =========== Net earnings . . . . . . . . . . . $ 313,262 28,819,144 =========== ===========
Also, for the year ended December 31, 1996, total income, expenses applicable to operations, gain on disposition of investment property and net earnings were $10,666,093, $9,283,744, $0 and $1,382,349, respectively, for the unconsolidated ventures listed above.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes of or disagreements with, auditors during fiscal year 1998 and 1997.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Managing General Partner of the Partnership is JMB Realty Corporation ("JMB"), a Delaware corporation. Substantially all of the outstanding stock of JMB is owned, directly or indirectly, by certain of its officers, directors and members of their families and affiliates. JMB, as the managing General Partner, has responsibility for all aspects of the Partnership's operations, subject to the requirement that sales of real property must be approved by the general partner of the Associate General Partner of the Partnership. Income Partners-X, an Illinois limited partnership with ABPP Associates, L.P. as its sole general partner and an affiliate of Merrill Lynch, Pierce, Fenner and Smith Incorporated as its limited partner, is the Associate General Partner of the Partnership. ABPP Associates, L.P. is an Illinois limited partnership with JMB as its general partner. The limited partners of ABPP Associates, L.P. are generally officers, directors and affiliates of JMB or its affiliates.
The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that the General Partners and their affiliates are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership or its investment properties by affiliates of the General Partners, including property management services and insurance brokerage services. In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership under certain circumstances, including, in certain geographical markets, for tenants and/or for the sale of property. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell a property, the establishment and maintenance of reasonable reserves and the determination of the sources (i.e., offering proceeds, cash generated from operations or sale proceeds) and uses of such reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations.
The names, positions held and length of service therein of each director and the executive and certain other officers of the Managing General Partner of the Partnership are as follows:
SERVED IN NAME OFFICE OFFICE SINCE - ---- ------ ------------
Judd D. Malkin Chairman 5/03/71 Director 5/03/71 Chief Financial Officer 2/22/96 Neil G. Bluhm President 5/03/71 Director 5/03/71 Burton E. Glazov Director 7/01/71 Stuart C. Nathan Executive Vice President 5/08/79 Director 3/14/73 A. Lee Sacks Director 5/09/88 John G. Schreiber Director 3/14/73 H. Rigel Barber Chief Executive Officer 8/01/93 Executive Vice President 1/02/87 Glenn E. Emig Executive Vice President 1/01/93 Chief Operating Officer 1/01/95 Gary Nickele Executive Vice President 1/01/92 General Counsel 2/17/84 Gailen J. Hull Senior Vice President 6/01/88 Howard Kogen Senior Vice President 1/02/86 Treasurer 1/01/91
There is no family relationship among any of the foregoing directors or officers. The foregoing directors have been elected to serve a one-year term until the annual meeting of the Managing General Partner to be held on June 2, 1999. All of the foregoing officers have been elected to serve one-year terms until the first meeting of the Board of Directors held after the annual meeting of the Managing General Partner to be held on June 2, 1999. There are no arrangements or understandings between or among any of said directors or officers and any other person pursuant to which any director or officer was elected as such.
JMB is the corporate general partner of Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle- - -XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), and Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and the managing general partner of JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), and JMB Income Properties, Ltd.-XI ("JMB Income-XI"). JMB is also the sole general partner of the associate general partner of most of the foregoing partnerships. Most of the foregoing directors and officers are also officers and/or directors of various affiliated companies of JMB, including Arvida/JMB Managers, Inc. (the general partner of Arvida/JMB Partners, L.P.). Most of such directors and officers are also partners, directly or indirectly, of certain partnerships which are associate general partners in the following real estate limited partnerships: the Partnership, Carlyle-XI, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, JMB Income-VII, JMB Income-XI, and Carlyle Income Plus-II.
The business experience during the past five years of each such director and officer of the Managing General Partner of the Partnership in addition to that described above is as follows:
Judd D. Malkin (age 61) is an individual general partner of JMB Income-V. Mr. Malkin has been associated with JMB since October, 1969. Mr. Malkin is also a director of Urban Shopping Centers, Inc., an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. He is a Certified Public Accountant. He is also a director of Chisox Corporation, which is the general partner of a limited partnership that owns the Chicago White Sox Major League Baseball team, and CBLS, Inc., which is the general partner of a limited partnership that owns the Chicago Bulls National Basketball Association Team.
