UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996. 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. [ ]
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
TABLE OF CONTENTS
PAGE
PART I
Item 1 Business............................................... 1-2
Item 2 Properties............................................. 3
Item 3 Legal Proceedings...................................... 3
Item 4 Submission of Matters to a Vote
of Limited Partners.................................... 3
PART II
Item 5 Market for the Partnership's Limited Partnership
Interests and Related Limited Partner Matters.......... 3
Item 6 Selected Financial Data................................ 4
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 5-7
Item 8 Financial Statements and Supplementary Data............ 8
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 8
PART III
Item 10 The General Partner of the Partnership................. 8-10
Item 11 Management Remuneration and Transactions............... 10-11
Item 12 Limited Partnership Ownership of Certain
Beneficial Owners and Management....................... 11
Item 13 Certain Relationships and Related
Transactions........................................... 11
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K................................ 11
SIGNATURES ....................................................... 12
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, 1996 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.
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
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. The amount of debt for acquisitions was
subject to a maximum of 75% loan to value. Although not required, the General
Partner intends to maintain this limit with any subsequent refinancings. The
Olde English Village Apartments were refinanced on June 30, 1994. No other
refinancings occurred in 1996, 1995, or 1994. 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 1996, 1995, and 1994 the
Partnership redeemed zero, two and zero 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.
<TABLE>
<CAPTION>
AVERAGE EFFECTIVE ANNUAL
RENTAL PER UNIT
VILLAS OF
OLDE ENGLISH PATRICIA
CANDLERIDGE LUNNONHAUS VILLAGE PARK RAINTREE
APARTMENTS VILLAGE APARTMENTS APARTMENTS APARTMENTS
URBANDALE, APARTMENTS W.DES MOINES, URBANDALE, LITTLE ROCK,
IOWA GOLDEN, CO IOWA IOWA ARKANSAS
- ---------- ---------------------- ---------------------- ---------------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
1996 $ 6,494 $ 7,114 $ 6,094 $ 6,095 *
- ---------- ---------------------- ---------------------- ---------------------- ----------------- -------------------
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
- ---------- ---------------------- ---------------------- ---------------------- ----------------- -------------------
</TABLE>
* Indicates the Partnership did not own the
property at any time during the year.
SCHEDULE OF REAL
ESTATE TAXES
<TABLE>
<CAPTION>
OLDE ENGLISH VILLAS OF
CANDLERIDGE LUNNONHAUS VILLAGE PATRICIA PARK RAINTREE
APARTMENTS VILLAGE APARTMENTS APARTMENTS APARTMENTS
URBANDALE, APARTMENTS WEST DES URBANDALE, LITTLE ROCK,
IOWA GOLDEN, CO MOINES, IOWA IOWA ARKANSAS
- ---------------------- -------------------- -------------------- --------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
1996
TAX RATE (a) 89.059 (a) (a) *
ASSESSMENT (a) $65,983 (a) (a) *
- ---------------------- -------------------- -------------------- --------------------- -------------------- --------------------
1995
TAX RATE 33.32970 89.412 33.32970 33.32970 *
ASSESSMENT $143,756 $66,244 $261,864 $121,792 *
- ---------------------- -------------------- -------------------- --------------------- -------------------- --------------------
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
- ---------------------- -------------------- -------------------- --------------------- -------------------- --------------------
</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.
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Item 2. Properties
The Partnership owns the real properties referred to in Item 1 to which
reference is hereby made.
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. 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 4. Submission of Matters to a Vote of Limited Partners
There were no matters submitted to a vote of the Limited Partners.
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and Related
Limited Partner Matters
There are approximately 707 holders of record of units of the
Partnership. There is no public market for units and it is not anticipated that
a public market for units will develop. The General Partner will not redeem or
repurchase units except upon death of the original limited partner.
Reference is made to Item 6 in this annual report for a discussion of
cash distributions made to the Limited Partners.
