UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K AMENDMENT NO. 1
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995. Commission file number 0-11200
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Minnesota 41-1398390
510 Marquette Avenue, Suite 300
Minneapolis, Minnesota
55402
Registrant's telephone number (612) 338-2828
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the act: $11,000,000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _x_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K. [ ]
Forms 8-K dated October 1, 1991 with an amendment dated October 16, 1991 and May
12, 1992 are incorporated by reference in this report.
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
PART I
Item 1. Business
The registrant, Griffin Real Estate Fund-II, A Limited Partnership (the
"Partnership"), was organized on September 19, 1980 under the laws of the State
of Minnesota. The Partnership was formed by the general partner, Investment
Associates, a Minnesota general partnership, to acquire existing,
income-producing real properties for rental purposes. On February 2, 1981 the
Partnership commenced an offering of $10,000,000 pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. The offering terminated
December 15, 1982 upon the acceptance of 2200 units $11,000,000), the maximum
allowed under the registration.
The Partnership is engaged solely in the business of real estate
investment, and is limiting its investment to the real property acquired at its
inception plus reasonable repairs and capital improvements. The goal of these
investments is to generate both capital gain income and current income from cash
flow. The Partnership does not invest in real estate mortgages, securities of or
interests in persons primarily engaged in real estate activities, or in other
securities. A presentation of information about industry segments is not
applicable and would not be material to an understanding of the Partnership's
business taken as a whole.
The General Partner manages and controls all of the affairs of the
Partnership, including deciding when and on what terms properties should be sold
or refinanced.
As of December 31, 1995 the Partnership has made the real property
investments set forth in the following table:
Name, type of property Date of Type of
and location (a) Size Purchase Ownership(b)
1. Villas of Patricia Park Apts. 120 units 12/30/81 Mortgage Note
Urbandale, Iowa
2. Candleridge Apartments 138 units 12/30/81 Mortgage Note
Urbandale, Iowa
3. Lunnonhaus Village Apts. 285 units 5/06/82 Mortgage Note
Golden, Colorado
4. Olde English Village Apts. 264 units 8/31/82 Mortgage Note
West Des Moines, Iowa
(a) Reference is made to Schedule III of this annual report.
(b) Reference is made to Note 3 of Notes to Financial Statements
filed with this annual report for the current outstanding
principal balances and a description of the long-term
indebtedness secured by the Partnership's real property
investments;
The Terms of Transactions between the Partnership and affiliates of the
General Partner are described in Item 11 to which reference is hereby made.
It is the Partnership's policy to conduct its business activities in accordance
with the Partnership Agreement which may not be changed without a vote of a
majority of the Limited Partnership units outstanding. Pursuant to the
Partnership Agreement, the Partnership may not issue senior securities, make
loans to other persons, invest in the securities of other entities for the
purposes of exercising control, underwrite the securities of others or offer
securities in exchange for property.
As circumstances dictate, the Partnership has the right under the Partnership
Agreement to borrow money, and to use its investments in real property as
collateral for that debt up to a maximum of 75% loan to value. The Olde English
Village. Apartments were refinanced on June 30, 1994. No other refinancings
occurred in 1995, 1994, or 1993. There is no limit on the number of mortgages
that may be taken out on any one piece of the Partnership's real properties.
The Partnership Agreement provides for the redemption of limited partnership
units under certain circumstances. In 1995, 1994, and 1993 the Partnership
redeemed two, zero and seven units respectively.
It is the policy of the General Partner to report on a quarterly basis to the
limited partners. Each interim report contains limited financial reporting with
a management discussion of operations and goals for the Partnership. The annual
report contains financial statements that are audited by independent public
accountants, and is accompanied by a management discussion of operations and
goals.
AVERAGE EFFECTIVE ANNUAL
RENTAL PER UNIT
VILLAS OF
OLDE ENGLISH PATRICIA
CANDLERIDGE LUNNONHAUS VILLAGE APARTMENTS PARK RAINTREE
APARTMENTS VILLAGE W.DES APARTMENTS APARTMENTS
URBANDALE, APARTMENTS MOINES, IOWA URBANDALE, LITTLE ROCK,
IOWA GOLDEN, CO IOWA ARKANSAS
1995 $ 6,605 $ 6,699 $ 6,329 $ 6,435 *
1994 6,345 6,311 6,094 6,214 *
1993 6,148 6,054 5,942 6,005 *
1992 5,988 5,786 5,834 5,856 $ 4,197
1991 5,890 5,606 5,698 5,717 4,118
* Indicates the Partnership did not own the property at any time during
the year.
