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, 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
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. [ ]
Forms 8-K dated September 9, 1998 and January 27, 1999 is incorporated by
reference in this report.
<PAGE>
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..........................8-9
Item 11 Management Remuneration and Transactions.........................10
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..........................................12
SIGNATURES .................................................................13
<PAGE>
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, 1998 the Partnership has made the real property
investment set forth in the following table:
Name, type of property Date of Type of
and location (a) Size Purchase Ownership (b)
---------------------- --------- -------- ---------
1. 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 investment;
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.
-1-
<PAGE>
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. No
refinancings occurred in 1998, 1997, or 1996. 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 1998, 1997, and 1996 the
Partnership redeemed no units.
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.
AVERAGE EFFECTIVE ANNUAL
RENTAL PER UNIT
Lunnonhaus Olde English Villas of
Candleridge Village Village Patricia Park
Apartments Apartments Apartments Apartments
Urbandale, IA Golden, CO W. Des Moines, IA Urbandale, IA
- --------------------------------------------------------------------------------
1998 * $7,786 $6,371 *
- --------------------------------------------------------------------------------
1997 6,397 7,453 5,996 5,650
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
* Indicates the partnership did not own the property at any time during the
year.
SCHEDULE OF REAL
ESTATE TAXES
Lunnonhaus Olde English Villas of
Candleridge Village Village Patricia Park
Apartments Apartments Apartments Apartments
Urbandale, IA Golden, CO W. Des Moines, IA Urbandale, IA
- --------------------------------------------------------------------------------
1998 Tax Rate * (a) (a) *
Assessment * (a) (a) *
- --------------------------------------------------------------------------------
1997 Tax Rate * 89.573 34.36266 *
Assessment * $74,071 $272,482 *
- --------------------------------------------------------------------------------
1996 Tax Rate 34.07312 89.059 34.07312 34.07312
Assessment $151,068 $65,983 $268,332 $127,987
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
* Indicates the Partnership did not own the property at the time of the
assessment.
(a) Data not yet available.
It is the opinion of the General Partner that the Partnership's property is
adequately covered by insurance.
-2-
<PAGE>
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Item 2. Properties
The Partnership owns the real property 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.
-3-
<PAGE>
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, 1998, 1997, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total Revenues $13,107,038 $ 9,542,670 $ 5,589,366 $ 5,472,890 $ 5,148,672
Net Income before 10,088,953 5,303,794 539,331 324,981 151,515
extraordinary item
Net Income before 4,565.70 2,359.35 234.49 141.24 65.81
extraordinary item
per limited
partnership unit (c)
Extraordinary item - -- (142,121) -- -- --
Loss on extingishment
of debt
Extraordinary item - -- (63.23) -- -- --
Loss on extingishment
of debt per limited
unit (c)
Net Income 10,088,953 5,161,673 539,331 324,981 151,515
Net Income per limited 4,565.70 2,296.12 234.49 141.24 65.81
partner unit (c)
Total Assets 4,441,242 9,902,298 14,308,137 14,837,677 15,184,304
Mortgages and 5,143,606 9,031,201 14,510,958 14,801,452 15,067,907
Contracts for deed
Cash distributions $ 5,293.00 $ 1,660.00 $ 357.54 $ 187.53 --
per limited
partner unit (b)
</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 $8,811 per Limited Partnership unit have been made
to the Limited Partners since the inception of the Partnership. These
distributions have not resulted in taxable income to such Limited Partners
and have therefore represented a return of capital. 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) Net income before extraordinary item, extraordinary item and Net income
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.
-4-
<PAGE>
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 - 1998 Compared to 1997
The year 1998 was marked by the continued disposition of the Partnership
properties that began in 1997. One of the remaining two properties was sold
during 1998 and the other was sold in January 1999. As a result of the sale of
the remaining property, the Partnership was terminated on February 28, 1999.
Quarterly distributions continued through the third quarter of 1998 at $400 per
unit for an annual rate of return of 8% of the limited partners' original
investment.
On August 26, 1998 the Partnership sold Lunnonhaus Village Apartments.
This sale and the two property sales in 1997 mean that 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 one remaining property that
was held for the entire year.