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Item 6. Selected Financial Data
Griffin Real Estate Fund-II, A Limited Partnership
For the Years Ended December 31, 1996, 1995, 1994, 1993, and 1992
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Revenues $ 5,589,366 $ 5,472,890 $ 5,148,672 $ 4,885,147 $ 4,991,815
Income (loss) before
extraordinary item(d) 539,331 324,981 151,515 199,138 (409,243)
Income (loss) before
extraordinary item
per limited partner
unit (c) 234.49 141.24 65.81 86.50 (177.12)
Extraordinary Item:
Gain on foreclosure
of property - - - - 739,559
Extraordinary Item:
Gain on foreclosure
of property per
limited partner
unit (c) - - - - 320.08
Net Income 539,331 324,981 151,515 199,138 330,316
Net Income per limited
partner unit (c) 234.49 141.24 65.81 86.50 142.96
Total Assets 14,308,137 14,837,677 15,184,304 15,175,828 15,154,826
Mortgages and
Contracts for deed 14,510,958 14,801,452 15,067,907 15,245,768 15,201,883
Cash distributions
per limited partner
unit (b) $ 357.54 $ 187.53 - - -
</TABLE>
(a) The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing in Exhibit 13 in this
annual report.
(b) Cash distributions of $1,858 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 weighted
average number of limited partnership units outstanding during the period,
which is 2,185 for the current year.
(d) 1992 figures reflect the foreclosure of Raintree Apartments on May 1, 1992.
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS
Summary of Operations - 1996 Compared to 1995
The year 1996 was a good one for the Partnership with consistent income
performances from its properties. This comes despite a decrease in overall
occupancy from 1995. Distributions continued and totaled $300 per unit
(including distributions paid in January 1997) or an annual return of 6%.
Physical occupancy decreased an average of 2.9% from 97.7% to 94.8%.
Individually, physical occupancy decreased at three of the four properties.
Candleridge Apartments decreased from an average of 97.5% to 95.3%, Olde English
Village decreased from an average of 98.3% to 91.8% and Villas of Patricia Park
Apartments decreased from an average of 95.5% to 92.8%. Physical occupancy of
Lunnonhaus Apartments, however, remained the same at an average of 99.5%.
Rental rates of the property portfolio increased 4.8%. Individually,
rental rates increased at all properties, with increases ranging from the
smallest increase of 2.6% at Villas of Patricia Park Apartments to the greatest
increase of 7.0% at Lunnonhaus Village Apartments.
As a result of increased rental rates and other income, the Partnership
was able to overcome the decreases in occupancy and interest income to record an
increase in overall revenue of approximately $116,500.
Interest expense decreased for two reasons, the first being that three
of the four properties have a fixed interest rate applied to steadily decreasing
principal payments each month. The other reason for the decrease is that the
variable interest rate for the loan on Olde English Village Apartments was lower
in 1996 than in 1995. The rate decreased from 8.8% in 1995 to 8.527%, rose later
in the year to a high of 8.719% and eventually declined again to end the year at
8.628%. This mortgage note is due June 30, 1997 but the Partnership intends to
exercise its option to extend the maturity date.
Real estate tax expense increased in total by approximately $65,500 due
to increased assessed values despite the slight decline in tax rates for all
properties.
Administrative expenses dropped about $84,600 and are much closer to
normal after the unusual legal fees incurred in 1995. These fees related to the
tender offer and unsuccessful solicitation of consent by Everest Investors as
discussed in Item 3 in this annual report.
Despite increases in depreciation and in real estate taxes, the
Partnership was able to reduce overall expenses by approximately $97,900 due to
fewer repairs and maintenance expenditures and due to the decreases in interest
and administrative expenses discussed above. The improvements in revenues and
expenses combined to produce an increase in Net Income of about $214,400.
