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 JUNE 30, 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 PARTNESHIIP
INDEX
PART I. Financial Information
Condensed Balance Sheets
June 30, 1998 and December 30, 1997..............................1
Condensed Statements of Operations
for the Three Months and Six Months Ended
June 30, 1998 and 1997...........................................2
Condensed Statements of Cash Flows
for the Six Months Ended
June 30, 1998 and 1997...........................................3
Condensed Statements of Changes
in Partners' Equity for the
Six Months ended June 30, 1998...................................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)
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
ASSETS
- ------
<S> <C> <C>
Cash and Cash Equivalents $ 597,980 $ 628,333
Receivables and Other Assets 327,051 266,535
------------ ------------
Total 925,031 $ 894,868
------------ ------------
PROPERTY:
Land 1,529,374 1,529,374
Buildings and Improvements 16,467,188 16,430,929
Furniture and Equipment 1,339,244 1,339,243
------------ ------------
Total 19,335,806 19,299,546
Less Accumulated Depreciation 10,626,099 10,292,116
------------ ------------
Property - Net 8,709,707 9,007,430
------------ ------------
TOTAL ASSETS $ 9,634,738 $ 9,902,298
============ ============
LIABILITIES AND PARTNERSHIP EQUITY
- ----------------------------------
LIABILITIES:
Accounts Payable and Accrued Liabilities $ 539,761 $ 546,908
Security Deposits 101,899 90,063
Mortgage Notes Payable 8,917,490 9,031,201
------------ ------------
Total Liabilities 9,559,150 $ 9,668,172
------------ ------------
PARTNERS' EQUITY:
General Partner (470,841) (462,914)
Limited Partner 546,429 697,040
------------ ------------
Total Partnership Equity 75,588 234,126
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 9,634,738 $ 9,902,298
============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
1998 1997 1998 1997
------------------------- -------------------------
<S> <C> <C> <C> <C>
REVENUES
Rental Income $ 963,705 $ 1,149,005 $ 1,912,665 $ 2,447,999
Interest Income 7,916 14,073 18,084 27,706
Other Income 49,996 58,874 93,960 122,363
Gain on Sale of Property -- 4,953,336 -- 4,953,336
----------- ----------- ----------- -----------
Total Revenues 1,021,617 6,175,288 2,024,709 7,551,404
----------- ----------- ----------- -----------
OPERATING EXPENSES
Operating Expenses 544,675 666,874 1,025,446 1,389,540
Interest Expense 178,219 252,147 359,371 542,552
Depreciation and
Amortization 169,215 212,445 338,430 451,813
----------- ----------- ----------- -----------
Total Operating Expenses 892,109 1,131,466 1,723,247 2,383,905
----------- ----------- ----------- -----------
NET INCOME BEFORE
EXTRAORDINARY ITEM 129,508 5,043,822 301,462 5,167,499
EXTRAORDINARY ITEM -
LOSS ON EXTINGUISHMENT
OF DEBT -- (142,121) -- (142,121)
----------- ----------- ----------- -----------
NET INCOME 129,508 $ 4,901,701 $ 301,462 $ 5,025,378
=========== =========== =========== ===========
NET INCOME ALLOCATED
TO GENERAL PARTNER 6,475 $ 46,951 $ 15,073 $ 53,135
=========== =========== =========== ===========
NET INCOME ALLOCATED
TO LIMITED PARTNERS $ 123,033 $ 4,854,750 $ 286,389 $ 4,972,243
=========== =========== =========== ===========
PER UNIT:
NET INCOME BEFORE
EXTRAORDINARY ITEM $ 56.31 $ 2,283.64 $ 131.07 $ 2,337.42
EXTRAORDINARY ITEM -- (61.79) -- (61.79)
----------- ----------- ----------- -----------
NET INCOME $ 56.31 $ 2,221.85 $ 131.07 $ 2,275.63
=========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE SIX MONTHS
ENDED JUNE 30,
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 301,462 $ 5,025,378
Adjustments to reconcile Net Income
to Net Cash Provided by Operating Activities:
Gain on Sale of Property -- (4,953,336)
Extraordinary Item - Loss on
Extinguishment of Debt -- 142,121
Depreciation and Amortization 338,430 451,813
Decrease (Increase) in Receivables
and Other Assets (64,963) 8,004
Decrease in Accounts Payable
and Accrued Liabilities (7,147) (341,776)
Increase (Decrease) in Security Deposits 11,836 (48,438)
----------- -----------
Net Cash Provided by Operating Activities 579,618 283,766
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment (36,260) (140,856)
Proceeds from Sale of Property and Equipment -- 8,365,572
----------- -----------
Net Cash Provided (Used) by Investing Activities (36,260) 8,224,716
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Partners (460,000) (3,238,811)
Prepayment Penalties on Mortgages -- (52,235)
Payments of Principal Mortgage Notes Payable (113,711) (5,369,338)
----------- -----------
Net Cash Used by Financing Activities (573,711) (8,660,384)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (30,353) (151,902)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 628,333 1,001,510
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 597,980 $ 849,608
=========== ===========
CASH PAID DURING THE PERIOD FOR INTEREST $ 360,779 $ 581,478
=========== ===========
See notes to condensed financial statement.