SCHEDULE OF REAL
ESTATE TAXES
<TABLE>
<CAPTION>
VILLAS OF
OLDE ENGLISH PATRICIA PARK
CANDLERIDGE LUNNONHAUS VILLAGE APARTMENTS RAINTREE
APARTMENTS VILLAGE APARTMENTS URBANDALE, APARTMENTS
URBANDALE, IOWA APARTMENTS WEST DES IOWA LITTLE ROCK,
GOLDEN, CO MOINES, IOWA ARKANSAS
<S> <C> <C> <C> <C> <C>
1995
TAX RATE (a) 89.412 (a) (a) *
ASSESSMENT (a) $66,244 (a) (a) *
1994
TAX RATE 34.39191 90.98 34.66721 34.39191 *
ASSESSMENT $128,614 $59,799 $242,212 $119,900 *
1993
TAX RATE 35.11437 90.98 34.98463 35.11437 *
ASSESSMENT $131,314 $59,799 $244,138 $122,420 *
1992
TAX RATE 34.86661 90.98 34.91742 34.86661 64.234
ASSESSMENT $130,388 $91,553 $236,272 $101,398 $59,610
1991
TAX RATE 34.90392 83.125 35.03054 34.90392 62.134
ASSESSMENT $130,528 $95,766 $237,038 $101,722 $57,663
</TABLE>
* Indicates the Partnership did not own the property at any time during
the year.
(a) Data not yet available
It is the opinion of the General Partner that the Partnership's properties are
adequately covered by insurance.
Item 3. Legal Proceedings
On September 20, 1995 Everest Investors, LLC ("Everest") filed a
lawsuit in Hennepin County Minnesota's Fourth Judicial District Court against
Investment Associates ("General Partner"), the general partner of Griffin Real
Estate Fund-II, A Limited Partnership ("Partnership"). The lawsuit alleged that
the General Partner had wrongfully denied Everest access to the books and
records of the Partnership. The court granted, in part, Everest's request for
access to the books and records and ordered the General Partner to provide
Everest access to these records. The General Partner complied with this court
order. Everest continued to seek access to additional books and records of the
Partnership beyond the scope of the court order. The General Partner vigorously
defended the Partnership's right to keep its proprietary records from being
reviewed by Everest, who has not been admitted as a limited partner of the
Partnership despite having been assigned a financial interest in 126 units by
some original limited partners. The General Partner filed for a dismissal of the
matter. The court heard arguments on September 29, 1995, October 26, 1995 and
November 17, 1995. On November 27, 1995 the court dismissed Everest's lawsuit.
Everest appealed the dismissal in the Minnesota Court of Appeals on March 12,
1996 and a decision is pending.
Item 6. Selected Financial Data
Griffin Real Estate Fund-II, A Limited
Partnership For the Years Ended December 31,
1995, 1994, 1993, 1992, and 1991
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Revenues $ 5,472,890 $ 5,148,672 $ 4,885,147 $ 4,991,815 $ 5,433,785
Income (loss) before
extraordinary item (d) 324,981 151,515 199,138 (409,243) (967,255)
Income (loss) before
extraordinary item
per limited partner
unit (c) 141.10 65.76 86.34 (176.91) (417.68)
Extraordinary Item:
Gain on foreclosure
of property - - - 739,559 -
Extraordinary Item:
Gain on foreclosure
of property per
limited partner
unit (c) - - - 319.72 -
Net Income (Loss) 324,981 151,515 199,138 330,316 (967,255)
Net Income (Loss) per
limited partner
unit (c) 141.10 65.76 86.34 142.81 (417.68)
Total Assets 14,837,677 15,184,304 15,175,828 15,154,826 19,840,092
Mortgages and
Contracts for deed 14,801,452 15,067,907 15,245,768 15,201,883 19,458,092
Cash distributions
per limited partner
unit (b) $ 187.35 - - - -
</TABLE>
(a) The above selected financial data should be read in conjunction with
the financial statements and the related notes appearing in Exhibit I
in this annual report.
(b) Cash distributions of $1,500 per Limited Partnership unit have been
made to the Limited Partners since the inception of the Partnership.
None of these distributions have resulted in taxable income to such
Limited Partners and have therefore all represented a return of capital
under generally accepted accounting principals. Each Partner's taxable
income (or loss) from the Partnership in each year is equal to his
allocable share of the taxable income (loss) of the Partnership,
without regard to cash generated or distributed by the Partnership.
(c) Income (loss) before extraordinary item, extraordinary item, and net
income (loss) per limited partnership unit is based upon the number of
limited partnership units outstanding during the period (2,188 for
current year, using weighted average).
