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, 1998
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
March 31, 1998 and December 31, 1997.............................1
Condensed Statements of Operations
for the three months ended
March 31, 1998 and 1997..........................................2
Condensed Statements of Cash Flows
for the three months ended
March 31, 1998 and 1997..........................................3
Condensed Statements of Changes
in Partners' Equity for the
three months ended March 31, 1998................................4
Notes to Financial Statements.......................................5
Management's Discussion and Analysis of
Financial Conditions and Results
of Operations..................................................6-8
PART II. Other Information...................................................8
SIGNATURES ....................................................................9
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
(unaudited)
March, 31, December, 31
1998 1997
------------ ------------
ASSETS
Cash and cash equivalents $ 554,988 $ 628,333
Receivables and other assets 374,426 266.535
------------ ------------
Total 929,414 894,868
------------ ------------
PROPERTY:
Land 1,529,374 1,529,374
Buildings and improvements 16,430,930 16,430,929
Furniture and equipment 1,339,244 1,339,243
------------ ------------
Total 19,299,548 19,299,546
Less accumulated depreciation 10,459,108 10,292,116
------------ ------------
Property - net 8,840,440 9,007,430
------------ ------------
TOTAL ASSETS $ 9,769,854 $ 9,902,298
============ ============
LIABILITIES AND PARTNERSHIP EQUITY
LIABILITIES:
Accounts payable and accrued liabilities $ 504,894 $ 546,908
Security deposits 85,404 90,063
Mortgage notes payable 9,003,476 9,031,201
------------ ------------
Total liabilities 9,593,774 9,668,172
------------ ------------
PARTNERS' EQUITY:
General Partner (465,816) (462,914)
Limited Partner 641,896 697,040
------------ ------------
Total partnership equity 176,080 234,126
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 9,769,854 $ 9,902,298
============ ============
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended
Ended March 31,
1998 1997
---------- ----------
REVENUES
Rental income $ 948,960 $1,298,994
(less vacancies - 1998, $ 58,613;
1997, $105,465)
Interest income 10,168 13,633
Other income 43,964 63,489
---------- ----------
Total revenues 1,003,092 1,376,116
---------- ----------
OPERATING EXPENSES
Operating expenses 480,771 722,666
Interest expense 181,152 290,405
Depreciation and amortization 169,215 239,368
---------- ----------
Total operating expenses 831,138 1,252,439
---------- ----------
NET INCOME 171,954 123,677
NET INCOME ALLOCATED TO
GENERAL PARTNER 8,598 6,184
---------- ----------
NET INCOME ALLOCATED TO
LIMITED PARTNERS $ 163,356 $ 117,493
========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT
(weighted average basis) $ 74.76 $ 53.77
========== ==========
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
For the Three Months
Ended March 31,
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 171,954 $ 123,677
Adjustments to reconcile
to net cash provided by operating
activities:
Depreciation and amortization 169,215 239,368
Increase in receivables and other assets (110,116) (26,981)
Decrease in accounts payable
and accrued liabilities (42,014) (80,921)
Decrease in security deposits (4,659) (1,991)
----------- -----------
Net cash provided by operating activities 184,380 253,152
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (230,000) (172,725)
Payments of principal (27,725) (76,540)
----------- -----------
Net cash used by financing activities (257,725) (249,265)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (73,345) 3,887
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 628,333 1,001,510
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 554,988 $ 1,005,397
=========== ===========
CASH PAID DURING THE PERIOD FOR INTEREST $ 209,807 $ 292,608
=========== ===========
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE THREE MONTHS ENDED March 31, 1998
(unaudited)
GENERAL LIMITED TOTAL
PARTNER PARTNERS PARTNERSHIP
--------- --------- ---------
PARTNERS' EQUITY (DEFICIT)
JANUARY 1, 1998 $(462,914) $ 697,040 $ 234,126
NET INCOME 8,598 163,356 171,954
DISTRIBUTIONS (11,500) (218,500) (230,000)
--------- --------- ---------
PARTNERS' EQUITY (DEFICIT)
March 31, 1998 $(465,816) $ 641,896 $ 176,080
========= ========= =========
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 1998
(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, 1998 and December 31, 1997 and the results of its operations for
the three months ended March 31, 1998 and 1997 and its cash flows for the
three months ended March 31, 1998 and 1997.