<PAGE>
GRIFFIN REAL ESTATE FUND-II
A LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(unaudited)
General Limited Total
Partner Partners Partnership
------- -------- -----------
Partner's Equity (Deficit) $(462,914) $ 697,040 $ 234,126
January 1, 1998
Net Income 15,073 286,389 301,462
Distributions (23,000) (437,000) (460,000)
--------- --------- ---------
Partners' Equity (Deficit) $(470,841) $ 546,429 $ 75,588
June 30, 1998 ========== ========= =========
See notes to condensed financial statements.
<PAGE>
GRIFFIN REAL ESTATE FUND-II
A LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 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 June 30,
1998 and December 31, 1997 and the results of its operations for the three
months and six months ended June 30, 1998 and 1997 and its cash flows for
the six months ended June 30, 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 six months ended June 30, 1998 and 1997 relating to the
Griffin Companies:
1998 1997
---- ----
Management fees $ 122,810 $152,236
Supervisory fees $ 21,368 $ 28,400
3. TAXABLE INCOME (LOSS)
The net income shown on the statement of operations is reconciled to the
taxable income (loss) as follows:
FOR THE SIX MONTHS
ENDED JUNE 30,
1998 1997
---- ----
Net income per statement of operations $ 301,462 $5,025,378
Excess of book depreciation
over tax depreciation 400,944 188,405
--------- ----------
Taxable income $ 702,406 $5,213,783
======== ==========
<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 June 30, 1998, the Partnership had cash and cash equivalents of $597,980
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 and again following the end of the second
quarter to unit holders of record on June 30, 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 27, 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 second quarter of 1998.
Lunnonhaus Village Apartments:
For the first six months, 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. Year-to-date
payroll expense increased $7,671 from $82,425 to $90,096 from the first six
months of 1997, while utilities rose $4,598 from $116,268 to $120,866 over the
same period. Significant decreases in expenses occurred in General and
Administrative, which declined $3,393 from $14,341 to $10,948, and in Repairs
and Maintenance which declined $5,508 from $38,903 to $33,395 during the first
six months of 1997 and 1998 respectively.
On May 8, 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 August. A
Securities and Exchange Commission Form 8-K will be filed following the closing
which will detail the transaction.
Olde English Village Apartments:
Vacancies were 11.3% for the first quarter, down slightly when compared to the
12.9% from the first six months of 1997. Rental rates also increased about 3%.
Therefore despite a decline in Other Income total revenues increased about 3.5%
for the first six months of 1998 over 1997. Operating expenses for the first
half of 1998 increased from the first half of 1997 by about 10.7%. The largest
increase was from Repairs and Maintenance which went from $21,526 in 1997 to
$45,563 in 1998, one result of making vacant units rent ready. Real estate taxes
also increased $8,400 from $123,600 in the first half of 1997 to $132,000 in
1998. Utilities on the other hand declined by $5,677 from $36,760 to $31,083.
<PAGE>
GRIFFIN REAL ESTATE FUND-II
A LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A formal sales contract is expected to be executed in late August 1998 for the
sale of Olde English Village Apartments. Although there can be no assurance a
closing will ultimately occur, a closing of the sale is expected during the
month of October. A Securities and Exchange Commission From 8-K will be filed
following the closing which will detail the transaction.
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 of financial position of the Partnership in any given year.
OCCUPANCY TABLE
Approximate occupancy levels of the Partnership's investment property by
quarter.
<TABLE>
<CAPTION>
1997 1998
at at
---------------------------- ----------------------------
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
<S> <C> <C> <C> <C> <C>
1. Villas of Patricia Park Apts.
Urbandale, Iowa 84% * * * *
2. Candleridge Apartments
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 Partnership did not own property at end of quarter.
</TABLE>
<PAGE>
GRIFFIN REAL ESTATE FUND-II
A LIMITED PARTNERSHIP
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
As of June 30, 1998, an individual was pursuing a legal action against the
partnership for injuries sustained moving a refrigerator. 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: August 14, 1998 By: /s/ Larry D. Fransen
---------------------------
Larry D. Fransen, for the
General Partner, Investment
Associates
Dated: August 14, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 597,980
<SECURITIES> 0
<RECEIVABLES> 327,051
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 925,031
<PP&E> 19,335,806
<DEPRECIATION> 10,626,099
<TOTAL-ASSETS> 9,634,738
<CURRENT-LIABILITIES> 641,660
<BONDS> 8,917,490
0
0
<COMMON> 0
<OTHER-SE> 75,588<F1>
<TOTAL-LIABILITY-AND-EQUITY> 9,634,738
<SALES> 0
<TOTAL-REVENUES> 2,006,625
<CGS> 0
<TOTAL-COSTS> 1,363,876
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 341,287
<INCOME-PRETAX> 301,462
<INCOME-TAX> 0
<INCOME-CONTINUING> 301,462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 301,462
<EPS-PRIMARY> 131.07<F2>
<EPS-DILUTED> 0.00
<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>
