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 September 30, 1996
[ ] 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.)
850 Third Avenue, Nineteenth Floor
New York, New York 10022
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (212) 822-2246
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)
September 30, 1996
Asets
Cash and cash equivalents:
Unrestricted $ 837,741
Restricted--tenant security deposits 61,524
Accounts receivable 152,772
Note receivable 38,849
Escrow and other deposits 235,674
Prepaid expenses 26,520
Deferred charges 203,216
Deferred rent receivable 7,200
Investment properties:
Land $ 3,188,684
Buildings and improvements 15,174,423
Furniture, fixtures and equipment 1,067,345
19,430,452
Less accumulated depreciation (10,712,038) 8,718,414
$ 10,281,910
Liabilities and Partners' Equity (Deficit)
Liabilities
Accounts payable $ 18,945
Accrued liabilities:
Interest $ 32,057
Property taxes 265,206
Professional fees 34,800
Other 33,537 365,600
Accountability to partnership (note 4) 812,291
Deposits payable 134,729
Mortgage and other indebtedness 8,338,508
Total liabilities 9,670,073
Partners' equity (deficit)
General partner (99,947)
Limited partners 711,784 611,837
$ 10,281,910
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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental operations $ 715,299 $ 684,592 $ 2,195,085 $2,099,216
Interest income 9,258 8,580 27,700 25,486
Other income 9,996 11,704 36,535 30,609
Total revenues 734,553 704,876 2,259,320 2,155,311
Expenses:
Rental operations 320,030 287,452 904,335 832,619
Equity in loss of
joint venture (Note 4) --- --- --- 111,337
General and administrative 23,018 24,173 75,081 82,463
Management fees to related
parties (Note 3) 17,737 17,382 53,576 52,800
Interest expense 188,982 194,416 572,029 588,474
Depreciation and amortization 217,890 211,425 650,013 632,739
Total expenses 767,657 734,848 2,255,034 2,300,432
Net (loss) income $ (33,104) $ (29,972) $ 4,286 $ (145,121)
Net (loss) income per limited
partnership unit (based
on 37,273 units issued
and outstanding) $ (.89) $ (.80) $ .11 $ (3.85)
<FN>
See Notes to Financial Statements
</TABLE>
c) DREXEL BURNHAM LAMERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
(Unaudited)
General Limited
Partner Partners Total
Partners' equity (deficit)
at December 31, 1995 $ (99,990) $ 710,902 $ 610,912
Net income for the nine months
ended September 30, 1996 43 4,243 4,286
Distributions to Limited Partners --- (3,361) (3,361)
Partners' equity (deficit)
at September 30, 1996 $ (99,947) $ 711,784 $ 611,837
See Notes to Financial Statements
d) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 4,286 $ (145,121)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 650,013 632,739
Equity in loss of joint venture --- 111,337
Change in accounts:
Restricted cash (14,645) 1,408
Accounts and note receivable (49,882) (97,241)
Deferred rent receivable 1,262 4,696
Escrow and other deposits (89,973) (97,879)
Prepaid expenses (9,275) (6,644)
Deferred charges (15,025) (18,385)
Accounts payable (14,490) (16,500)
Accrued liabilities 102,375 114,525
Deposits payable 422 (11,066)
Net cash provided by operating
activities 565,068 471,869
Cash flows from investing activities:
Additions to real and personal property (59,315) (111,457)
Net cash used in investing activities (59,315) (111,457)
Cash flows from financing activities:
Principal payments on mortgage and other
indebtedness (174,473) (184,097)
Partners' distributions paid (282,909) (279,548)
Net cash used in financing activities (457,382) (463,645)
Net increase (decrease) in cash and cash
equivalents 48,371 (103,233)
Cash and cash equivalents at beginning of period 789,370 807,773
Cash and cash equivalents at end of period $ 837,741 $ 704,540
Supplemental disclosure of cash flow information:
Cash paid for interest $ 572,029 $ 589,060
See Notes to Financial Statements
e) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 30, 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 and nine month periods ended
September 30, 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 joint venture investment in SP Associates
("SPA") (See "Note 4")under the equity method of accounting.
Certain reclassifications have been made to the 1995 balances to conform with
the 1996 presentation.
NOTE 3 - RELATED PARTY TRANSACTIONS
For the nine months ended September 30, 1996 and 1995, management fees paid to
related parties are as follows:
1996 1995
The Wynnewood Company, Inc. $ 36,476 $ 35,700
W.W. Reynolds Company 17,100 17,100
$ 53,576 $ 52,800
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 nine months ended September 30, 1996.
The Partnership's equity in the losses of SPA for the nine months ended
September 30, 1995, was $111,337.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
For the nine months ended September 30, 1996, the Partnership realized net
income of $4,286 compared to a net loss of $145,121 for the nine months ended
September 30, 1995. For the three months ended September 30, 1996, the
Partnership realized a net loss of $33,104, compared to a net loss of $29,972
for the three months ended September 30, 1995. Operating expenses increased for
both the three and nine months ended September 30, 1996, primarily due to
increased maintenance expense at Wendover II along with a slight increase in
property tax expense at Presidential House. Wendover II maintenance expense
increased due to increased expense for maintenance personnel along with several
minor roof repairs.
Contributing to the decrease in net loss for the nine months ended September 30,
1996, was 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).
Liquidity and Capital Resources
At September 30, 1996, the Partnership held cash (including shares of money
market funds) of $837,741. The present cash reserves of the Partnership are
believed to be adequate for the foreseeable needs of the Partnership.
Occupancy remains favorable at all of the Partnership's properties other than
normal tenant rollover. The Table Mesa shopping center and Presidential
Apartments have occupancy levels approximating 95% while Wendover Business Park
Phase II is 89% occupied. The Table Mesa Joint Venture is discussing the
refinancing of the existing first mortgage which matures in early 1998. Proceeds
would be used to retire existing indebtedness and to fund needed capital
improvements. A new leasing company has been engaged with respect to the
Wendover property in an effort to increase occupancy at that property.
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 September 30, 1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) 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 September 30, 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: November 6, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Drexel
Burnham Lambert Real Estate Associates II 1996 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 837,741
<SECURITIES> 0
<RECEIVABLES> 152,772
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 19,430,452
<DEPRECIATION> (10,712,038)
<TOTAL-ASSETS> 10,281,910
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,338,508
0
0
<COMMON> 0
<OTHER-SE> 611,837
<TOTAL-LIABILITY-AND-EQUITY> 10,281,910
<SALES> 0
<TOTAL-REVENUES> 2,259,320
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,255,034
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 572,029
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 00
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,286
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