Olde English Village Apartments:
Physical occupancy recovered to 96% from the 87% level reached in the
first quarter of 1998. This is a welcome reversal of the trend that began in
late 1996 and continued through 1997 when the Des Moines market was unusually
soft. Gross potential rents rose 2.2% from 1997 to 1998. Rent loss decreased by
$68,922 from $221,152 in 1997 to $152,230 in 1998. These two factors overcame a
small decrease in other income to bring total income up 6% from $1,666,370 in
1997 to $1,766,765 in 1998.
Continued vacancies earlier in 1998 caused a continued increase in the
areas of repairs and maintenance expense and in painting and decorating as the
apartments were made rent ready. Repairs and maintenance increased from $60,660
in 1997 to $84,076 in 1998. Advertising also increased 31% in an attempt to
lease the vacant units. Total advertising rose from $26,907 in 1997 to $35,207
in 1998.
Capital expenditures of $247,881 were used mostly for landscaping and
garage roof repairs, along with the normal carpet and appliance replacements and
numerous other small projects.
Summary of Operations - 1997 Compared to 1996
The year 1997 was a year of transition for the Partnership. The General
Partner began the marketing of the properties for sale, resulting in the sale of
two of the four apartment communities. The remaining two continue to be marketed
for sale. Quarterly distributions from operations for 1997 were increased to
$400 per unit (including distributions paid in January 1998) or an annual return
of 8% of the limited partners' original investment.
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 held for the entire year.
-5-
<PAGE>
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Lunnonhaus Village Apartments:
Physical occupancy remained at or near 100% during 1997 which compares
closely to 1996. Rental rates increased 4.4% and with a slight increase in other
income, total revenues increased 5.0% over 1996.
Operating expenses in total were up only slightly from 1996. Utilities
increased 10% from $196,662 in 1996 to $216,333 in 1997. However, there were
other expenses that decreased enough to largely offset this. Most notably,
repairs and maintenance dropped 8.2% from $247,579 in 1996 to $228,727 in 1997.
The decrease is mainly a result of fewer carpet and appliance replacements
during 1997. Real estate tax expense increased by $10,423 from $65,871 in 1996
to $76,294 in 1997. Capital expenditures of $167,768 were used to repair
sidewalks, steps, siding, roofs to remodel the clubhouse and to purchase laundry
equipment.
Olde English Village Apartments:
Physical occupancy rebounded a bit during 1997 from the 87% level as of
December 31, 1996. However, after reaching the low 90's it had slipped back to
88% by December 31, 1997 due to the soft Des Moines market. Rental rates
increased almost 3%, but with the increases in vacancy and a decrease in other
income, total income dropped 3.6% in 1997.
Increased tenant turnover caused a commensurate increase in expenses in
the areas of repairs and maintenance and in painting and decorating as the
apartments were made rent ready. Repairs and maintenance increased from $223,822
in 1996 to $317,835 in 1997. Advertising also increased 68% in an attempt to
lease the vacant units. The amount spent rose 68% from $16,011 in 1996 to
$26,907 in 1997.
Capital expenditures of $203,984 were used to patch and seal the parking
lot, replace concrete, for wood, roof and window replacement, for fence repairs
and restroom remodeling. The lease on the property's truck was also bought out.
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 have resulted in a system failure or miscalculations causing
disruptions of operations. The General Partner had been evaluating the
accounting software to find out if a Year 2000 problem existed. However, given
that the Partnership terminated on February 28, 1999 this is no longer an issue.
LIQUIDITY
The Partnership had approximately $149,401 of cash reserves on hand at
December 31, 1998. This provided the Partnership with ample liquidity with which
to operate the Partnership up to its termination on February 28, 1999. The
Partnership sold Olde English Village Apartments on January 14, 1999 and
distributed sales proceeds of $1,573 to unitholders of record on February 18,
1999.
Candleridge and Villas of Patricia Park Apartments were both sold on May
27, 1997. Sales proceeds of $1,285 per unit were distributed on June 17, 1997 to
unitholders of record on May 27, 1997. Lunnonhaus Village Apartments was sold on
August 26, 1998. Sales proceeds of $4,741 per unit were distributed on September
2, 1998 to unitholders of record on August 26, 1998.