(d) 1992 figures reflect the foreclosure of Raintree Apartments on May 1,
1992.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Everest Investors, LLC, A California Limited Liability Company
("Everest") commenced a tender offer to purchase up to 600 of the outstanding
limited partnership interests ("units") at a purchase price of $2,387.50 per
unit net to the seller in cash, subject to the terms and conditions set forth in
an offer to purchase dated April 21, 1995. The General Partner of the
Partnership determined that the offer price was inadequate in comparison to the
liquidation value of the units and recommended to the Limited Partners that they
not tender any units in response to the Everest Offer to Purchase. The tender
offer expired on July 12, 1995, with Everest acquiring a total of 126 units.
Everest was also attempting to change the Partnership Agreement in
several ways by sending the Limited Partners a solicitation of consent, which
expired on August 18, 1995. The General Partner had determined that the proposed
changes were not in the interests of the Limited Partners and recommended that
consent to change not be given. The solicitation of consent was unsuccessful.
RESULTS OF OPERATIONS
Summary of Operations - 1995 Compared to 1994
During 1995, the Partnership and its properties turned in another solid
year of performance. As a result of the improved performance of the property
portfolio, the Partnership was able to continue distributions in 1995. Units
held of record for calendar year 1995 received a distribution of $320 per unit
(including distributions paid in January 1996) or an annual return of 6.4%.
Physical occupancy increased an average of 1.1% from 96.8% to 97.7%.
Individually physical occupancy increased at two of the four properties.
Candleridge Apartments increased from an average of 95% to 97.5% and Olde
English Village Apartments increased from an average of 95.5% to 98.3%.
Lunnonhaus Apartments physical occupancy remained the same at an average of
99.5% for both years. Physical occupancy at Villas of Patricia Park Apartments
declined from an average of 97% to 95.5%.
Rental rates of the property portfolio increased 4.7%. Individually
rental rates increased at all properties, with increases ranging from the
smallest increase of 3.5% at Villas of Patricia Park Apartments to the greatest
increase of 6.2% at Lunnonhaus Village Apartments.
As a result of increased rental rates and improved occupancy, plus the
increase in interest and other income, overall revenue increased by
approximately $324,200.
Interest expense increased as a result of the increased interest rate
on the Olde English Village Apartments mortgage debt. The Olde English Village
loan terms include an adjustable rate of interest which adjusts every three
months based on three month treasury bills. Interest rate increased from 7.8% in
1994 to a high of 9.3% in May of 1995. Interest rates began to decline again in
1995 ending the year at 8.8%. The mortgage debt on the other three properties
have a fixed rate of interest which was the same in both years.
Real estate tax expense declined in total by approximately $29,400 as a
result of overestimating the real estate tax liability for 1994. Actual assessed
values in 1995 were not increased materially from that of 1994.
The decline in utilities expense was essentially due to the approximate
$39,000 decline in utility expense at Lunnonhaus Village Apartments. The decline
in utilities was a result of two factors. A milder winter heating season during
the winter of 1994-1995 versus 1993-1994. Also savings resulted from prior
expenditures on energy saving devices in the heating system throughout the
property.
The approximate $133,000 increase in administrative expenses was
essentially due to the legal fees incurred by the Partnership in connection with
Everest's tender offer and solicitation of consent.
Despite the overall increase in total expense, the Partnership
increased its Net Operating Income by approximately $173,500.
During the year, the Partnership invested approximately $597,000 in
physical improvements to the properties. The majority of these expenditures were
made for physical improvements to the Olde English Village Apartments and
Lunnonhaus Village Apartments. At Olde English Village, the exterior renovations
were completed and a major landscaping project was also completed. At Lunnonhaus
Village, the expenditures were incurred for landscaping. At Candleridge and
Villas of Patricia Park Apartments, expenditures were made for improvements to
the garages and landscaping.
Summary of Operations - 1994 Compared to 1993
Rental rates for the property portfolio on average increased 3.7%.
Physical occupancy for the property portfolio on average increased from 95.8% to
96.8%. Due to improved occupancy and collections, total revenue increased by
approximately $263,500. Individually, each property in the portfolio experienced
an increase in revenue.
The approximate $39,400 decline in interest expense is essentially due
to the refinancing of Olde English Village Apartments, which was completed on
June 30, 1994. The refinancing reduced the blended interest rate for the retired
first and second mortgages from 9.3% to 7.8%. The monthly debt service was
initially reduced from $48,674 to $44,675, a savings of $3,999 per month,
however, rising short term interest rates have caused the loan's adjustable
interest rate to increase correspondingly.
Real estate tax expense increased by approximately $81,300 due to
rising property assessments. Assessed valuations are used as a base for the
computation of the real estate taxes. Assessed valuations have increased because
of improved property operations throughout the portfolio.
