FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 2-85829
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(Exact name of small business issuer as specified in its charter)
New York 13-3202289
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
230 Park Avenue, Suite 2400
New York, New York 10169
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (212) 697-2330
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
BALANCE SHEET
(Unaudited)
March 31, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 677,795
Restricted--tenant security deposits 45,373
Accounts receivable 127,426
Note receivable 43,969
Escrow and other deposits 229,451
Prepaid expenses 12,015
Deferred charges 230,056
Deferred rent receivable 8,462
Investment properties:
Land $ 3,188,684
Buildings and improvements 15,171,534
Furniture, fixtures and equipment 1,018,091
19,378,309
Less accumulated depreciation (10,312,723) 9,065,586
$ 10,440,133
Liabilities and Partners' Equity (Deficit)
Liabilities
Accounts payable $ 31,673
Accrued liabilities:
Interest $ 32,057
Property taxes 241,656
Professional fees 28,100
Other 38,564 340,377
Accountability to partnership (note 4) 812,291
Deposits payable 134,510
Mortgage and other indebtedness 8,456,311
Total liabilities 9,775,162
Partners' equity (deficit)
General partner (99,449)
Limited partners 764,420 664,971
$ 10,440,133
See Notes to Financial Statements
b) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Revenues:
Rental operations $ 774,285 $ 747,287
Interest income 9,648 6,396
Other income 12,739 8,532
Total revenue 796,672 762,215
Expenses:
Rental operations 292,713 268,534
Equity in loss of joint venture (note 4) -- 111,337
General and administrative 24,297 26,138
Management fees to related party (note 3) 18,092 17,638
Interest expense 192,164 196,788
Depreciation and amortization 215,347 210,323
Total expenses 742,613 830,758
Net income (loss) $ 54,059 $ (68,543)
Net income (loss) per limited partnership interest
(based on 37,273 units issued and outstanding) $ 1.44 $ (1.82)
<FN>
See Notes to Financial Statements
</TABLE>
c) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Partners' equity (deficit) at
December 31, 1995 $ (99,990) $ 710,902 $ 610,912
Net income for the three months
ended March 31, 1996 541 53,518 54,059
Partners' equity (deficit) at
March 31, 1996 $ (99,449) $ 764,420 $ 664,971
<FN>
See Notes to Financial Statements
</TABLE>
d) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 54,059 $ (68,543)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 215,347 210,323
Equity in loss of joint venture -- 111,337
Change in accounts:
Restricted cash 1,506 --
Accounts receivable and notes receivable (29,656) (40,734)
Escrow and other deposits (83,750) (59,954)
Prepaid expenses 5,230 9,425
Deferred charges (6,514) (3,704)
Accounts payable (1,762) (17,884)
Accrued liabilities 77,152 62,642
Deposits payable 203 (1,228)
Net cash provided by operating activities 231,815 201,680
Cash flows from investing activities:
Note receivable from tenant -- (57,000)
Additions to real and personal property (7,172) (22,918)
Net cash used in investing activities (7,172) (79,918)
Cash flows from investing activities:
Principal payments on mortgage and other
indebtedness (56,670) (51,856)
Distributions to partners (279,548) (279,548)
Net cash used in financing activities (336,218) (331,404)
Net decrease in cash and cash equivalents (111,575) (209,642)
Cash and cash equivalents at beginning of period 789,370 807,773
Cash and cash equivalents at end of period $ 677,795 $ 598,131
Supplemental disclosure of cash flow information:
Cash paid during period for interest $ 192,164 $ 196,980
<FN>
See Notes to Financial Statements
</TABLE>
e) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 1996
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b)of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the General Partner, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 1996, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1996. For further information,
refer to the financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-KSB for the fiscal year ended December
31, 1995.
Note 2 - Basis of Accounting
The financial statements include the Partnership's operating divisions,
Wendover Business Park - Phase II ("Wendover II") and Presidential House at Sky
Lake ("Presidential"), in addition to its 50% pro rata share of assets,
liabilities, equity, income and expenses of its joint venture in the Table Mesa
Shopping Center ("Table Mesa").
The Partnership accounts for its investment in SP Associates ("SPA") (see
"Note 4") under the equity method of accounting. Since the Partnership is
responsible, as General Partner, for obligations of SPA, losses recorded under
the equity method exceed the cost of the Partnership's investment.
