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, 1997
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
WATS NUMBER 800-328-3788
Indicate by check mark whether the registrant (1) has filed reports 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 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-Q
or any amendment to this Form 10-Q. [ ]
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
INDEX
PART 1. Financial Information
Condensed Balance Sheets
March 31, 1997 and December 31, 1996............................1
Condensed Statements of Operations
for the three months ended
March 31, 1997 and 1996.........................................2
Condensed Statements of Cash Flows
for the three months ended
March 31, 1997 and 1996.........................................3
Condensed Statements of Changes
in Partners' Equity for the
three months ended March 31, 1997...............................4
Notes to Financial Statements......................................5
Management's Discussion and Analysis of
Financial Conditions and Results
of Operations.................................................6-7
PART II. Other Information..................................................8
SIGNATURES. ..................................................................9
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
(unaudited)
March, 31, December, 31
1997 1996
------------ ------------
ASSETS
Cash and cash equivalents $ 1,005,397 $ 1,001,510
Receivables and other assets 513,162 499,213
------------ ------------
Total 1,518,559 1,500,723
------------ ------------
PROPERTY:
Land 2,160,676 2,160,676
Buildings and improvements 22,530,068 22,530,068
Furniture and equipment 2,076,669 2,076,669
------------ ------------
Total 26,767,413 26,767,413
Less accumulated depreciation 14,186,335 13,959,999
------------ ------------
Property - net 12,581,078 12,807,414
------------ ------------
TOTAL ASSETS $ 14,099,637 $ 14,308,137
============ ============
LIABILITIES AND PARTNERSHIP EQUITY
LIABILITIES:
Accounts payable and accrued liabilities $ 804,056 $ 884,977
Security deposits 139,172 141,163
Mortgage notes payable 14,434,418 14,510,958
------------ ------------
Total liabilities 15,377,646 15,537,098
------------ ------------
PARTNERS' EQUITY:
General Partner (538,509) (536,068)
Limited Partner (739,500) (692,893)
------------ ------------
Total partnership equity (1,278,009) (1,228,961)
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 14,099,637 $ 14,308,137
============ ============
See notes to condensed financial statements.
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended
Ended March 31,
1997 1996
---------- ----------
REVENUES
Rental income $1,298,994 $1,315,332
(less vacancies - 1997, $ 105,465;
1996, $43,073)
Interest income 13,633 9,438
Other income 63,489 66,138
---------- ----------
Total revenues 1,376,116 1,390,908
---------- ----------
OPERATING EXPENSES
Operating expenses 722,666 686,654
Interest expense 290,405 309,158
Depreciation and amortization 239,368 242,179
---------- ----------
Total operating expenses 1,252,439 1,237,991
---------- ----------
NET INCOME 123,677 152,917
NET INCOME ALLOCATED TO
GENERAL PARTNER 6,184 7,646
---------- ----------
NET INCOME ALLOCATED TO
LIMITED PARTNERS $ 117,493 $ 145,271
========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT
(weighted average basis) $ 53.77 $ 66.42
========== ==========
See notes to condensed financial statements.
<TABLE>
<CAPTION>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
For the Three Months
Ended March 31,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 123,677 $ 152,917
Adjustments to reconcile
to net cash provided by operating
activities:
Depreciation and amortization 239,368 242,179
Increase in receivables and other assets (26,981) (15,923)
Decrease in accounts payable
and accrued liabilities (80,921) (63,094)
Decrease in security deposits (1,991) (257)
----------- -----------
Net cash provided by operating activities 253,152 315,822
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (172,725) (304,833)
Payments of principal (76,540) (58,809)
----------- -----------
Net cash used by financing activities (249,265) (363,642)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,887 (47,820)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 1,001,510 1,044,305
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,005,397 $ 996,485
=========== ===========
CASH PAID DURING THE PERIOD FOR INTEREST $ 292,608 $ 310,548
=========== ===========
</TABLE>
See notes to condensed financial statements.
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE THREE MONTHS ENDED March 31, 1997
(unaudited)
GENERAL LIMITED TOTAL
PARTNER PARTNERS PARTNERSHIP
----------- ----------- -----------
PARTNERS' EQUITY (DEFICIT)
JANUARY 1, 1997 $ (536,068) $ (692,893) $(1,228,961)
NET INCOME 6,184 117,493 123,677
DISTRIBUTIONS (8,625) (164,100) (172,725)
----------- ----------- -----------
PARTNERS' EQUITY (DEFICIT)
March 31, 1997 $ (538,509) $ (739,500) $(1,278,009)
=========== =========== ===========
See notes to condensed financial statements.
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
1. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly Griffin Real
Estate Fund-II, A Limited Partnership's financial position as of March 31,
1997 and December 31, 1996 and the results of its operations for the three
months ended March 31, 1997 and 1996 and its cash flows for the three
months ended March 31, 1997 and 1996.
