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United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly Report under Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

For the quarter ended March 31, 2012 Commission file #0-13545

 

 

JMB/245 PARK AVENUE ASSOCIATES, LTD.

(Exact name of registrant as specified in its charter)

 

 

Illinois

(State of organization)

36-3265541

(I.R.S. Employer Identification No.)

   

900 N. Michigan Ave., Chicago, Illinois

(Address of principal executive office)

60611

(Zip Code)

 

Registrant's telephone number, including area code: 312-915-1987

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") during the preceding 12 months (or for such a shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S    No £

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer £   Accelerated filer £  
  Non-accelerated filer £   Smaller reporting company S  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £    No S

1
 

TABLE OF CONTENTS

 

 

 

Part I   FINANCIAL INFORMATION    
         
Item 1.   Financial Statements 3  
         
Item 2.  

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

8  
         
Item 4.   Controls and Procedures 10  
         
Part II  OTHER INFORMATION    
         
Item 1.   Legal Proceedings 11  
         
Item 1A.   Risk Factors 11  
         
Item 6.   Exhibits 11  
         
SIGNATURES 12  

 

 

2
 

Part I.  Financial Information

     Item 1.  Financial Statements

 

JMB/245 PARK AVENUE ASSOCIATES, LTD.

(A Limited Partnership)

and Consolidated Venture

 

Consolidated Balance Sheets

 

March 31, 2012 and December 31, 2011

 

Assets

 

March 31,

2012

(Unaudited)

 

December 31,

2011

Current assets:          
    Cash and cash equivalents $ 10,708    $ 4,566 
          Total assets $ 10,708    $ 4,566 
           
Liabilities and Partners’ Capital Accounts (Deficits)
           
Current liabilities:          
   Accounts payable $ 14,056    $ 15,483 

    Demand note payable to an affiliate, including accrued

      interest of $2,683,364 at March 31, 2012 and

      $2,602,933 at December 31, 2011

  7,757,648      7,587,217 
           
Commitments and contingencies          
           
          Total liabilities   7,771,704      7,602,700 
           
Partners’ capital accounts (deficits):          
    General partners:          
      Capital contributions   26,664,247      26,664,247 
      Cumulative cash distributions   (480,000)     (480,000)
      Cumulative net losses   (11,034,183)     (11,024,411)
          Total general partners’ capital account   15,150,064      15,159,836 

    Limited partners (926 and 930 interests at March 31, 2012

      and December 31, 2011, respectively):

         
      Capital contributions, net of offering costs   113,057,394      113,057,394 
      Cumulative cash distributions   (7,520,000)     (7,520,000)
      Cumulative net losses   (128,448,454)     (128,295,364)
          Total limited partners’ capital account   (22,911,060)     (22,757,970)
           
          Total partners’ capital accounts (deficits)   (7,760,996)     (7,598,134)
           
          Total liabilities and partners’ capital accounts (deficits) $ 10,708    $ 4,566 

 

 

See accompanying notes to consolidated financial statements.

3
 

JMB/245 PARK AVENUE ASSOCIATES, LTD.

(a Limited Partnership)

and Consolidated Venture

 

Consolidated Statements of Operations

 

Three Months Ended March 31, 2012 and 2011

 

(Unaudited)

 

 

 

  2012   2011
Expenses:          
  Interest $ 80,431    $ 75,096 
  Professional services   57,453      51,200 
  General and administrative   24,978      14,158 
           
       Total expenses   162,862      140,454 
           
      Net loss $ (162,862)   $ (140,454)
           
      Net loss per limited partnership interest $ (165)   $ (142)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

4
 

JMB/245 PARK AVENUE ASSOCIATES, LTD.

(a Limited Partnership)

and Consolidated Venture

 

Consolidated Statements of Cash Flows

 

Three Months Ended March 31, 2012 and 2011

(Unaudited)

 

 

 

  2012   2011
Cash  flows from operating activities:          
      Net loss $ (162,862)   $ (140,454)
      Changes in:          
            Accounts payable   (1,427)     5,157 
            Interest payable to affiliates   80,431      75,096 
                  Net cash used in operating activities   (83,858)     (60,201)
           
Cash flows from financing activities:          
      Fundings of demand note payable   90,000      40,000 
                  Net cash provided by financing activities   90,000      40,000 
           
                  Net increase (decrease) in cash   6,142      (20,201)
           
                  Cash and cash equivalents, beginning of period   4,566      24,551 
           
                  Cash and cash equivalents, end of period $ 10,708    $ 4,350 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

5
 

JMB/245 PARK AVENUE ASSOCIATES, LTD.