Repairs and maintenance expense increased by approximately $281,800 as
a result of additional expenditures made at all properties which were not
required to be capitalized as additional property purchases. The majority of
these expenditures were made at Lunnonhaus and Olde English Village Apartments
for various building repairs and cosmetic improvements.
Although revenue for the year increased, increasing expenses, in
particular in the repair and maintenance categories resulted in a decline in Net
Income.
Improved operating results in the last quarter of 1994 allowed the
Partnership to resume distributions to holders of record on December 31, 1994 in
the amount of $62.50 per unit or an annualized return of 5%.
LIQUIDITY
The Partnership had approximately $1,044,300 of cash reserves on hand
at December 31, 1995. This should provide the Partnership with ample liquidity
with which to operate the properties and provide for capitol improvements to the
property portfolio in the near term and into the future. The Partnership will be
committing approximately $250,000 to external improvements to Lunnonhaus Village
Apartments and approximately $150,000 to the remodeling of the entry ways at
Olde English Apartments.
Although there can be no assurance of continuing cash flow from
property operations, if anticipated cash flow is realized, the Partnership
intends on continuing distributions in 1996 at an annual rate of $300 or 6% per
unit.
Although there can be no assurance that a sale will be completed,
Partnership plans call for the sale of Candleridge and Villas of Patricia Park
Apartments during 1996. A purchaser has not yet been identified, but a marketing
plan has been established. The plan includes developing marketing materials,
offering the property in advertising in several publications and mass mailing to
prospective buyers. Upon the successful completion of the sale of these
properties, sales proceeds will be distributed.
OCCUPANCY TABLE
<TABLE>
<CAPTION>
Lunnonhaus Olde English Raintree
Candleridge Village Village Villas of Patricia Apartments
Apartments Apartments Apartments Park Apartments Little Rock
Urbandale, IA Golden, CO W. Des Moines, IA Urbandale, IA Arkansas
------------- ---------- ----------------- ------------- --------
<S> <C> <C> <C> <C> <C>
3/31/95 95% 100% 97% 93% *
6/30/95 99% 99% 99% 96% *
9/30/95 97% 99% 100% 98% *
12/31/95 99% 100% 97% 95% *
3/31/94 92% 100% 93% 97% *
6/30/94 98% 99% 92% 95% *
9/30/94 96% 100% 99% 98% *
12/31/94 94% 99% 98% 98% *
3/31/93 94% 99% 90% 95% *
6/30/93 99% 98% 97% 100% *
9/30/93 99% 99% 97% 98% *
12/31/93 92% 99% 94% 94% *
3/31/92 97% 95% 92% 98% 89%
6/30/92 93% 87% 92% 97% *
9/30/92 97% 94% 98% 97% *
12/31/92 94% 96% 91% 95% *
3/31/91 94% 89% 91% 98% 94%
6/30/91 96% 88% 98% 98% 93%
9/30/91 98% 94% 99% 99% 88%
12/31/91 96% 95% 93% 94% 94%
</TABLE>
* Indicates the Partnership did not own the property at the end of the quarter.
Item 12. Limited Partnership Ownership of Certain Beneficial Owners and
Management
Everest Investors, LLC, ("Everest") located at 11755 Wilshire
Boulevard, Suite 2360, Los Angeles, California 90025, is the only person or
"group" known by the Partnership to own beneficially more than 5% of the
outstanding units of the Partnership. Everest Investors, LLC has only a
financial interest in their units which were assigned by the original owners of
126 units. Everest has not been admitted as a limited partner of the
Partnership.
Amount and Nature Percent of Class
of Beneficial Outstanding at
Title of Class Ownership December 31, 1995
Limited Partnership Units 126 units, purchased at 5.8%
$2,387.50 per unit
The individual general partners of the General Partner as a group have
the following interest in the Partnership:
Amount and Nature Percent of Class
of Beneficial Outstanding at
Title of Class Ownership December 31, 1995
Limited Partnership Units 26 units purchased at 1.2%
$4,462 per unit
No partner of the General Partner possesses a right to acquire
beneficial ownership of interest of the Partnership.
There exists no arrangement, known to the Partnership, the operation
of which may at subsequent date result in a change in control of the
Partnership.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: May 24, 1996 Griffin Real Estate Fund-II,
A Limited Partnership
By: /s/ Larry D. Fransen
Larry D. Fransen
for the General Partner
Investment Associates
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following person on behalf of the Registrant
and in the capacity and on the date indicated.