Neil G. Bluhm (age 61) is an individual general partner of JMB Income-V. Mr. Bluhm has been associated with JMB since August, 1970. Mr. Bluhm is also a principal of Walton Street Capital, L.L.C., which sponsors real estate investment funds and a director of Urban Shopping Centers. He is a member of the Bar of the State of Illinois and a Certified Public Accountant.
Burton E. Glazov (age 60) has been associated with JMB since June, 1971 and served as an Executive Vice President of JMB until December 1990. He is a member of the Bar of the State of Illinois. Mr. Galzov is currently retired.
Stuart C. Nathan (age 57) has been associated with JMB since July, 1972. He is a member of the Bar of the State of Illinois.
A. Lee Sacks (age 65) has been associated with JMB since December, 1972. He is also President and a director of JMB Insurance Agency, Inc.
John G. Schreiber (age 52) has been associated with JMB since December, 1970 and served as an Executive Vice President of JMB until December 1990. Mr. Schreiber is President of Schreiber Investments, Inc., which is engaged in the real estate investing business. He is also a senior advisor and partner of Blackstone Real Estate Advisors L.P., an affiliate of the Blackstone Group, L.P. In addition, Mr. Schreiber is a director of Urban Shopping Centers and Host Marriott Corporation, The Brickman Group, Ltd., which is engaged in the landscape maintenance business, a number of investment companies advised or managed by T. Rowe Price Associates, Inc. and its affiliates and a trustee of Amli Residential Property Trust. He holds a Masters degree in Business Administration from Harvard University Graduate School of Business.
H. Rigel Barber (age 50) has been associated with JMB since March, 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois.
Glenn E. Emig (age 51) has been associated with JMB since December 1979. It is expected that Mr. Emig will leave his positions with JMB on or about May 31, 1999 and his responsibilities will be taken over by various other officers of JMB. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig was Executive Vice President and Treasurer of JMB Institutional Realty Corporation. He holds a Masters degree in Business Administration from the Harvard University Graduate School of Business and is a Certified Public Accountant.
Gary Nickele (age 46) has been associated with JMB since February, 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois.
Gailen J. Hull (age 50) has been associated with JMB since March, 1982. He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant.
Howard Kogen (age 63) has been associated with JMB since March, 1973. He is a Certified Public Accountant.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no officers or directors. The General Partners of the Partnership are entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of profits or losses. Reference is made to the Notes for a description of such transactions, distributions and allocations. In 1998, 1997 and 1996, no cash distributions were paid to the General Partners.
Affiliates of the Managing General Partner provided property management services to the Partnership in 1998 for the North Hills Mall in North Richland, Texas. Fees are calculated at 4% of fixed and percentage rents from North Hills Mall. In 1998, such affiliate earned property management and leasing fees amounting to $145,226, of which all was paid as of December 31, 1998. As set forth in the Prospectus of the Partnership, the Managing General Partner must negotiate such agreements on terms no less favorable to the Partnership than those customarily charged for similar services in the relevant geographical area (but in no event at rates greater than 6% of the gross receipts from a property), and such agreements must be terminable by either party thereto, without penalty, upon 60 days' notice.
JMB Insurance Agency, Inc., an affiliate of the Managing General Partner, earned and received insurance brokerage commissions in 1998 aggregating $12,477 in connection with the provision of insurance coverage for certain of the real property investments of the Partnership. Such commissions are at rates set by insurance companies for the classes of coverage provided.
The General Partners of the Partnership or their affiliates may be reimbursed for their direct expenses or out-of-pocket expenses and salaries relating to the administration of the partnership and operation of the Partnership's real property investments. In 1998, the Managing General Partner incurred such out-of-pocket expenses and salaries in the amount of $84,494, of which $18,080 was unpaid at December 31, 1998.