During the year, the Partnership invested approximately $501,000 in
physical improvements to the properties. The majority of the funds were spent at
Lunnonhaus Village and Olde English Village. At Lunnonhaus Village most of the
funds were spent on the clubhouse remodeling. At Olde English Village most of
the funds were spent on common areas for floor coverings and paint. All
properties did some landscaping and other smaller projects as well.
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%.
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Physical occupancy increased an average of .9% 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 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.
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 $1,001,510 of cash reserves on hand
at December 31, 1996. 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 $100,000 each to external improvements to Lunnonhaus
Village Apartments, Olde English Village Apartments, and Villas of Patricia Park
Apartments.
GRIFFIN REAL ESTATE FUND II, A LIMITED PARTNERSHIP
Although there can be no assurance of continuing cash flow from
property operations, if anticipated cash flow is realized, the Partnership
intends to increase distributions in 1997 to an annual rate of $400 or 8% per
unit.
Although there can be no assurance that a sale will be completed, a purchase
agreement has been signed for the sale of Candleridge and Villas of Patricia
Park Apartments with the anticipated closing date of May 1, 1997. Upon the
successful completion of the sale of these properties, sales proceeds will be
distributed.
<TABLE>
<CAPTION>
OCCUPANCY TABLE
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
------------- ---------- ----------------- ------------- --------
<C> <C> <C> <C> <C> <C> <C>
3/31/96 96% 100% 94% 96% *
6/30/96 95% 98% 92% 91% *
9/30/96 96% 100% 94% 95% *
12/31/96 94% 100% 87% 89% *
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% *
</TABLE>
* Indicates the Partnership did not own the property at the end of the quarter.
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Item 8. Financial Statements and Supplementary Data
The Table of Contents to Financial Statements, Financial Statements and
Supplementary Data listed in Item 14 are referenced herein as included in the
exhibits attached to this report and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in independent auditors and as of the date
of the filing, there were no material disagreements with the current independent
auditors (Larson, Allen, Weishair & Co.,LLP) regarding any of the following:
1) Accounting principles or practices
2) Extent and quality of financial statement disclosure
3) Auditing scope or procedures
PART III
Item 10. The General Partner of the Partnership
The General Partner of the Partnership is Investment Associates, a
Minnesota general partnership formed in September of 1980 by certain directors
and officers of Griffin Companies for the sole purpose of acting as General
Partner of the Partnership. As General Partner, Investment Associates manages
and controls the affairs of the Partnership and has general responsibility and
authority in all matters affecting its business.
Griffin Companies, A Minnesota corporation organized in 1969, is
engaged in real estate brokerage, real estate investment counseling, and
management of commercial and multi-family real estate. Griffin Companies and its
Affiliates have organized and served as general partners in thirty-two privately
placed partnerships and six publicly offered partnerships, which were formed for
the purpose of real estate investment.
The General Partner and its Affiliates provide executive, supervisory
and certain administrative services for the Partnership's operations and the
General Partner is responsible for determining whether, when and on what terms
properties should be sold or refinanced. In addition, the books and records of
the Partnership are maintained by Griffin Companies, and are subject to audit by
independent certified public accountants. The partners of the General Partner
intend to devote only as much of their time to the business of the Partnership
as they determine to be reasonably required. Limited Partners have no right to
participate in the management of the Partnership.
Effective December 31, 1994 James R. Wadsworth, one of the partners of
the General Partner, withdrew as a partner. His share of ownership and his share
of future profits and losses were assigned to and split equally between Larry D.
Fransen and Robert S. Dunbar. Mr. Fransen and Mr. Dunbar were already partners
of the General Partner.
The identity and business experience of each of the partners of the
General Partner is as follows:
Larry D. Fransen (age 56) founded Griffin Companies in 1969. He is a
Director and senior officer of each of its operating entities, in addition to
serving as Chairman.
Since 1969, he has acted as general partner in many partnerships
investing in apartments, office buildings, warehouses, land and motels.
Acting on behalf of Griffin Companies' clients, Mr. Fransen has negotiated the
acquisition and disposition of more than one billion dollars in investment real
estate properties nationwide.