The accounting policies followed by the Partnership are set forth in Note 1
to the Partnership financial statements in the 1996 Griffin Real Estate
Fund-II, A Limited Partnership Form 10K.
2. RELATED PARTY TRANSACTIONS
The partners of Investment Associates, the general partner of the
Partnership, are also owners, directors, and officers of the Griffin
Companies, a Minnesota corporation. The following is a summary of fees
incurred for the three months ended March 31, 1997 and 1996 relating to the
Griffin Companies:
1997 1996
---- ----
Management fees $ 78,229 $ 73,263
Supervisory fees $ 18,899 $ 11,074
3. TAXABLE INCOME
The net income shown on the statement of operations is reconciled to the
taxable income as follows:
For the Three Months
Ended March 31,
1997 1996
---- ----
Net income per statement
of operations $ 123,677 $ 152,917
Book depreciation over
(under) tax depreciation 105,036 (14,137)
--------- ---------
Taxable income $ 228,713 $ 138,780
========= =========
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Partnership had cash and cash equivalents of
$1,005,397 which will be used for working capital requirements of the
Partnership and its properties. It is anticipated that the Partnership will be
able to meet current obligations and commitments from cash on hand and from cash
generated from operations during 1997.
A quarterly distribution to partners of $100.00 per limited partnership unit was
made following the first quarter to unit holders of record on March 31, 1997.
Future cash distributions will depend on future property operations.
RESULTS OF OPERATIONS
The General Partner, after reasonable inquiry, is not aware of any material
factors relating to any of the Partnership's properties or the operations of the
Partnership that would cause the financial information of the Partnership not to
be indicative of future operating results or of future financial conditions,
other than those discussed in the footnotes to the Partnership financial
statements filed with Form 10K.
Rental income for the first three months of 1997 was $1,298,994, a decrease of
$16,338 or 1.2% from total revenues for the first three months of 1996. This
decrease was a result of the soft rental market in Des Moines, IA and the
associated decline in occupancy, where three of the four Partnership's
properties are located. The soft rental market also results in shorter term
leases and an increase in the costs associated with the movement of tenants.
Operating expenses such as advertising, painting and decorating, appliance and
carpet replacement increase in this environment. Although interest expense
declined, the decrease in revenue and increase in expenses resulted in a
decrease in net income of $29,240.
On March 1, 1997, formal sales contracts were executed for the sale of
Candleridge and Villas of Patricia Park Apartments. Although there can be no
assurance a closing will ultimately occur, a closing of the sales is expected
during the month of May. A Securities and Exchange Commission Form 8-K will be
filed following the closing which will detail the transactions.
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
OCCUPANCY TABLE
Approximate occupancy levels of the Partnership's investment property by
quarter.
<TABLE>
<CAPTION>
1996 1997
------------------------------ ------------------------------
at at
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
1. Villas of
Patricia Park Apts.
Urbandale, Iowa 96% 91% 95% 89% 84%
2. Candleridge Apts.
Urbandale, Iowa 96% 95% 96% 94% 96%
3. Lunnonhaus Village
Apartments
Golden, Colorado 100% 98% 100% 100% 99%
4. Olde English Village
Apartments
W. Des Moines, Iowa 94% 92% 94% 87% 89%
</TABLE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
PART II
OTHER INFORMATION
Item 1. 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. Briefs were filed and oral arguments were heard by the court on July 1,
1996. On September 10, 1996 the court affirmed the dismissal.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
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.
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
Dated: May 15, 1997 By /s/ Larry D. Fransen
--------------------
Larry D. Fransen, for the
General Partner, Investment
Associates
Dated: May 15, 1997 By /s/ Larry D. Fransen
--------------------
Larry D. Fransen,
A General Partner of the
General Partner, Investment
Associates
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,005,397
<SECURITIES> 0
<RECEIVABLES> 513,162
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,518,559
<PP&E> 26,767,413
<DEPRECIATION> 14,186,335
<TOTAL-ASSETS> 14,099,637
<CURRENT-LIABILITIES> 943,228
<BONDS> 14,434,418
0
0
<COMMON> 0
<OTHER-SE> (1,278,009)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 14,099,637
<SALES> 0
<TOTAL-REVENUES> 1,362,483
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 962,034
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276,772
<INCOME-PRETAX> 123,677
<INCOME-TAX> 0
<INCOME-CONTINUING> 123,677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123,677
<EPS-PRIMARY> 53.77<F2>
<EPS-DILUTED> 0
<FN>
<F1>THIS ENTITY IS A LIMITED PARTNERSHIP. THE OTHER STOCKHOLDERS' EQUITY LINE
REPRESENTS TOTAL PARTNERSHIP EQUITY.
<F2>THE EPS-PRIMARY LINE REPRESENTS NET INCOME PER LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