The Partnership is permitted to engaged in various transactions involving affiliates of the Managing General Partner of the Partnership, as described in Item 10 and Exhibit 21 hereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Managing General Partner, affiliates or their management other than those described in Items 10 and 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements and Supplementary Data (See Index to Financial Statements filed with this annual report)
2. Exhibits.
3-A.* The Prospectus of the Partnership dated June 29, 1983 as supplemented September 12, 1983 and October 21, 1983, as filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference. Copies of pages 8-12, 57-59 and A-7 to A-11 are hereby incorporated herein by reference.
3-B.* Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which agreement is hereby incorporated herein by reference.
3-C. Acknowledgement of rights and duties of the General Partners of the Partnership between ABPP Associates, L.P. (a successor Associated General Partner of the Partnership) and JMB Realty Corporation as of December 31, 1995 is hereby incorporated by reference to the Partnership's Report on Form 10Q/A (File No. 0-12140) dated November 25, 1996.
4-A. Document relating to the mortgage loan secured by the North Hills Mall in North Richland Hills, Texas, is hereby incorporated by reference to the Partnership's Report on Form 10-K (File No. 0-12432) dated December 31, 1995.
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in the 40 Broad Street office building in New York, New York are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-12432) dated December 31, 1985.
10-B. Acquisition documents relating to the purchase by the Partnership of an interest in the Royal Executive Park office complex in Rye Brook, New York are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-12432) dated December 30, 1983.
10-C. Acquisition documents relating to the purchase by the Partnership of the North Hills Mall in North Richland Hills, Texas are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-83599) dated June 29, 1983.
10-G. Sale documents relating to the sale of the 40 Broad Street office building in New York, New York are hereby incorporated by reference to the Partnership's report for December 30, 1997 on Form 8-K (File No. 0-12140) dated February 27, 1998.
10-H. Sale-Purchase Agreement with exhibits dated December 5, 1997 relating to the sale of the Royal Executive Park office complex in Rye Brook, New York between Royal Executive Park I, Royal Executive Park II, Royal Executive Park III and Reckson Operating Partnership, L.P. are hereby incorporated by reference to the Partnership's report for December 31, 1997 on Form 10-K (File No. 0-12140) dated March 25, 1998.
21. List of Subsidiaries.
24. Powers of Attorney.
27. Financial Data Schedule.
___________
* Previously filed as Exhibits 3-A and 3-B, respectively, to the Partnership's Report for December 31, 1992 on Form 10-K (File No. 0-12432) dated March 19, 1993.
(b) No Reports on Form 8-K were filed since the beginning of the last quarter of the period covered by this report.
No annual report or proxy material for the fiscal year 1998 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - X
By: JMB Realty Corporation Managing General Partner
GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date: March 22, 1999
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.
By: JMB Realty Corporation Managing General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 22, 1999
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 22, 1999
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 22, 1999
GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 22, 1999
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 22, 1999
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 22, 1999
By: STUART C. NATHAN* Stuart C. Nathan, Executive Vice President and Director Date: March 22, 1999
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 22, 1999
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE Page ------------ ---- 3-A. Pages 8-12, 57-59 and A-7 to A-11 of the Prospectus of the Partnership dated June 29, 1983, as supplemented September 12, 1983 and October 21, 1983 Yes --
3-B. Amended and Restated Agreement of Limited Partnership Yes --
3-C. Acknowledgement of rights and duties of the General Partners of the Partnership Yes --
4-A. Mortgage loan documents related to North Hills Mall Yes --
10-A. Acquisition documents related to the 40 Broad Street office building Yes --
10-B. Acquisition documents related to the Royal Executive Park office complex Yes --
10-C. Acquisition documents related to the North Hills Mall Yes --
10-D. Sale documents related to the Collin Creek Mall Yes --
10-E. Sale documents related to the Animas Valley Mall Yes --
10-F. Documents describing the transferred title of the Partnership's interest in the Pasadena Town Square Shopping Center Yes
10-G. Sale documents related to the 40 Broad Street office building Yes --
10-H. Purchase-Sale Agreement related to the Royal Executive Park office complex No --
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the Managing General Partner, affiliates or their management other than those described in Items 10 and 11 above.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements and Supplementary Data (See Index to Financial Statements filed with this annual report)
2. Exhibits.
3-A.* The Prospectus of the Partnership dated June 29, 1983 as supplemented September 12, 1983 and October 21, 1983, as filed with the Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated herein by reference. Copies of pages 8-12, 57-59 and A-7 to A-11 are hereby incorporated herein by reference.