-6-
<PAGE>
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
OCCUPANCY TABLE
Lunnonhaus Olde English Villas
Candleridge Village Village of Patricia
Apartments Apartments Apartments Park Apartments
Urbandale, IA Golden, CO W. Des Moines, IA Urbandale, IA
------------- ---------- ----------------- ---------------
3/31/98 * 99% 87% *
6/30/98 * 99% 92% *
9/30/98 * * 95% *
12/31/98 * * 96% *
3/31/97 96% 99% 89% 84%
6/30/97 * 100% 91% *
9/30/97 * 100% 93% *
12/31/97 * 100% 88% *
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%
* Indicates the Partnership did not own the property at the end of the quarter.
-7-
<PAGE>
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 February 29, 1998 Thomas A. Robeson, one of the partners of the
General Partner, withdrew as a partner. Effective December 31, 1994 James R.
Wadsworth, one of the partners of the General Partner, withdrew as a partner.
Also effective July 22, 1997 Frederick R. Lamb, one of the partners of the
General Partners, withdrew as a partner. Their shares of ownership and their
shares 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:
-8-
<PAGE>
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Larry D. Fransen (age 58) 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.
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 59) 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.
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.
-9-
<PAGE>
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
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 $43,944, $23,857 and $24,064 in 1998, 1997, and 1996 respectively,
for these expenses.
Reference is made to Note 4 of Notes to Financial Statements appearing
elsewhere in this annual report for a description of related party transactions.
-10-
<PAGE>
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
Item 12. Limited Partnership Ownership of Certain Beneficial Owners
and Management
Everest Investors, LLC, 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, 1998
-------------- --------- -----------------
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 31,1998
-------------- --------- -----------------
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:
1998 1997 1996
-------- -------- --------
Property management fees $219,394 $259,996 $302,319
Major improvement
supervisory fees 24,198 68,502 73,408
-11-
<PAGE>
GRIFFIN REAL ESTATE FUND-II, A LIMITED PARTNERSHIP
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.
An 8-K was filed on June 12, 1997 in regards to the sale of the
Candleridge Apartments and Villas of Patricia Park Apartments on May 27, 1997.
Another 8-K was filed on September 9, 1998 in regards to the sale of Lunnonhaus
Village Apartments on August 26, 1998. An 8-K was filed on January 27, 1999 in
regards to the sale of Olde English Village on January 14, 1999. Proforma
Financial Information was included with these filings.
No annual report or proxy material for the fiscal year 1998 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.
-12-
<PAGE>
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 29, 1999 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 29, 1999 By: Larry D. Fransen\s\
----------------------------
Larry D. Fransen
Managing General Partner
of the General Partner
Investment Associates
-13-
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, 1998, 1997 AND 1996
TABLE OF CONTENTS
Page
Independent Auditor's Report................................................ 1
Balance Sheets, December 31, 1998 and 1997.................................. 2
Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996............................................ 3
Statements of Cash Flows for the Years
Ended December 31, 1998, 1997 and 1996...................................... 4
Statements of Changes in Partners' Equity (Deficit)
for the Years Ended December 31, 1998, 1997 and 1996........................ 5
Notes to Financial Statements...............................................6-10
Financial Statement Schedules............................................... 11
III Real Estate and Accumulated Depreciation,
December 31, 1998............................................... 11
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.
<PAGE>
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, 1998 and 1997 and the related
statements of operations, changes in partner's equity (deficit), and cash flows
for each of the years in the three-year period ended December 31, 1998. 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, 1998 and 1997, and the results of its
operations and its cash flows of each of the years in the three-year period
ended December 31, 1998 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.
As discussed in Note 1 and Note 5 to the financial statements, the Partnership
sold its remaining property on January 14, 1999 and was liquidated on February
28, 1999.