Dated: May 24, 1996 By: /s/ Larry D. Fransen
Larry D. Fransen
Managing General Partner
of the General Partner
Investment Associates
EXHIBIT I
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
INCLUDED IN ANNUAL REPORT (FORM 10-K)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
TABLE OF CONTENTS
Page
Independent Auditor's Report .......................................... 1
Balance Sheets, December 31, 1995 and 1994............................. 2
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993....................................... 3
Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993................................. 4
Statements of Changes in Partners' Deficit
for the Years Ended December 31, 1995, 1994 and 1993................... 5
Notes to Financial Statements.......................................... 6-10
Financial Statement Schedules.......................................... 11
III Real Estate and Accumulated Depreciation,
December 31, 1995.......................................... 11
All schedules other than those indicated in the Table of Contents have
been omitted as the required information is inapplicable or the
information is presented in the financial statements or related notes.
INDEPENDENT AUDITOR'S REPORT
Griffin Real Estate Fund-II,
A Limited Partnership
Minneapolis, Minnesota
We have audited the accompanying balance sheets of Griffin Real Estate Fund-II,
A Limited Partnership, as of December 31, 1995 and 1994, and the related
statements of operations, changes in partner's deficit, and cash flows for each
of the years in the three-year period ended December 31, 1995. Our audits also
included the financial statement schedules listed in the table of contents at
Exhibit I. These financial statements and financial statement schedules are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Griffin Real Estate Fund-II, A
Limited Partnership, as of December 31, 1995 and 1994, and the results of its
operations and its cash flows of each of the years in the three-year period
ended December 31, 1995 in conformity with generally accepted accounting
principles. Also, in our opinion, the financial statement schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
LARSON, ALLEN, WEISHAIR & CO., LLP
Minneapolis, Minnesota
March 11, 1996
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
1995 1994
------------ ------------
ASSETS
Cash and cash equivalents $ 1,044,305 $ 742,672
Escrow deposits 331,948 625,910
Receivables and other assets 45,562 49,902
------------ ------------
Total 1,421,815 1,418,484
------------ ------------
PROPERTY AND EQUIPMENT:
Land 2,160,676 2,160,676
Buildings and improvements 22,028,985 21,432,061
Furniture and equipment 2,076,669 2,076,669
------------ ------------
Total 26,266,330 25,669,406
Less accumulated depreciation 13,062,669 12,183,949
------------ ------------
Property and equipment - net 13,203,661 13,485,457
------------ ------------
Debt financing costs (net of accumulated
amortization - 1995, $158,997;
1994, $77,350) 212,201 280,363
------------ ------------
TOTAL ASSETS $ 14,837,677 $ 15,184,304
============ ============
LIABILITIES AND PARTNERS' DEFICIT
LIABILITIES:
Accounts payable:
Affiliate $ 27,712 $ 24,778
Other 151,350 125,637
Security deposits 143,572 131,777
Accrued expenses:
Real estate taxes 559,044 569,145
Interest 100,506 95,976
Mortgage notes payable 14,801,452 15,067,907
------------ ------------
Total liabilities 15,783,636 16,015,220
------------ ------------
PARTNERS' DEFICIT:
General Partner (521,918) (516,592)
Limited Partners (424,041) (314,324)
------------ ------------
Total Partners' Deficit (945,959) (830,916)
------------ ------------
TOTAL LIABILITIES AND PARTNERS'
DEFICIT $ 14,837,677 $ 15,184,304
============ ============
See Notes to Financial Statements
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
----------- ----------- -----------
REVENUES:
Rent (less vacancies:
1995, $117,629; 1994, $190,560;
1993, $237,699) $ 5,142,356 $ 4,833,598 $ 4,605,304
Interest 47,135 34,108 16,661
Other 283,399 280,966 263,182
----------- ----------- -----------
Total revenues 5,472,890 5,148,672 4,885,147
----------- ----------- -----------
EXPENSES:
Interest 1,239,396 1,233,398 1,272,829
Depreciation and amortization 960,367 911,261 886,031
Real estate taxes 546,083 575,493 494,179
Repairs and maintenance 716,057 703,387 421,603
Utilities 460,305 498,909 487,086
Salaries and employee benefits 509,800 502,232 540,271
Management fees to related parties 292,361 269,439 254,764
Administrative 260,500 127,508 149,957
Insurance 151,849 163,071 162,676
Bad debts (227) 6,495 16,613
Other 11,418 5,964 --
----------- ----------- -----------
Total expenses 5,147,909 4,997,157 4,686,009
----------- ----------- -----------
NET INCOME $ 324,981 $ 151,515 $ 199,138
=========== =========== ===========
NET INCOME ALLOCATED
TO GENERAL PARTNER $ 16,249 $ 7,576 $ 9,957
=========== =========== ===========
NET INCOME ALLOCATED