3-B.* Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, which agreement is hereby incorporated herein by reference.
3-C. Acknowledgement of rights and duties of the General Partners of the Partnership between ABPP Associates, L.P. (a successor Associated General Partner of the Partnership) and JMB Realty Corporation as of December 31, 1995 is hereby incorporated by reference to the Partnership's Report on Form 10Q/A (File No. 0-12140) dated November 25, 1996.
4-A. Document relating to the mortgage loan secured by the North Hills Mall in North Richland Hills, Texas, is hereby incorporated by reference to the Partnership's Report on Form 10-K (File No. 0-12432) dated December 31, 1995.
10-A. Acquisition documents relating to the purchase by the Partnership of an interest in the 40 Broad Street office building in New York, New York are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-12432) dated December 31, 1985.
10-B. Acquisition documents relating to the purchase by the Partnership of an interest in the Royal Executive Park office complex in Rye Brook, New York are hereby incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-12432) dated December 30, 1983.
10-C. Acquisition documents relating to the purchase by the Partnership of the North Hills Mall in North Richland Hills, Texas are hereby incorporated by reference to the Partnership's Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-83599) dated June 29, 1983.
10-G. Sale documents relating to the sale of the 40 Broad Street office building in New York, New York are hereby incorporated by reference to the Partnership's report for December 30, 1997 on Form 8-K (File No. 0-12140) dated February 27, 1998.
10-H. Sale-Purchase Agreement with exhibits dated December 5, 1997 relating to the sale of the Royal Executive Park office complex in Rye Brook, New York between Royal Executive Park I, Royal Executive Park II, Royal Executive Park III and Reckson Operating Partnership, L.P. are hereby incorporated by reference to the Partnership's report for December 31, 1997 on Form 10-K (File No. 0-12140) dated March 25, 1998.
21. List of Subsidiaries.
24. Powers of Attorney.
27. Financial Data Schedule.
___________
* Previously filed as Exhibits 3-A and 3-B, respectively, to the Partnership's Report for December 31, 1992 on Form 10-K (File No. 0-12432) dated March 19, 1993.
(b) No Reports on Form 8-K were filed since the beginning of the last quarter of the period covered by this report.
No annual report or proxy material for the fiscal year 1998 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
JMB INCOME PROPERTIES, LTD. - X
By: JMB Realty Corporation Managing General Partner
GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date: March 22, 1999
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.
By: JMB Realty Corporation Managing General Partner
JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 22, 1999
NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 22, 1999
H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 22, 1999
GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 22, 1999
GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 22, 1999
A. LEE SACKS* By: A. Lee Sacks, Director Date: March 22, 1999
By: STUART C. NATHAN* Stuart C. Nathan, Executive Vice President and Director Date: March 22, 1999
*By: GAILEN J. HULL, Pursuant to a Power of Attorney
GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 22, 1999
EXHIBIT INDEX
DOCUMENT INCORPORATED BY REFERENCE Page ------------ ---- 3-A. Pages 8-12, 57-59 and A-7 to A-11 of the Prospectus of the Partnership dated June 29, 1983, as supplemented September 12, 1983 and October 21, 1983 Yes --
3-B. Amended and Restated Agreement of Limited Partnership Yes --
3-C. Acknowledgement of rights and duties of the General Partners of the Partnership Yes --
4-A. Mortgage loan documents related to North Hills Mall Yes --
10-A. Acquisition documents related to the 40 Broad Street office building Yes --
10-B. Acquisition documents related to the Royal Executive Park office complex Yes --
10-C. Acquisition documents related to the North Hills Mall Yes --
10-D. Sale documents related to the Collin Creek Mall Yes --
10-E. Sale documents related to the Animas Valley Mall Yes --
10-F. Documents describing the transferred title of the Partnership's interest in the Pasadena Town Square Shopping Center Yes
10-G. Sale documents related to the 40 Broad Street office building Yes --
10-H. Purchase-Sale Agreement related to the Royal Executive Park office complex No --
21. List of Subsidiaries No
24. Powers of Attorney No
27. Financial Data Schedule No