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
He is a member of numerous professional organizations, including the
Greater Minneapolis Area Board of Realtors, the Minnesota Association of
Realtors, the National Association of Realtors (NAR), Minnesota Multi Housing
Association (MHA), National Multi-Housing Council (NMHC), the National Apartment
Association (NAA), Commercial and Investment Institute, National Association of
Real Estate Investment Trusts (NAREIT), and the Pension Real Estate Association
(PREA).
Mr. Fransen holds the CCIM (Certified Commercial Investment Member)
designation of the Commercial Investment Institute, as well as the SRS
(Specialist in Real Estate Securities) designation. For 13 years, he was an
instructor for the Commercial Investment Institute and served as the group's
national president in 1983. He has been awarded the Omega Tau Rho Medal of
Service for his years of service to the National Association of Realtors.
Robert S. Dunbar (age 57) is Chief Executive Officer of Griffin
Companies. Following several years with Control Data Corporation where he held
various administrative and management positions, he was named Executive Vice
President of the U.S. Jaycees in 1970, with responsibility for planning,
budgeting and administration of the national organization. In 1972, he joined
Ed. Phillips & Sons Company in Minneapolis, Minnesota as a sales manager. In
1975 he was elected President of Westland Capital Corporation, a Minneapolis
venture capital firm, where he was responsible for analyzing various companies
for potential investment opportunities. He joined Griffin Companies in 1977.
Mr. Dunbar is a member of the Institute of Real Estate Management
(IREM) and the Minnesota Multi Housing Association (MHA). He holds the Certified
Apartment Manager (CAM) designation of the National Apartment Association and is
a Certified Property Manager (CPM) as designated by the National Association of
Realtors. Mr. Dunbar also holds a Minnesota Real Estate Broker's License and has
completed the necessary course work for their prestigious Certified Commercial
Investment Member (CCIM) designation conferred by the Commercial Investment
Institute. He is a member of the national Multi-Housing Council and The
Executive Committee (T.E.C.). He also serves on the Board of Trustees of
Northwestern College.
Frederick R. Lamb (age 60) left Griffin Companies during 1982,
returning to a position he had previous to joining Griffin Companies. He became
Senior Vice President and Director of the Griffin Companies in July of 1979. He
began his real estate career in 1965 when he represented the Minneapolis
Institute of Arts in the acquisition of several city blocks, a portion of which
ultimately became the site of the Minneapolis Institute of Arts Building and the
Minneapolis College of Arts and Design.
In 1968, Mr. Lamb was employed as a sales associate at a Minneapolis,
Minnesota brokerage company. In 1972, Mr. Lamb was promoted to Vice President
and Manager of the Commercial-Investment Division of the company and served in
this capacity until 1976. In 1977, Mr. Lamb became Vice President and Sales
Manager of another Minneapolis, Minnesota brokerage company. In 1978, he became
President of the Commercial Industrial Multiple Listing Service of the Greater
Minneapolis Area Board of Realtors. He has taught commercial investment real
estate courses.
Mr. Lamb holds the professional designation Certified Commercial
Investment Member (CCIM) of the Realtors National Marketing Institute and is a
member of the Greater Minneapolis Area Board of Realtors, the Minnesota
Association of Realtors and the National Association of Realtors. In 1979, he
was elected to the Board of Directors of the Greater Minneapolis Area Board of
Realtors for a three year term.
Thomas A. Robeson (age 65) served as a Senior Vice President of Griffin
Companies, which he joined in April 1980, until his departure on February 29,
1988.
Mr. Robeson's previous business experience includes service in the
Investment Division of a national insurance company, from 1955 to 1957, and from
1957 to 1972, with IBM Corporation, where he held various sales and management
positions.