TO LIMITED PARTNERS $ 308,732 $ 143,939 $ 189,181
=========== =========== ===========
PER UNIT:
NET INCOME $ 141.10 $ 65.76 $ 86.34
=========== =========== ===========
See Notes to Financial Statements
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 324,981 $ 151,515 $ 199,138
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation and amortization 960,367 911,261 886,031
Decrease (increase) in:
Receivables and other assets 4,340 9,416 (9,542)
Escrows 293,962 (243,562) (33,246)
Increase (decrease) in:
Accounts payable 28,647 2,271 (160,733)
Security deposits 11,795 9,741 8,538
Accrued expenses (5,571) 22,810 (44,351)
----------- ----------- -----------
Net cash provided by operating
activities 1,618,521 863,452 845,835
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (596,924) (771,276) (315,883)
----------- ----------- -----------
Net cash used by
investing activities (596,924) (771,276) (315,883)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage notes and
contracts for deed payable -- 5,600,000 257,700
Repurchase of limited
partner units (8,530) -- (25,475)
Distributions to partners (431,494) -- --
Payments on mortgages
and contracts for deed (266,455) (5,777,861) (213,814)
Payments for debt
financing costs (13,485) (183,629) --
----------- ----------- -----------
Net cash provided (used) by financing
activities (719,964) (361,490) 18,411
----------- ----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 301,633 (269,314) 548,363
CASH AND CASH EQUIVALENTS
- BEGINNING OF YEAR 742,672 1,011,986 463,623
----------- ----------- -----------
CASH AND CASH EQUIVALENTS
- END OF YEAR $ 1,044,305 $ 742,672 $ 1,011,986
=========== =========== ===========
CASH PAID FOR INTEREST $ 1,234,866 $ 1,243,216 $ 1,272,477
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CHANGES IN PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
GENERAL LIMITED
PARTNER'S PARTNERS'
EQUITY EQUITY
(DEFICIT) (DEFICIT) TOTAL
----------- ----------- -----------
PARTNERS' DEFICIT
DECEMBER 31, 1992 $ (534,125) $ (621,969) $(1,156,094)
NET INCOME 9,957 189,181 199,138
REPURCHASE OF SEVEN UNITS -- (25,475) (25,475)
----------- ----------- -----------
PARTNERS' DEFICIT
DECEMBER 31, 1993 (524,168) (458,263) (982,431)
NET INCOME 7,576 143,939 151,515
----------- ----------- -----------
PARTNERS' DEFICIT
DECEMBER 31, 1994 (516,592) (314,324) (830,916)
NET INCOME 16,249 308,732 324,981
REPURCHASE OF TWO UNITS -- (8,530) (8,530)
DISTRIBUTIONS (21,575) (409,919) (431,494)
----------- ----------- -----------
PARTNERS DEFICIT
DECEMBER 31, 1995 $ (521,918) $ (424,041) $ (945,959)
=========== =========== ===========
See Notes to Financial Statements
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Partnership - Griffin Real Estate Fund-II, A Limited
Partnership (the Partnership), was organized on September 18, 1980 under
the laws of the State of Minnesota. As of December 31, 1995 there are
2,200 limited partnership units authorized and 2,185 outstanding.
Statements of Cash Flows - For the purpose of the statements of cash
flows, the Partnership considers all highly liquid debt instruments with
an original maturity of three months or less to be cash equivalents. Cash
equivalents of $1,044,305, and $742,672 at December 31, 1995 and 1994
respectively, consist of government money market portfolios with banks and
are recorded at cost which approximates market value. The Partnership
places its temporary cash investments with high credit quality financial
institutions. At times such investments may be in excess of the FDIC
insurance limit.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements. Estimates also affect the reported amounts of
revenue and expense during the reported period. Actual results could
differ from those estimates.
Financial Instruments
The carrying amounts for all financial instruments approximates fair
value. The carrying amounts for cash, receivables, accounts payable and
accrued liabilities, and loans payable approximate fair value because of
the short maturity of these instruments. The fair value of long-term debt
approximates the current rates at which the Partnership could borrow funds
with similar remaining maturities.
Properties and Depreciation - Properties are stated at cost including
capitalized acquisition fees and are depreciated using a straight-line
method over the estimated useful lives of the related assets (buildings,
25 years; furnishings and equipment, 5 years). For income tax purposes,
the Partnership depreciates the buildings over 15 to 19 years using the
Accelerated Cost Recovery System. Building improvements made subsequent to
January 1, 1987 are depreciated over 27.5 years using the Modified Cost
Recovery System for tax purposes.
Escrow Deposits - The escrow deposits consist of funds held for future
payment of real estate taxes, insurance premiums and replacement reserves
for major expenditures.
Leases - Apartment leases are generally renewable on a six month to one
year basis.