The accounting policies followed by the Partnership are set forth in Note
1 to the Partnership financial statements in the 1997 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, 1998 and 1997 relating to
the Griffin Companies:
1998 1997
-------- --------
Management fees $ 55,712 $ 78,229
Supervisory fees $ 13,664 $ 18,899
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,
1998 1997
--------- ---------
Net income per statement
of operations $ 171,954 $ 123,677
Book depreciation over
tax depreciation 200,472 105,036
--------- ---------
Taxable income $ 372,426 $ 228,713
========= =========
<PAGE>
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, 1998, the Partnership had cash and cash equivalents of $554,988
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 1998.
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, 1998.
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.
On May, 1997 the Partnership sold the Candleridge Apartments and the Villas of
Patricia Park Apartments, therefore comparison of results from one year to the
next is not possible for the Partnership taken as a whole. The following
discussion is therefore limited to the two remaining properties that were still
held in the first quarter of 1998.
Lunnonhaus Village Apartments:
For the first quarter, vacancies remained at less than 1% while rental rates
rose 5% from 1997 to 1998. This together with an increase in Other Income
resulted in an increase of 5.7% in total revenues from 1997. Payroll expense
increased $4,251 to $45,582 from the first quarter of 1997, while insurance
declined $3,996 from $8,555 to $4,559 over the same period. Changes in other
operating expenses were even smaller so that the total operating expenses in the
first quarter increased less than 1% from the first quarter of 1997.
On May 7, 1998, a formal sales contract was executed for the sale of Lunnonhaus
Village Apartments. Although there can be no assurance a closing will ultimately
occur, a closing of the sale is expected during the month of July. A Securities
and Exchange Commission Form 8-K Will be filed following the closing which will
detail the transaction.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Olde English Village Apartments:
Vacancies were 13% for the first quarter, up only slightly when compared to the
11% from the first quarter of 1997. While rental rates increased about 3%, a
decline in Other Income and the vacancy increase offset this so that total
revenues increased less than 1% for the first quarter of 1998 over 1997.
Operating expenses for the first quarter of 1998 increased from the first
quarter of 1997 by about 4%. The largest increase was from Repairs and
Maintenance which went from $7,659 in 1997 to $13,861 in 1998, one result of
making vacant units rent ready. Real estate taxes also increased $4,200 from
$61,800 in the first quarter of 1997 to $66,000 in 1998. Utilities on the other
hand declined by $5,677 from $36,760 to $31,083.
Year 2000
The Year 2000 compliance issue concerns the inability of computerized
information systems to accurately calculate, store or use a date after 1999.
This could result in a system failure or miscalculations causing disruptions of
operations. The General Partner is currently evaluating the accounting software
to find out if a Year 2000 problem exists. If the results of that evaluation
show that there is a problem, there will be a conversion to another software
that is widely used in the real estate industry, is readily available and is
Year 2000 compliant. Such a conversion, if necessary, would occur in 1999. The
General Partner's current estimate is that the costs associated with the Year
2000 issue, and the consequences of incomplete or untimely resolution of the
Year 2000 issue, will not have a material adverse affect on the results of
operations or financial position of the Partnership in any given year.
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
OCCUPANCY TABLE
Approximate occupancy levels of the Partnership's investment property by
quarter.
1997 1998
------------------------- -------------------------
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 84% * * * *
2. Candleridge Apts.
Urbandale, Iowa 96% * * * *
3. Lunnonhaus Village
Apartments
Golden, Colorado 99% 100% 100% 100% 99%
4. Olde English Village
Apartments
W. Des Moines, Iowa 89% 91% 93% 88% 87%
* Indicates the Partnership did not own the property at the end of the quarter.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
As of March 31, 1998, an individual was pursuing a legal action against the
Partnership for injuries sustained in a fall. The individual is attempting to
recover monetary damages and to receive reimbursement for medical costs. Any
judgment against the Partnership would be covered by insurance.
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.
<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: May 15, 1998 By /s/ Larry D. Fransen
--------------------
Larry D. Fransen, for the
General Partner, Investment
Associates
Dated: May 15, 1998 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 554,988
<SECURITIES> 0
<RECEIVABLES> 374,426
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 929,414
<PP&E> 19,299,548
<DEPRECIATION> 10,459,108
<TOTAL-ASSETS> 9,769,854
<CURRENT-LIABILITIES> 590,298
<BONDS> 9,003,476
0
0
<COMMON> 0
<OTHER-SE> 176,080<F1>
<TOTAL-LIABILITY-AND-EQUITY> 9,769,854
<SALES> 0
<TOTAL-REVENUES> 992,924
<CGS> 0
<TOTAL-COSTS> 649,986
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,984
<INCOME-PRETAX> 171,954
<INCOME-TAX> 0
<INCOME-CONTINUING> 171,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 171,954
<EPS-PRIMARY> 74.76<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>