LARSON, ALLEN, WEISHAIR & CO., LLP
Minneapolis, Minnesota
March 5, 1999
-1-
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSET
1998 1997
------------ ------------
Cash and cash equivalents $ 149,401 $ 628,333
Escrow deposits 128,094 224,511
Receivables and other assets 15,510 19,784
------------ ------------
Total 293,005 872,628
------------ ------------
PROPERTY AND EQUIPMENT:
Land 815,329 1,529,374
Buildings and improvements 7,592,813 16,430,929
Furniture and equipment 798,704 1,339,243
------------ ------------
Total 9,206,846 19,299,546
Less accumulated depreciation 5,071,953 10,292,116
------------ ------------
Property and equipment - net 4,134,893 9,007,430
------------ ------------
Debt financing costs (net of accumulated
amortization - 1998, $196,974; 13,344 22,240
1997, $188,078) ------------ ------------
TOTAL ASSETS $ 4,441,242 $ 9,902,298
============ ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accounts payable:
Affiliate $ 3,124 $ 8,657
Other 362,134 135,272
Security deposits 33,705 90,063
Accrued expenses:
Real estate taxes 272,482 342,403
Interest 36,554 60,576
Mortgage notes payable 5,143,606 9,031,201
------------ ------------
Total liabilities 5,851,605 9,668,172
------------ ------------
PARTNERS' EQUITY:
General Partner (518,256) (462,914)
Limited Partners (892,107) 697,040
------------ ------------
Total Partners' Equity (Deficit) (1,410,363) 234,126
------------ ------------
TOTAL LIABILITIES AND PARTNERS'
EQUITY $ 4,441,242 $ 9,902,298
============ ============
See Notes to Financial Statements
-2-
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Rent (less vacancies:
1998, $157,377; 1997, $268,496;
1996, $249,891) $ 3,122,683 $ 4,335,378 $ 5,263,634
Interest 41,377 45,414 39,501
Other 154,010 208,541 286,231
Gain on sale of property 9,788,968 4,953,337 --
------------ ------------ ------------
Total revenues 13,107,038 9,542,670 5,589,366
------------ ------------ ------------
EXPENSES:
Interest 630,518 903,543 1,187,555
Depreciation and amortization 550,213 803,521 980,071
Real estate taxes 288,714 470,006 611,626
Repairs and maintenance 478,531 662,336 678,240
Utilities 286,981 411,435 452,082
Salaries and employee benefits 372,366 458,340 515,722
Management fees to related parties 219,394 259,996 302,319
Administrative 116,139 150,699 175,891
Insurance 69,286 108,003 133,277
Bad debts (2,628) 5,479 3,336
Other 8,571 5,518 9,916
------------ ------------ ------------
Total expenses 3,018,085 4,238,876 5,050,035
------------ ------------ ------------
NET INCOME BEFORE
EXTRAORDINARY ITEM 10,088,953 5,303,794 539,331
EXTRAORDINARY ITEM -
LOSS ON EXTINGUISHMENT
OF DEBT -- (142,121) --
------------ ------------ ------------
NET INCOME $ 10,088,953 $ 5,161,673 $ 539,331
============ ============ ============
NET INCOME ALLOCATED
TO GENERAL PARTNER $ 112,888 $ 144,640 $ 26,967
============ ============ ============
NET INCOME ALLOCATED
TO LIMITED PARTNERS $ 9,976,065 $ 5,017,033 $ 512,364
============ ============ ============
PER UNIT:
NET INCOME BEFORE
EXTRAORDINARY ITEM $ 4,565.70 $ 2,359.35 $ 234.49
EXTRAORDINARY ITEM -- (63.23) --
------------ ------------ ------------
NET INCOME $ 4,565.70 $ 2,296.12 $ 234.49
============ ============ ============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,088,953 $ 5,161,673 $ 539,331
Adjustments to reconcile net
income to net cash provided by
operating activities:
Gain on sale of property (9,788,968) (4,953,337) --
Extraordinary Item - Loss
on extinguishment of debt -- 142,121 --
Depreciation and amortization 550,213 803,521 980,071
Decrease (increase) in:
Receivables and other assets 4,274 11,656 14,121
Escrows 96,417 113,801 (6,364)
Increase (decrease) in:
Accounts payable 221,329 (48,397) 13,264
Security deposits (56,358) (51,100) (2,409)
Accrued expenses (93,943) (289,672) 33,101
------------ ------------ ------------
Net cash provided by operating
activities 1,021,917 890,266 1,571,115
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property
and equipment 14,168,142 8,365,575 --
Purchase of property and equipment (44,278) (371,752) (501,083)
------------ ------------ ------------
Net cash provided (used) by
investing activities 14,123,864 7,993,823 (501,083)
------------ ------------ ------------
CASH FROM FINANCING ACTIVITIES:
Distributions to partners (11,733,442) (3,698,586) (822,333)
Payments on mortgages
and contracts for deed (3,891,271) (5,479,757) (290,494)
Prepayment penalties on mortgages -- (52,235) --
Payments for debt
financing costs -- (26,688) --
------------ ------------ ------------
Net cash used by financing
activities (15,624,713) (9,257,266) (1,112,827)
------------ ------------ ------------
DECREASE IN CASH