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Mr. Robeson entered the real estate field in 1972 when he joined a real
estate firm in St. Paul, Minnesota. His responsibilities included brokerage,
management and syndication of various types of real estate. In 1975, Mr. Robeson
joined a Minneapolis investment company where he was involved in the brokerage
of a wide range of commercial, industrial, and investment real estate. In 1978,
he was promoted to Vice President and Manager of the Commercial-Investment
Division of that company. He has experience in the acquisition and disposition
of shopping centers, apartment buildings, commercial office buildings, motels,
net leased industrial warehouse and manufacturing facilities, and industrial,
commercial and residential unimproved property.
Mr. Robeson holds the professional designation CCIM (Certified
Commercial Investment Member of the Realtors National Marketing Institute). He
is a member of the International Association for Financial Planning and of
several real estate organizations, including the National Association of
Industrial and Office Parks, the Upper Midwest Chapter of the Realtors National
Marketing Institute, the Greater Minneapolis Area Board of Realtors, the
Minnesota Association of Realtors and the National Association of Realtors.
Messrs. Fransen and Dunbar together own 100% of the issued and
outstanding shares of common stock of Griffin Companies. The partners of the
General Partner represent and warrant that they have a collective personal net
worth on an unaudited cost basis and on an unaudited estimated current value
basis (measured as total assets at estimated current value less all liabilities)
in excess of $1,500,000. The assets of the partners of the General Partner are
largely invested in interests in real property and in Griffin Companies
Therefore, it may be difficult to precisely value such assets or to liquidate
such assets expeditiously or on terms favorable to the seller.
Item 11. Management Remuneration and Transactions
Partners of the General Partner receive no current or proposed direct
remuneration in such capacity. The Partnership is required to pay a management
fee to Griffin Companies and the General Partner is 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 as described below:
* 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 is entitled to engage in various transactions involving
affiliates of the General Partner of the Partnership.
Griffin Companies ("Griffin"), an affiliate of the General Partner, may
be reimbursed for direct expenses relating to the administration of the
Partnership and operation of the Partnership real property investments. Griffin
received approximately $24,064, $20,918 and $12,827 in 1996, 1995, and 1994
respectively, for these expenses.
GRIFFIN REAL ESTATE FUND II, A LIMITED PARTNERSHIP
Reference is made to Note 4 of Notes to Financial Statements appearing
elsewhere in this annual report for a description of related party transactions.
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, 1996
-------------- ----------------- -----------------
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, 1996
-------------- ----------------- -----------------
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.
Item 13. Certain Relationships and Related 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:
1996 1995 1994
---- ---- ----
Property management fees $ 302,319 $ 292,361 $ 269,439
Major improvement
supervisory fees 73,408 98,705 96,865
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
The following documents are filed as part of this report:
Exhibit 13: Financial Statements and Schedules.
Exhibit 27: Financial Data Schedule
No annual report or proxy material for the fiscal year 1996 has been
sent to the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing substantially similar to this form 10K.
