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 SEPTEMBER 30, 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.
[ ]
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
INDEX
PART 1. Financial Information
Condensed Balance Sheets
September 30, 1997 and December 31, 1996........................1
Condensed Statements of Operations
for the three months and nine months ended
September 30, 1997 and 1996.....................................2
Condensed Statements of Cash Flows
for the nine months ended
September 30, 1997 and 1996.....................................3
Condensed Statements of Changes
in Partners' Equity for the
nine months ended September 30, 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
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
(unaudited)
September, 30 December, 31
1997 1996
------------ ------------
ASSETS
- ------
Cash and cash equivalents $ 707,706 $ 1,001,510
Receivables and other assets 392,887 499,213
------------ ------------
Total 1,100,593 1,500,723
------------ ------------
PROPERTY:
Land 1,529,374 2,160,676
Buildings and improvements 16,311,382 22,530,068
Furniture and equipment 1,298,139 2,076,669
------------ ------------
Total 19,138,895 26,767,413
Less accumulated depreciation 10,121,898 13,959,999
------------ ------------
Property - net 9,016,997 12,807,414
------------ ------------
TOTAL ASSETS $ 10,117,590 $ 14,308,137
============ ============
LIABILITIES AND PARTNERSHIP EQUITY
- ----------------------------------
LIABILITIES:
Accounts payable and accrued liabilities $ 520,084 $ 884,977
Security deposits 92,453 141,163
Mortgage notes payable 9,087,169 14,510,958
------------ ------------
Total liabilities 9,699,706 15,537,098
------------ ------------
PARTNERS' EQUITY (DEFICIT):
General Partner (538,416) (536,068)
Limited Partner 956,300 (692,893)
------------ ------------
Total partnership equity (deficit) 417,884 (1,228,961)
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 10,117,590 $ 14,308,137
============ ============
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
REVENUES
Rental income $937,035 $1,330,766 $3,385,034 $3,938,053
Interest income 11,506 10,983 39,212 26,754
Other income 44,655 77,341 167,017 214,017
Gain on sale of property -- -- 4,953,337 --
-------- ---------- ---------- ----------
Total revenues 993,196 1,419,090 8,544,600 4,178,824
-------- ---------- ---------- ----------
OPERATING EXPENSES
Operating expenses 538,221 742,777 1,927,761 2,151,686
Interest expense 195,531 287,669 790,318 891,906
Depreciation and
amortization 169,391 242,177 711,090 726,532
-------- ---------- ---------- ----------
Total operating expenses 903,143 1,272,623 3,429,169 3,770,124
-------- ---------- ---------- ----------
NET INCOME 90,053 146,467 5,115,431 408,700
NET INCOME ALLOCATED
TO GENERAL PARTNER 4,503 7,323 57,638 20,435
-------- ---------- ---------- ----------
NET INCOME ALLOCATED
TO LIMITED PARTNERS $ 85,550 $ 139,144 $5,057,793 $ 388,265
======== ========== ========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT
(weighted average basis) $ 39.15 $ 63.62 $ 2,314.78 $ 177.53
======== ========== ========== ==========
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine Months
Ended September 30,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,115,431 $ 408,700
Adjustments to reconcile net income
to net cash provided by
operating activities:
Gain on sale of property (4,953,337) --
Depreciation and amortization 711,090 726,532
Decrease (increase) in receivables
and other assets (15,483) 8,194
Decrease in accounts payable
and accrued liabilities (364,893) (44,601)
Increase (decrease) in security deposits (48,710) 1,258
----------- -----------
Net cash provided by operating
activities 444,098 1,100,083
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (211,099) (320,236)
Proceeds from sale of property & equipment 8,365,572 --
----------- -----------
Net cash provided (used)
by investing activities 8,154,473 (320,236)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (3,468,586) (649,833)
Payments of principal mortgage notes payable (5,423,789) (215,756)
----------- -----------
Net cash used by financing activities (8,892,375) (865,589)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (293,804) (85,742)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 1,001,510 1,044,305
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 707,706 $ 958,563
=========== ===========
CASH PAID DURING THE PERIOD FOR INTEREST $ 829,699 $ 893,457
=========== ===========
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(unaudited)
GENERAL LIMITED TOTAL
PARTNER PARTNERS PARTNERSHIP
--------- ----------- -----------
PARTNERS' EQUITY (DEFICIT)
JANUARY 1, 1997 $(536,068) $ (692,893) $(1,228,961)
NET INCOME 57,638 5,057,793 5,115,431
DISTRIBUTIONS (59,986) (3,408,600) (3,468,586)
--------- ----------- -----------
PARTNERS' EQUITY (DEFICIT)
SEPTEMBER 30, 1997 $(538,416) $ 956,300 $ 417,884
========= =========== ===========
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 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