(a Limited Partnership)

and Consolidated Venture

 

Notes to Consolidated Financial Statements

 

March 31, 2012 and 2011

(Unaudited)

 

 

General

 

Readers of this quarterly report should refer to the Partnership's audited financial statements for the fiscal year ended December 31, 2011, which are included in the Partnership's 2011 Annual Report on Form 10-K (File No. 0-13545) filed on March 13, 2012, as certain footnote disclosures which would substantially duplicate those contained in such audited financial statements have been omitted from this report. Capitalized terms used but not defined in this quarterly report have the same meanings as in the Partnership's 2011 Annual Report on Form 10-K.

 

JMB/245 Park Avenue Associates, Ltd. (the "Partnership"), through JMB 245 Park Avenue Holding Company, LLC ("245 Park Holding"), owns an approximate .5% general partner interest in Brookfield Financial Properties, L.P. ("BFP, LP"), formerly known as World Financial Properties, L.P. The ownership is represented by 567.375 Class A Units. BFP, LP is a limited partnership that holds equity investments in commercial office buildings, certain of which are owned subject to ground leases of the underlying land. Business activities consist primarily of rentals to a variety of commercial tenants and the ultimate sale or disposition of such real estate. 245 Park Holding is a limited liability company in which the Partnership is a 99% member and BFP Property GP Corp. ("BFP GP"), which is an affiliate of the managing general partner of BFP, LP, is a 1% member. The accompanying consolidated financial statements include the accounts of the Partnership and its majority-owned limited liability company, 245 Park Holding. The effect of all transactions between the Partnership and its consolidated venture has been eliminated.

 

The Partnership has no future funding obligations to BFP, LP. In addition, the Partnership has not received distributions from BFP, LP, has no indication from BFP, LP that it intends to make distributions in the future, has no influence or control over the day-to-day affairs of BFP, LP, and its investment in BFP, LP has been reduced to less than 1%. Accordingly, the Partnership discontinued the application of the equity method of accounting, recorded its investment at zero, and no longer recognizes its share of earnings or losses from BFP, LP.

 

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 these estimates.

 

 

6
 

The Partnership's future liquidity and ability to continue as a going concern is dependent upon additional cash advances from JMB Realty Corporation ("JMB") and there is no assurance that such advances will be made. JMB's advances, as well as consolidated balances from prior notes, are evidenced by a demand note (the "Demand Note"), dated December 1, 2004, which Demand Note is secured by the Partnership's indirect interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time. This uncertainty and the fact that the Partnership has a net capital deficiency raise substantial doubt about the Partnership's ability to continue as a going concern. No adjustments to these consolidated financial statements for this uncertainty have been made.

 

Transactions with Affiliates

 

The operations of the Partnership since 2005 have been funded entirely by cash advances from JMB which totaled $1,592,000 as of March 31, 2012 ($90,000 of which was funded during the three months ended March 31, 2012) and which, together with the amount owed and rolled over from prior notes, are evidenced by the Demand Note. There were no additional cash advances made by JMB under the Demand Note through May 9, 2012, the date this report was filed. The Demand Note, which had an outstanding balance of unpaid principal and accrued interest at March 31, 2012 of $7,757,648, accrues interest at prime plus 1 percent, 4.25% at March 31, 2012, with interest compounded quarterly and included in principal, and is secured by the Partnership's interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of the Demand Note together with accrued and unpaid interest at any time.

 

In accordance with the Partnership Agreement, the Corporate General Partner and its affiliates are entitled to receive payment or 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 real property investments. Additionally, the Corporate General Partner and its affiliates are entitled to reimbursements for portfolio management, legal and accounting services. The Partnership incurred costs of $4,160 and $1,393 for the three months ended March 31, 2012 and 2011, respectively, for these services. The Partnership owed the Corporate General Partner and its affiliates $5,000 and $11,923 for these services at March 31, 2012 and December 31, 2011, respectively.

 

Any reimbursable amounts currently payable to the Corporate General Partner and their affiliates do not bear interest.

 

Adjustments

 

In the opinion of the Corporate General Partner, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation (assuming the Partnership continues as a going concern) have been made to the accompanying financial statements as of March 31, 2012 and 2011, and for the three months ended March 31, 2012 and 2011.