GRIFFIN REAL ESTATE FUND-II, A LIMITED 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: March 25, 1997 Griffin Real Estate Fund-II,
A Limited Partnership
By: Larry D. Fransen\s\
-------------------
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: March 25, 1997 By: Larry D. Fransen\s\
-------------------
Larry D. Fransen
Managing General Partner
of the General Partner
Investment Associates
EXHIBIT 13
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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Independent Auditor's Report ......................................................................................... 1
Balance Sheets, December 31, 1996 and 1995................................................................................ 2
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994.......................................................................................... 3
Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994.................................................................................... 4
Statements of Changes in Partners' Deficit
for the Years Ended December 31, 1996, 1995 and 1994...................................................................... 5
Notes to Financial Statements............................................................................................. 6-10
Financial Statement Schedules............................................................................................. 11
III Real Estate and Accumulated Depreciation,
December 31, 1996.......................................................................................... 11
</TABLE>
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, 1996 and 1995, 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, 1996. Our audits also
included the financial statement schedules listed in the table of contents at
Exhibit 13. 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, 1996 and 1995, and the results of its
operations and its cash flows of each of the years in the three-year period
ended December 31, 1996 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 14, 1997
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 1,001,510 $ 1,044,305
Escrow deposits 338,312 331,948
Receivables and other assets 31,440 45,562
------------ ------------
Total 1,371,262 1,421,815
------------ ------------
PROPERTY AND EQUIPMENT:
Land 2,160,676 2,160,676
Buildings and improvements 22,530,068 22,028,985
Furniture and equipment 2,076,669 2,076,669
------------ ------------
Total 26,767,413 26,266,330
Less accumulated depreciation 13,959,999 13,062,669
------------ ------------
Property and equipment - net 12,807,414 13,203,661
------------ ------------
Debt financing costs (net of accumulated
amortization - 1996, $241,738;
1995, $158,997) 129,461 212,201
------------ ------------
TOTAL ASSETS $ 14,308,137 $ 14,837,677
============ ============
LIABILITIES AND PARTNERS' DEFICIT
LIABILITIES:
Accounts payable:
Affiliate $ 2,275 $ 27,712
Other 190,051 151,350
Security deposits 141,163 143,572
Accrued expenses:
Real estate taxes 593,395 559,044
Interest 99,256 100,506
Mortgage notes payable 14,510,958 14,801,452
------------ ------------
Total liabilities 15,537,098 15,783,636
------------ ------------
PARTNERS' DEFICIT:
General Partner (536,068) (521,918)
Limited Partners (692,893) (424,041)
------------ ------------
Total Partners' Deficit (1,228,961) (945,959)
------------ ------------
TOTAL LIABILITIES AND PARTNERS'
DEFICIT $ 14,308,137 $ 14,837,677
============ ============
See Notes to Financial Statements
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Rent (less vacancies:
1996, $249,891; 1995, $117,629;
1994, $190,560) $ 5,263,634 $ 5,142,356 $ 4,833,598
Interest 39,501 47,135 34,108
Other 286,231 283,399 280,966
----------- ----------- -----------
Total revenues 5,589,366 5,472,890 5,148,672
----------- ----------- -----------
EXPENSES:
Interest 1,187,555 1,239,396 1,233,398
Depreciation and amortization 980,071 960,367 911,261
Real estate taxes 611,626 546,083 575,493
Repairs and maintenance 678,240 716,057 703,387
Utilities 452,082 460,305 498,909
Salaries and employee benefits 515,722 509,800 502,232
Management fees to related parties 302,319 292,361 269,439
Administrative 175,891 260,500 127,508
Insurance 133,277 151,849 163,071
Bad debts 3,336 (227) 6,495
Other 9,916 11,418 5,964
----------- ----------- -----------
Total expenses 5,050,035 5,147,909 4,997,157
----------- ----------- -----------
NET INCOME $ 539,331 $ 324,981 $ 151,515
=========== =========== ===========
NET INCOME ALLOCATED
TO GENERAL PARTNER $ 26,967 $ 16,249 $ 7,576