Certain reclassifications have been made to the 1995 balances to conform to
the 1996 presentation.
Note 3 - Related Party Transactions
For the three months ended March 31, 1996 and 1995, amounts paid to related
parties are as follows:
1996 1995
The Wynnewood Company, Inc.
Management Fees $12,392 $11,938
W.W. Reynolds Company
Management Fees 5,700 5,700
$18,092 $17,638
Note 4 - Investment in SP Associates
SP Associates (SPA) was formed on April 4, 1984, by the Partnership and
Coreal N.V., Inc. (Coreal) as a joint venture under the laws of the State of New
Jersey to acquire the Sheraton Poste Inn, a 220-room hotel located in Cherry
Hill, New Jersey.
The Hotel is leased to SPV Corp. (SPV) under the terms of an operating lease
agreement. One of the stockholders of SPV is also the sole stockholder of the
parent of the general partner and the other stockholder of SPV is a former
officer/employee of Drexel Burnham Lambert Realty, Inc.
On October 1, 1992, the joint venture agreement was amended to admit a new
joint venturer, Almanzil Inc., upon the contribution of $1,250,000, all of which
was contributed as of December 31, 1994. Almanzil made an additional equity
contribution of $703,970 during 1994. Almanzil Inc. is a wholly owned
subsidiary of Coast Investment and Development Company (CIDCO). CIDCO is a
stockholder of the parent of Coreal. Almanzil replaced the Partnership's
exclusive authority to manage the operations and affairs of SPA and to make all
decisions regarding the business of SPA. In addition, cash from operations and
capital transactions, as defined, of SPA shall be allocated 50% to Almanzil,
33.3% to the Partnership and 16.7% to Coreal, after Almanzil receives an amount
equal to an annual 20% preferred cumulative return on its outstanding capital
and a return of its original investment. Losses from operations are allocated
66.7% to the Partnership and 33.3% to Coreal, as defined.
Losses recognized in excess of the Partnership's investment in and advances
to SPA have been limited to the Partnership's share of recourse liabilities. As
a result, no losses were recognized for the period ended March 31, 1996. The
Partnership's equity in the losses of SPA for the three months ended March 31,
1995, was $111,337.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
For the three months ended March 31, 1996, the Partnership realized net
income of $54,059, compared to a net loss of $68,543 for the corresponding
period of 1995. The increase in net income was primarily due to a decrease in
the Partnership's share of equity in loss of joint venture. The Partnership has
limited the equity in the loss of the joint venture to the extent of the
Partnership's share of recourse liabilities (see "Note 4" of the Notes to
Financial Statements). Partnership operations were otherwise comparable in the
two periods.
Liquidity and Capital Resources
At March 31, 1996, the Partnership held unrestricted cash and cash
equivalents (including shares of money market funds and a certificate of
deposit) of $677,795. The present cash reserves of the Partnership are believed
to be adequate for the foreseeable needs of the Partnership.
Occupancy remained favorable at all of the Partnership's properties other
than normal tenant turnover. The Table Mesa Shopping Center was fully occupied
at March 31, 1996. Wendover Business Park II had an occupancy level of
approximately 95% and Presidential House Apartments had an occupancy level of
approximately 98% at March 31, 1996.
Other than normal leasing and capital improvement programs, the Partnership
has not entered into any material commitments for capital expenditures at any of
its properties as of March 31, 1996. In February 1996, the Partnership paid a
distribution of $7.50 per partnership interest, totalling $279,548, from
existing cash reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit
to this report.
(b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(Registrant)
By: DBL Properties Corporation
(General Partner)
By: /s/William D. Clements
William D. Clements
President
Date: May 6, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Drexel
Burnham Lambert Real Estate Associates II 1996 First Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000725646
<NAME> DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 677,795
<SECURITIES> 0
<RECEIVABLES> 127,426
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 19,378,309
<DEPRECIATION> (10,312,723)
<TOTAL-ASSETS> 10,440,133
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,456,311
0
0
<COMMON> 0
<OTHER-SE> 664,971
<TOTAL-LIABILITY-AND-EQUITY> 10,440,133
<SALES> 0
<TOTAL-REVENUES> 796,672
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 742,613
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 192,164
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,059
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