Offering Costs - Expenses incurred in connection with the registration and
offering of the partnership units syndication costs, including selling
commissions and advertising, are recorded as a reduction of Partners'
Equity. Such costs are not deductible for income tax purposes by the
Partnership nor its partners.
Debt Financing Costs - Costs incurred in connection with securing
financing on Partnership properties have been capitalized and are being
amortized on the straight-line basis over the remaining life of the
related financing agreement.
Income Taxes - The financial statements of the Partnership do not include
a provision for income taxes as the income and losses of the Partnership
are allocated to the individual partners for inclusion in their income tax
returns.
Net Income Per Limited Partnership Unit - The net income per limited
partnership unit is computed by dividing the net income allocated to
limited partners by the weighted average number of limited partnership
units outstanding during the year.
Recently Issued Accounting Standards
The Financial Accounting Standards Board ("FASB") issued Statement No. 121
Accounting for the Impairment of Long Lived Assets, which requires the
recognition of impairments on long lived assets in the Statements of
Operations. This statement is effective for years beginning after December
15, 1995. This SFAS is not expected to have a material effect on the
Partnership.
2. ORGANIZATION
The Partnership was formed by the general partner, Investment Associates,
a Minnesota general partnership, to acquire existing, income-producing
real properties for rental purposes. Investment Associates is not required
to make any capital contributions to the Partnership.
The Limited Partnership Agreement and Certificate of Limited Partnership
(Partnership Agreement) contains certain provisions, among others,
described as follows:
* The management and general responsibility of operating the
Partnership business shall be vested exclusively in the general
partner.
* Profits, losses, and cash flow distributions, other than from
refinancing or from the sale of Partnership properties, are
allocated 95% to the limited partners and 5% to the general partner.
* Net proceeds from refinancing or from the sale of property other
than upon liquidation, less any necessary liability reserves or debt
payments, will be distributed in the following order subject to the
general partner receiving at least 1% of the distributions:
** First, to the limited partners to the extent that prior
distributions are less than the original capital contribution
plus 6% per annum (as defined in the Partnership Agreement);
** Second, any unpaid real estate commissions due to the general
partner on the resale of the Partnership properties;
** Third, any remaining balance, 80% to the limited partners and
20% to the general partner.
* The Partnership will terminate on December 31, 2021 or earlier upon
the sale of substantially all of the properties or the occurrence of
certain other events as stated in the Partnership Agreement.
3. MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following at December 31:
1995 1994
---- ----
Mortgage note (Villas of Patricia Park),
monthly installments of $20,717
including interest at 8.375% due
August 2001; callable August 1998 $ 2,485,192 $ 2,523,888
Mortgage note (Candleridge)
monthly installments of $23,917
including interest at 8.375%
due August 2001; callable August 1998 2,869,029 2,913,700
Mortgage Note (Olde English Village)
monthly installments of $47,909
including interest at 8.76%
due June 30, 1997 5,474,346 5,565,082
Mortgage note (Lunnonhaus)
monthly installments of $31,166
including interest at 7%,
due June 2014 3,972,885 4,065,237
----------- -----------
Total mortgage notes payable $14,801,452 $15,067,907
=========== ===========
All property is pledged as collateral to the mortgage notes payable.
Future principal maturities are as follows:
1996 $ 291,917
1997 5,576,778
1998 220,948
1999 238,500
2000 257,459
Later 8,215,850
---------
Total $14,801,452
On June 30, 1994, the Partnership refinanced the Olde English Village
Mortgage Note. On June 15, 1995, the prepayment provision of the
Candleridge Apartments contract for deed and the Villas of Patricia Park
mortgage note were modified. Terms of these refinancings and prepayment
provisions, as modified, are as follows:
Candleridge Apartments: Prepayment of the note is subject to a prepayment
premium ranging from 1% to 3% depending on the year of the loan in which
it is prepaid. The prepayment premium does not apply if the lender calls
the note.
Villas of Patricia Park: Prepayment of the note is subject to a prepayment
premium ranging from 1% to 3% depending upon the year of the loan in which
it is prepaid. The prepayment premium does not apply if the lender calls
the note.
Olde English Village: Loan amount of $5,600,000 with monthly installments
of $47,909 at December 31, 1995, including interest which is adjusted
quarterly to 350 basis points above the Treasury yield, due June 30, 1997.
The mortgage note carries an option to extend the maturity date for an
additional term of 3 years to July 1, 2000. An extension would require an
extension fee payment equal to 1/2 of 1% of the outstanding principal
balance at the time of extension.
The lender has the right to call the Candleridge and Villas of Patricia
Park notes on August 31, 1998, with no prepayment premium. The lender has
the right to call the Olde English Village note upon certain events. The
Lunnonhaus mortgage is subject to The Department of Housing and Urban
Development regulations.