 

 

7
 

Part I.  Financial Information

 

    Item 2.  Management’s Discussion and Analysis of Financial Condition and

                  Results of Operations

 

Liquidity and Capital Resources

 

Capitalized terms used herein but not defined have the same meanings as in the Partnership's 2011 Annual Report on Form 10-K.

 

The Partnership's future liquidity and ability to continue as a going concern are dependent upon additional cash advances from JMB and there is no assurance that such advances will continue to be made. This uncertainty and the fact that the Partnership has a net capital deficiency raise substantial doubt about the Partnership's ability to continue as a going concern. The operations of the Partnership since 2005 have been funded entirely by cash advances from JMB which totaled $1,592,000 as of March 31, 2012 ($90,000 of which was funded during the three months ended March 31, 2012) and which, together with the amount owed and rolled over from prior notes, are evidenced by the Demand Note. There were no additional cash advances made by JMB under the Demand Note through May 9, 2012, the date that this report was filed. The Demand Note, which had an outstanding balance of unpaid principal and accrued interest at March 31, 2012 of $7,757,648, accrues interest at prime plus 1 percent, with interest compounded quarterly and included in principal, and is secured by the Partnership's interest in BFP, LP. JMB is under no obligation to make further advances and has the right to require repayment of advances previously made together with accrued and unpaid interest at any time. These conditions raise substantial doubt about the Partnership's ability to continue as a going concern.

 

BFP, LP has the right to sell the BFP 245 Interest and any of its other assets without the consent of the Partnership. Under certain circumstances, the Partnership may have obligations for Federal or state withholding or estimated tax payments on behalf of certain Holders of Interests. Notwithstanding any such obligations, the Partnership believes that the Holders of Interests have the ultimate responsibility for the timely filing of state and Federal tax returns and the payment of all related taxes, including the reimbursement to the Partnership of all withholding tax payments or estimated tax payments made on their behalf.

 

 

8
 

The Partnership holds, through 245 Park Holding, an approximate .5% general partner interest in BFP, LP. Persons who are interested in obtaining information concerning BFP, LP should be aware that Brookfield Office Properties, Inc. (“BOP”), formerly Brookfield Properties Corporation files periodic reports and other information, which includes information about BFP, LP and its assets and operations, with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934. BOP's filings with the SEC are available to the public through the SEC's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system accessible through the SEC's web site at http://www.sec.gov. Interested persons also may read and copy any report, statement or other information that BOP has filed with the SEC at its Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549, or may call the SEC for more information on obtaining information from the SEC's public reference rooms. This description is provided for informational purposes only. The Partnership does not prepare, and is not responsible for the preparation of, any of BOP’s reports or other information it files with the SEC including, but not limited to, those concerning the business and financial results of BFP, LP. Those reports and other information are not intended to be incorporated by reference into this report on Form 10-Q, and the Partnership has no responsibility for the accuracy of any information included in BOP's reports or other information.

 

BFP, LP has a substantial amount of indebtedness outstanding. Any proceeds from the sale of the buildings in which BFP, LP has an interest would likely be first applied to repayment of the mortgage and other indebtedness of BFP, LP and also likely to be retained for future investment. In any event, any net proceeds obtained by the Partnership could then be available to satisfy the Demand Note (the balance of which exceeds the maximum potential amount to be received on redemption). Only after such applications would any remaining proceeds be available to be distributed to the Holders of Interests. Similarly, in the event of a sale or other disposition of the Retained Interest (including a redemption), the Partnership's share of the proceeds of such sale or disposition would first be applied to satisfy the Demand Note. Only after such application would remaining proceeds, if any, be available to be distributed to the Holders of Interests.

 

The outstanding balance of the Demand Note at March 31, 2012 is approximately $7,760,000 and such Demand Note continues to accrue interest and be increased in principal amount by additional advances from JMB. As such amount exceeds the maximum proceeds payable to the Partnership under the amended limited partnership agreement of BFP, LP at March 31, 2012, it is unlikely that the Holders of Interests ever will receive any further distributions from the Partnership. However, it is expected that Holders of Interests will be allocated a substantial amount of additional gain for Federal and state income tax purposes as a result of transactions which may occur over the remaining term of the Partnership. These transactions include (i) a sale or other disposition of the 245 Park Avenue property or other properties in which BFP, LP owns an interest; (ii) a sale or other disposition of the Partnership's interest in BFP, LP (including a redemption of the Retained Interest); or (iii) a significant reduction in the indebtedness of the 245 Park Avenue property or other indebtedness of the Partnership for Federal and state income tax purposes. Moreover, none of these transactions is expected to result in Holders of Interests receiving any cash distributions. The amount of gain for Federal and state income tax purposes to be allocated to a Holder of Interests over the remaining term of the Partnership is expected to be, at a minimum, equal to all or most of the amount of such Holder's deficit capital account for tax purposes. Such gain may be offset by suspended losses from prior years (if any) that have been allocated to the Holder of Interests. The actual tax liability of each Holder of Interests will depend on such Holder's own tax situation.