=========== =========== ===========
NET INCOME ALLOCATED
TO LIMITED PARTNERS $ 512,364 $ 308,732 $ 143,939
=========== =========== ===========
PER UNIT:
NET INCOME $ 234.49 $ 141.24 $ 65.81
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 539,331 $ 324,981 $ 151,515
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation and amortization 980,071 960,367 911,261
Decrease (increase) in:
Receivables and other assets 14,121 4,340 9,416
Escrows (6,364) 293,962 (243,562)
Increase (decrease) in:
Accounts payable 13,264 28,647 2,271
Security deposits (2,409) 11,795 9,741
Accrued expenses 33,101 (5,571) 22,810
----------- ----------- -----------
Net cash provided by operating
activities 1,571,115 1,618,521 863,452
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (501,083) (596,924) (771,276)
----------- ----------- -----------
Net cash used by
investing activities (501,083) (596,924) (771,276)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage notes and
contracts for deed payable - - 5,600,000
Repurchase of limited
partner units - (8,530) -
Distributions to partners (822,333) (431,494) -
Payments on mortgages
and contracts for deed (290,494) (266,455) (5,777,861)
Payments for debt
financing costs - (13,485) (183,629)
----------- ----------- -----------
Net cash used by financing
activities (1,112,827) (719,964) (361,490)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (42,795) 301,633 (269,314)
CASH AND CASH EQUIVALENTS
- BEGINNING OF YEAR 1,044,305 742,672 1,011,986
----------- ----------- -----------
CASH AND CASH EQUIVALENTS
- END OF YEAR $ 1,001,510 $ 1,044,305 $ 742,672
=========== =========== ===========
CASH PAID FOR INTEREST $ 1,188,805 $ 1,234,866 $ 1,243,216
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER'S PARTNERS'
EQUITY EQUITY
(DEFICIT) (DEFICIT) TOTAL
PARTNERS' DEFICIT
<S> <C> <C> <C>
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)
NET INCOME 26,967 512,364 539,331
DISTRIBUTIONS (41,117) (781,216) (822,333)
----------- ----------- -----------
PARTNERS DEFICIT
DECEMBER 31, 1996 $ (536,068) $ (692,893) $(1,228,961)
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
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, 1996 and 1995 there
are 2,200 limited partnership units authorized and 2,185 outstanding.
Sale of Properties - The Partnership is currently under a $8,400,000
purchase agreement dated March 1, 1997 for the sale of Candleridge
Apartments and Villas of Patricia Park Apartments. The anticipated closing
date of this purchase agreement is May 1, 1997. Estimated closing costs of
$60,000 are associated with this purchase agreement. Prepayment penalties
of approximately $105,000 related to the properties' mortgage notes are
anticipated upon the sale of the properties and the related payoff of the
mortgage notes.
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
and cash equivalents of $1,001,510 and $1,044,305 at December 31, 1996 and
1995 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.
GRIFFIN REAL ESTATE FUND II,
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
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.
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.
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
3. MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Mortgage note (Villas of Patricia Park),
monthly installments of $20,717
including interest at 8.375% due
August 2001; callable August 1998 $ 2,443,129 $ 2,485,192
Mortgage note (Candleridge)
monthly installments of $23,917
including interest at 8.375%
due August 2001; callable August 1998 2,820,469 2,869,029
Mortgage Note (Olde English Village)
monthly installments of $47,138
including interest of 8.628% at
December 31, 1996 due June 30, 1997 5,373,502 5,474,346
Mortgage note (Lunnonhaus)
monthly installments of $31,166
including interest at 7%,
due June 2014 3,873,858 3,972,885
---------- ----------
Total mortgage notes payable $14,510,958 $14,801,452
========== ==========
</TABLE>
All property is pledged as collateral to the mortgage notes payable.
Future principal maturities are as follows:
1997 $ 5,578,200
1998 220,948
1999 238,500
2000 257,459
2001 277,937
Later 7,937,914
-----------
Total $14,510,958
===========
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 variable monthly
installments of principal and interest. Interest is adjusted quarterly to
350 basis points above the Treasury yield. Although the mortgage note is
due June 30, 1997, it 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 Partnership intends to exercise this
option and extend the maturity date to July 1, 2000.