All of the above debt is non-recourse to the individual partners.
4. RELATED PARTY TRANSACTIONS
The partners of Investment Associates, the general partner of the
Partnership, are also owners and employees of Griffin Companies, a
Minnesota corporation. Accounts payable - affiliates consists of unpaid
management fees to and advances from Griffin Companies. The following is a
summary of approximate fees incurred for the years ended December 31:
1995 1994 1993
---- ---- ----
Property management fees $ 292,361 $ 269,439 $ 254,764
Major improvement
supervisory fees 98,705 96,865 41,195
5. TAXABLE INCOME (LOSS)
The net income shown on the financial statements is reconciled to the
taxable income (loss) as follows:
1995 1994 1993
---- ---- ----
Net income per
financial statements $ 324,981 $ 151,515 $199,138
Excess of tax depreciation
over book depreciation (211,027) (200,367) (194,170)
Interest income for tax purposes
in excess of (less than) interest
for financial statements - (1,898) 2,828
Excess of tax mortgage insurance
over financial statement
mortgage insurance - (3,066) -
Financial statement expense
for real estate taxes
less than deduction
for tax purposes - - (581,220)
Rental income for financial
statements in excess of
rental income for tax purposes (5,670) - -
Rental income for tax purposes
in excess of rental
income for financial statements - 11,144 9,740
------- -------- --------
Taxable income (loss) $ 108,284 $(42,672) $(563,684)
======= ======== ========
6. PARTNERS' DEFICIT RECONCILIATION
Reconciliation of financial statement deficit to tax return deficit is as
follows:
1995 1994 1993
---- ---- ----
Deficit per
financial statements $ (945,959) $ (830,916) $ (982,431)
Cumulative excess of tax
depreciation over financial
statement depreciation (7,703,316) (7,492,289) (7,291,922)
Cumulative excess of tax interest
income over financial
statement interest income - - 1,898
Excess of financial statement
mortgage insurance over tax
mortgage insurance - - 3,066
Prepaid rent recognized as
income for tax purposes 70,820 76,491 65,347
--------- ---------- ----------
Deficit per tax return $(8,578,455) $(8,246,714) $(8,204,042)
=========== ========== ===========
SCHEDULE III
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Costs
Capitalized
Initial Cost to Subsequent to Gross Amount at Which Carried
Partnership (a) Acquisition at Close of Period (b) (c)
--------------- ----------- --------------------------
Land/
Bldgs./ Bldgs. Bldgs. & Accum. Date of Date
Description Encumbrances Land Improve Improve Land Improve Total Deprec. ,Construct. Acquired
- ----------- ------------ ---- ------- ------- ---- ------- ----- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
URBANDALE, IA
Candleridge $ 2,869,029 $ 372,378 $ 3,580,857 $ 372,244 $ 372,378 $ 3,953,101 $ 4,325,479 $ 2,249,693 1979 12/30/81
Villas of
Patricia Park 2,485,192 258,924 2,984,746 193,371 258,924 3,178,117 3,437,041 1,816,378 1979 12/30/81
GOLDEN, CO
Lunnonhaus
Village 3,972,885 714,045 8,049,914 1,058,299 714,045 9,108,213 9,822,258 4,824,691 1975 5/06/82
W. DES
MOINES, IA
Olde English
Village 5,474,346 815,329 6,745,860 1,120,363 815,329 7,866,223 8,681,552 4,171,907 1972 8/31/82
----------- ---------- ----------- ---------- ---------- ----------- ----------- -----------
TOTAL $14,801,452 $2,160,676 $21,361,377 $2,744,277 $2,160,676 $24,105,654 $26,266,330 $13,062,669
=========== ========== =========== ========== ========== =========== =========== ===========
</TABLE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(a) The cost to the Partnership represents the original purchase price of the
properties.
(b) The cost basis of real estate owned at December 31, 1995 is the same for
financial statement purposes as it is for tax purposes, with the aggregate total
being $26,266,330.
1993 1994 1995
----------- ----------- --------
Balance at beginning of period $24,582,247 $24,898,130 $25,669,406
Additions during period - -
Improvements 315,883 771,276 596,924
----------- ----------- -----------
Balance at end of period $24,898,130 $25,669,406 $26,266,330
=========== =========== ===========
(d) Reconciliation of accumulated depreciation:
Balance at beginning of period $10,490,327 $11,330,522 $12,183,949
Depreciation expense for period 840,195 853,427 878,720
----------- ----------- -----------
Balance at end of period $11,330,522 $12,183,949 $13,062,669
=========== =========== ===========
Depreciation calculated on 5-27.5 year lives using the straight-line method on
real property and accelerated for personal property.