 

9
 

Results of Operations

 

The operations of the Partnership since 2005 have been funded entirely by cash advances from JMB which totaled $1,592,000 as of March 31, 2012 ($90,000 of which was funded during the three months ended March 31, 2012) and which, together with the amount owed and rolled over from prior notes, are evidenced by the Demand Note at March 31, 2012.

 

The increase in demand note payable to an affiliate at March 31, 2012 as compared to December 31, 2011 is due to fundings totaling $90,000 and interest of approximately $80,400 added to the principal in 2012.

 

The increase in interest expense for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011 is due to additional fundings under the Demand Note.

 

The increase in professional services for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011 is primarily due to the timing of billings for tax services.

 

The increase in general and administrative expenses for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011 is due to an increase in costs for SEC reporting and compliance requirements.

 

 

Item 4.  Controls and Procedures

 

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-15(e) of the Securities Exchange Act of 1934 promulgated thereunder, the principal executive officer and the principal financial officer of the Partnership have evaluated the effectiveness of the Partnership's disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and the principal financial officer have concluded that the Partnership's disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in this report was recorded, processed, summarized and reported within the time period specified in the applicable rules and form of the Securities and Exchange Commission for this report. The Partnership's disclosure controls and procedures do not include the disclosure controls and procedures of BFP, LP, which the Partnership has no ability to control.

 

Changes in Internal Control over Financial Reporting

 

There were no significant changes to our internal control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) of the Securities Exchange Act of 1934) during the three months ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

10
 

Part II.  Other Information

 

    Item 1.  Legal Proceedings

 

The Partnership is not subject to any material pending legal proceedings.

 

 

    Item 1A. Risk Factors

 

There has been no known material changes from risk factors as previously disclosed in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2011.

 

 

    Item 6.  Exhibits

 

  a. Exhibits.
       
    3.1. Amended and Restated Agreement of Limited Partnership of the Partnership is hereby incorporated herein by reference to the Partnership's Report for June 30, 2002 on Form 10-Q (File No. 0-13545) dated August 21, 2002.
       
    3.2. Amendment to the Amended and Restated Agreement of Limited Partnership of JMB/245 Park Avenue Associates, Ltd. by and between JMB Park Avenue, Inc. and Park Associates, L.P. dated January 1, 1994 is hereby incorporated herein by reference to Exhibit 3-B to the Partnership's Report for March 31, 1995 on Form 10-Q (File No. 0-13545) dated May 11, 1995.
       
    4.1. Security Agreement, dated May 7, 2001, by JMB/245 Park Avenue Associates, Ltd. in favor of JMB Realty Corporation is hereby incorporated herein by reference to the Partnership's Report for September 30, 2004 on Form 10-Q (File No. 0-13545) dated November 10, 2004.
       
    4.2. Promissory Note, payable on demand, dated December 1, 2004, in the original amount of $172,000, is hereby incorporated herein by reference to the Partnership's Report for December 1, 2004 on Form 8-K (File No. 0-13545), dated December 7, 2004.
       
    31.1. Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities and Exchange Act of 1934, as amended, is filed herewith.
       
    31.2. Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities and Exchange Act of 1934, as amended, is filed herewith.
       
    32 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith.

 

 

11
 

SIGNATURES

 

 

Pursuant to the requirements 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.

 

  JMB/245 PARK AVENUE ASSOCIATES, LTD.
     
  By:

JMB Park Avenue, Inc.

Corporate General Partner

     
    GAILEN J. HULL
  By: Gailen J. Hull, Vice President
  Date: May 9, 2012

 

 

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacities and on the date indicated.

 

    GAILEN J. HULL
  By:

Gailen J. Hull, Chief Financial Officer

and Principal Accounting Officer

  Date: May 9, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12