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, AND 1994
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:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Property management fees $ 302,319 $ 292,361 $ 269,439
Major improvement
supervisory fees 73,408 98,705 96,865
</TABLE>
5. TAXABLE INCOME (LOSS)
The net income shown on the financial statements is reconciled to the
taxable income (loss) as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net income per
financial statements $ 539,331 $ 324,981 $ 151,515
Excess of tax depreciation
over book depreciation (60,174) (211,027) (200,367)
Interest income for tax purposes
in excess of (less than) interest
for financial statements - - (1,898)
Excess of tax mortgage insurance
over financial statement
mortgage insurance - - (3,066)
Rental income for financial
statements in excess of
rental income for tax purposes 3,319 (5,670) -
Rental income for tax purposes
in excess of rental
income for financial statements - - 11,144
--------- --------- ---------
Taxable income (loss) $ 482,476 $ 108,284 $ (42,672)
========= ========= =========
</TABLE>
GRIFFIN REAL ESTATE FUND-II,A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, AND 1994
6. PARTNERS' DEFICIT RECONCILIATION
Reconciliation of financial statement deficit to tax return deficit is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Deficit per
financial statements $ (1,228,961) $ (945,959) $ (830,916)
Cumulative excess of tax
depreciation over financial
statement depreciation (7,763,417) (7,703,316) (7,492,289)
Prepaid rent recognized as
income for tax purposes 74,066 70,820 76,491
------------ ----------- ------------
Deficit per tax return $ (8,918,312) $(8,578,455) $ (8,246,714)
============ ============ ============
</TABLE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
Schedule III
<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. &
Description Encumbrances Land Improve Improve Land Improve Total
- ----------- ------------ ---- ------- ------- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
URBANDALE, IA
Candleridge $ 2,820,469 $ 372,378 $ ,580,857 $ 426,731 $ 372,378 $ 4,007,588 $ 4,379,966
URBANDALE, IA
Villas of
Patricia Park 2,443,129 258,924 2,984,746 215,983 258,924 3,200,729 3,459,653
GOLDEN, CO
Lunnonhaus
Village 3,873,858 714,045 8,049,914 1,205,252 714,045 9,255,166 9,969,211
W. DES
MOINES, IA
Olde English
Village 5,373,502 815,329 6,745,860 1,397,394 815,329 8,143,254 8,958,583
----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL $14,510,958 $ 2,160,676 $21,361,377 $ 3,245,360 $ 2,160,676 $24,606,737 $26,767,413
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
(WIDE TABLE CONTINUED FROM ABOVE)
Accum. Date of Date
Description Deprec. Construct. Acquired
- ----------- ------- ---------- --------
URBANDALE, IA
Candleridge $ 2,390,551 1979 12/30/81
URBANDALE, IA
Villas of
Patricia Park 1,932,774 1979 12/30/81
GOLDEN, CO
Lunnonhaus
Village 5,173,156 1975 5/06/82
W. DES
MOINES, IA
Olde English
Village 4,463,518 1972 8/31/82
------------
TOTAL $13,959,999
===========
(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, 1996 is the same for
financial statement purposes as it is for tax purposes, with the aggregate total
being $26,767,413.
1994 1995 1996
----------- ----------- -----------
Balance at beginning of period $24,898,130 $25,669,406 $26,266,330
Additions during period
Improvements 771,276 596,924 501,083
----------- ----------- -----------
Balance at end of period $25,669,406 $26,266,330 $26,767,413
=========== =========== ===========
(d) Reconciliation of accumulated depreciation:
Balance at beginning of period $11,330,522 $12,183,949 $13,062,669
Depreciation expense for period 853,427 878,720 897,330
----------- ----------- -----------
Balance at end of period $12,183,949 $13,062,669 $13,959,999
=========== =========== ===========
Depreciation calculated on 5-27.5 year lives using the straight-line method on
real property and accelerated for personal property.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,001,510
<SECURITIES> 0
<RECEIVABLES> 31,440
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,371,262
<PP&E> 26,767,413
<DEPRECIATION> 13,959,999
<TOTAL-ASSETS> 14,308,137
<CURRENT-LIABILITIES> 1,026,140
<BONDS> 14,510,958
0
0
<COMMON> 0
<OTHER-SE> (1,228,961)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 14,308,137
<SALES> 0
<TOTAL-REVENUES> 5,549,865
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,862,480
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,148,054
<INCOME-PRETAX> 539,331
<INCOME-TAX> 0
<INCOME-CONTINUING> 539,331
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 539,331
<EPS-PRIMARY> 234.49<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>