AND CASH EQUIVALENTS (478,932) (373,177) (42,795)
CASH AND CASH EQUIVALENTS
- BEGINNING OF YEAR 628,333 1,001,510 1,044,305
------------ ------------ ------------
CASH AND CASH EQUIVALENTS
- END OF YEAR $ 149,401 $ 628,333 $ 1,001,510
============ ============ ============
CASH PAID FOR INTEREST $ 654,540 $ 942,224 $ 1,188,805
============ ============ ============
</TABLE>
See Notes to Financial Statements
-4-
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
CHANGES IN PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
GENERAL LIMITED
PARTNER'S PARTNERS'
EQUITY EQUITY
(DEFICIT) (DEFICIT) TOTAL
------------ ------------ ------------
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)
NET INCOME 144,640 5,017,033 5,161,673
DISTRIBUTIONS (71,486) (3,627,100) (3,698,586)
------------ ------------ ------------
PARTNERS' EQUITY (DEFICIT)
DECEMBER 31, 1997 (462,914) 697,040 234,126
NET INCOME 112,888 9,976,065 10,088,953
DISTRIBUTIONS (168,229) (11,565,213) (11,733,442)
------------ ------------ ------------
PARTNERS' EQUITY (DEFICIT)
DECEMBER 31, 1998 $ (518,256) $ (892,107) $ (1,410,363)
============ ============ ============
See Notes to Financial Statements
-5-
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
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, 1998 there are
2,200 limited partnership units authorized and 2,185 outstanding.
Termination of Partnership - Effective February 28, 1999, the
Partnership was terminated. A final liquidating distribution was made on
February 18, 1999 to the general and limited partners.
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 equivalents of $149,401 and $628,333 at December 31, 1998 and 1997,
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.
-6-
<PAGE>
GRIFFIN REAL ESTATE FUND II,
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
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.
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 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.
-7-
<PAGE>
GRIFFIN REAL ESTATE FUND II,
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
3. MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following at December 31:
1998 1997
----------- -----------
Mortgage note (Olde English Village)
monthly installments of $48,411
Principal and interest (8.051% at
December 31, 1998) due July 1, 2000 $ 5,143,606 5,263,528
Mortgage note (Lunnonhaus)
monthly installments of $31,166
including interest at 7%,
due June 2014 -- 3,767,673
----------- -----------
Total mortgage notes payable $ 5,143,606 $ 9,031,201
=========== ===========
All property is pledged as collateral to the mortgage notes payable.
Future principal maturities are as follows:
1999 $ 149,459
2000 4,994,147
------------
Total $ 5,143,606
============
During 1997, the Partnership extended the Olde English Village Mortgage
Note. The loan amount is $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 was due June
30, 1997, it carried an option, which the Partnership exercised, to
extend the maturity date for an additional term of 3 years to July 1,
2000. The extension required an extension fee payment equal to 1/2 of 1%
of the outstanding principal balance at the time of extension, or
$26,688. The lender has the right to call the note upon certain events.
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:
1998 1997 1996
--------- --------- ---------
Property management fee $ 219,394 $ 259,996 $ 302,319
Major improvement
supervisory fees 24,198 68,502 73,408
-8-
<PAGE>
GRIFFIN REAL ESTATE FUND II,
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
5. SALE OF PROPERTIES
The Partnership sold Lunnohaus Village Apartments on August 26, 1998. The
Partnership also sold the Candleridge Apartments and Villas of Patricia
Park Apartments on May 27, 1997. Details of these sales are as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------------------------
Lunnonhaus Villas of
Village Candleridge Patricia Park
Apartments Apartments Apartments
------------ ------------ ------------
<S> <C> <C> <C>
Sales price $ 14,200,000 $ 4,700,000 $ 3,700,000
Cost basis (4,375,498) (1,932,061) (1,480,176)
Selling expenses (35,534) (14,416) (20,010)
------------ ------------ ------------
Gain on sale $ 9,788,968 $ 2,753,523 $ 2,199,814
============ ============ ============
Debt extinguishment $ 3,692,651 $ 2,799,008 $ 2,424,539
============ ============ ============
Extraordinary loss
on debt extinguishment:
Write off unamortized
loan costs $ -- $ 46,946 $ 42,940
Prepayment penalty $ -- 27,990 24,245
------------ ------------ ------------
$ -- $ 74,936 $ 67,185
============ ============ ============
</TABLE>
On January 14, 1999 the Partnership sold its remaining property for
$9,000,000 with sales costs of $23,810.