September 30, 1997 and December 31, 1996 and the results of its operations
for the three months and nine months ended September 30, 1997 and 1996 and
its cash flows for the nine months ended September 30, 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 nine months ended September 30, 1997 and 1996 relating to
the Griffin Companies:
1997 1996
---- ----
Management fees $ 205,948 $196,419
Supervisory fees $ 54,468 $ 56,485
3. TAXABLE INCOME (LOSS)
The net income shown on the statement of operations is reconciled to the
taxable income (loss) as follows:
For the Nine Months
Ended September 30,
1997 1996
---- ----
Net income per statement
of operations $5,115,431 $408,700
Excess of book depreciation
over (under) tax depreciation 237,745 (42,412)
---------- --------
Taxable income $5,353,176 $366,288
========== ========
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Griffin Real Estate Fund-II, A Limited Partnership (the "Partnership") is a
limited partnership formed in 1980 to invest in and operate income-producing
real property. The Partnership raised $11,000,000 through the sale of Limited
Partnership interests and utilized these proceeds to acquire five real property
investments. Prior to 1997, title to one of these properties was relinquished
through foreclosure. The Candleridge and Villas of Patricia Park Apartments were
sold on May 27, 1997. The sales were reported on form 8-K to the SEC. The
Partnership continues to operate its two remaining properties.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1996 for a more complete understanding of the
Partnership's financial position.
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.
1997 Compared to 1996
With property sales occuring before the end of the second quarter of 1997,
results of operations are not easily comparable for the Partnership as a whole.
Comparisons are only meaningful either on a property by property basis or by
comparing the combined results of the two remaining properties.
Higher third quarter occupancy rates at Lunnonhaus Village Apartments were
partly offset by lower rates at Olde English Village Apartments. Rental income
plus other income for the two properties combined for a total income that was
virtually unchanged from the third quarter of 1996.
Third quarter expenses were up a combined $11,747 for the two properties over
the same period of 1996. The majority of this increase was due to the Repairs
and Maintenance expense at Olde English Village Apartments. This increase of
$7,414 was expected with the lower occupancy and the associated cost of making
vacant units rent ready. Olde English Village Apartments also had capital
expenditures for the parking lot, the sidewalks and to replace an old fence to
enhance the appearance of the property.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Partnership had cash and cash equivalents of $707,706
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.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A quarterly distribution to partners of $100.00 per limited partnership unit was
made following the first two quarters and again following the end of the third
quarter to unit holders of record on September 30, 1997. Future cash
distributions will depend on future property operations. In addition, following
the sales of Candleridge and Villas of Patricia Park Apartments, sales proceeds
of $1,285 per unit were distributed on June 17, 1997.
OCCUPANCY TABLE
Approximate occupancy levels of the Partnership's investment property by
quarter.
1996 1997
------------------------- -------------------------
at at
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% 100% 100%
4. Olde English Village
Apartments
W. Des Moines, Iowa 94% 92% 94% 87% 89% 91% 93%
* Indicates Partnership did not own property at end of quarter.
<PAGE>
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) Form 8-K was filed on June 12, 1997 to report the sales of
Candleridge and Villas of Patricia Park Apartments on May 27,
1997.
<PAGE>
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: November 14, 1997 By /s/ Larry D. Fransen
--------------------
Larry D. Fransen, for the
General Partner, Investment
Associates
Dated: November 14, 1997 By /s/ Larry D. Fransen
--------------------
Larry D. Fransen,
Managing General Partner of the
General Partner, Investment
Associates
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 707,706
<SECURITIES> 0
<RECEIVABLES> 392,887
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,100,593
<PP&E> 19,138,895
<DEPRECIATION> 10,121,898
<TOTAL-ASSETS> 10,117,590
<CURRENT-LIABILITIES> 612,537
<BONDS> 9,087,169
0
0
<COMMON> 0
<OTHER-SE> 417,884<F1>
<TOTAL-LIABILITY-AND-EQUITY> 10,117,590
<SALES> 0
<TOTAL-REVENUES> 8,505,388
<CGS> 0
<TOTAL-COSTS> 2,638,851
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 751,106
<INCOME-PRETAX> 5,115,431
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,115,431
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,115,431
<EPS-PRIMARY> 2,314.78<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>