6. TAXABLE INCOME
The net income shown on the financial statements is reconciled to the
taxable income as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net income per
financial statements $ 10,088,953 $ 5,161,673 $ 539,331
Excess of tax depreciation
under (over) book depreciation 429,668 278,673 (60,174)
Gain on sale of property for
tax purposes in excess of
gain for financial statements 2,735,095 2,140,024 --
Rental income for financial
statements in excess of (less
than) rental income for tax
purposes (93,275) 21,752 3,319
------------ ------------ ------------
Taxable income $ 13,160,441 $ 7,602,122 $ 482,476
============ ============ ============
</TABLE>
-9-
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, AND 1996
7. PARTNERS' DEFICIT RECONCILIATION
Reconciliation of financial statement equity (deficit) to tax return
deficit is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Equity (deficit) per
financial statements $ (1,410,363) $ 234,126 $ (1,228,961)
Cumulative excess of tax
depreciation over financial
statement depreciation (2,179,958) (5,344,720) (7,763,417)
Prepaid rent recognized as
income for tax purposes 2,543 95,818 74,066
------------ ------------ ------------
Deficit per tax return $ (3,587,778) $ (5,014,776) $ (8,918,312)
============ ============ ============
</TABLE>
-10-
<PAGE>
GRIFFIN REAL ESTATE FUND-II,
A LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
SCHEDULE III
<TABLE>
<CAPTION>
Costs
Capitalized
Subsequent
Initial Cost to to Gross Amount at Which Carried
Partnership (a) Acquisition at Close of Period (b) (c)
--------------- ---------- -----------------------------
Date
Bldgs/ Land/Bldg Buildings Accumulated of Date
Description Encumbrances Land Improve Improve Land & Improve Total Deprec.(d) Const Acquired
---------- -------- ---------- ---------- -------- ---------- ---------- ---------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
W. DES MOINES, IA
Olde English
Village $5,143,606 $815,329 $6,745,860 $1,645,656 $815,329 $8,391,516 $9,206,846 $5,071,953 1972 8/31/82
---------- -------- ---------- ---------- -------- ---------- ---------- ---------- ---- -------
Total $5,143,606 $815,329 $6,745,860 $1,645,656 $815,329 $8,391,516 $9,206,846 $5,071,953
========== ======== ========== ========== ======== ========== ========== ==========
</TABLE>
(a) The cost to the Partnership represents the original purchase price of the
properties.
(b) The aggregate cost of real estate owned at December 31, 1998 for federal
income tax purposes is $9,206,846.
(c) Reconciliation of property:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 26,266,330 $ 26,767,413 $ 19,299,546
Additions during period
Improvements 501,083 371,752 44,278
Dispositions -- (7,839,619) (10,136,978)
------------ ------------ ------------
Balance at end of period $ 26,767,413 $ 19,299,546 $ 9,206,846
============ ============ ============
</TABLE>
(d) Reconciliation of accumulated depreciation:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Balance at beginning of period $ 13,062,669 $ 13,959,999 $ 10,292,116
Depreciation expense for perio 897,330 759,499 541,317
Dispositions -- (4,427,382) (5,761,480)
------------ ------------ ------------
Balance at end of period $ 13,959,999 $ 10,292,116 $ 5,071,953
============ ============ ============
</TABLE>
Depreciation calculated on 5-27.5 year lives using the straight-line
method on real porperty and accelerated for personal property.
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 149,401
<SECURITIES> 0
<RECEIVABLES> 15,510
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 293,005
<PP&E> 9,206,846
<DEPRECIATION> 5,071,953
<TOTAL-ASSETS> 4,441,242
<CURRENT-LIABILITIES> 857,458
<BONDS> 4,994,147
0
0
<COMMON> 0
<OTHER-SE> (1,410,363)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 4,441,242
<SALES> 0
<TOTAL-REVENUES> 13,065,661
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,387,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 589,141
<INCOME-PRETAX> 10,088,953
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,088,953
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,088,953
<EPS-PRIMARY> 4,565.70<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>
