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 June 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)
June 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 752,803
Restricted--tenant security deposits 54,574
Accounts receivable 142,525
Note receivable 41,445
Escrow and other deposits 172,146
Prepaid expenses 6,787
Deferred charges 213,623
Deferred rent receivable 8,462
Investment properties:
Land $ 3,188,684
Buildings and improvements 15,174,423
Furniture, fixtures and equipment 1,040,111
19,403,218
Less accumulated depreciation (10,512,039) 8,891,179
$ 10,283,544
Liabilities and Partners' Equity (Deficit)
Liabilities
Accounts payable $ 17,255
Accrued liabilities:
Interest $ 32,057
Property taxes 176,229
Professional fees 23,200
Other 45,809 277,295
Accountability to partnership (note 4) 812,291
Deposits payable 133,401
Mortgage and other indebtedness 8,398,361
Total liabilities 9,638,603
Partners' equity (deficit)
General partner (99,616)
Limited partners 744,557 644,941
$ 10,283,544
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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental operations $705,501 $667,337 $1,479,786 $1,414,624
Interest income 8,794 10,510 18,442 16,906
Other income 13,800 10,373 26,539 18,905
Total revenues 728,095 688,220 1,524,767 1,450,435
Expenses:
Rental operations 291,592 276,633 584,305 545,167
Equity in loss of
joint venture (Note 4) -- -- -- 111,337
General and administrative 27,766 32,152 52,063 58,290
Management fees to related
party (Note 3) 17,747 17,780 35,839 35,418
Interest expense 190,883 197,270 383,047 394,058
Depreciation and amortization 216,776 210,991 432,123 421,314
Total expenses 744,764 734,826 1,487,377 1,565,584
Net income (loss) $(16,669) $(46,606) $ 37,390 $ (115,149)
Net income (loss) per limited
partnership unit (based on
37,273 units issued and
outstanding) $ (.44) $ (1.24) $ .99 $ (3.06)
<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)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Partners' equity (deficit) $(99,990) $710,902 $610,912
at December 31, 1995
Net income for the six months
ended June 30, 1996 374 37,016 37,390
Distributions to Limited Partners -- (3,361) (3,361)
Partners' equity (deficit)
at June 30, 1996 $(99,616) $744,557 $644,941
<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>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 37,390 $(115,149)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 432,123 421,314
Equity in loss of joint venture -- 111,337
Change in accounts:
Restricted cash (7,695) 3,889
Accounts and note receivables (42,231) (113,525)
Escrow and other deposits (26,445) (172,025)
Prepaid expenses 10,458 11,134
Deferred charges (7,541) (11,653)
Accounts payable (16,180) (17,955)
Accrued liabilities 14,070 186,164
Deposits payable (906) (1,052)
Net cash provided by
operating activities 393,043 302,479
Cash flows from investing activities:
Additions to real and personal property (32,081) (55,142)
Net cash used in investing activities (32,081) (55,142)
Cash flows from financing activities:
Principal payments on mortgage and other
indebtedness (114,620) (129,879)
Partners' distributions paid (282,909) (279,548)
Net cash used in financing activities (397,529) (409,427)
Net decrease in cash and cash equivalents (36,567) (162,090)
Cash and cash equivalents at beginning of period 789,370 807,773
Cash and cash equivalents at end of period $ 752,803 $ 645,683
Supplemental disclosure of cash flow information:
Cash paid for interest $ 383,047 $ 394,445
<FN>
See Notes to Financial Statements
</TABLE>
e) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 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 six month period ended June 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 to the
1996 presentation.
Note 3 - Related Party Transactions
For the six months ended June 30, 1996, management fees paid to related parties
are as follows:
1996 1995
The Wynnewood Company, Inc. $24,439 $24,018
W.W. Reynolds Company 11,400 11,400
$35,839 $35,418
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 six months ended June 30, 1996. The
Partnership's equity in the losses of SPA for the six months ended June 30,
1995, was $111,337.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
For the six months ended June 30, 1996, the Partnership realized net income of
$37,390, compared to a net loss of $115,149 for the six months ended June 30,
1995. For the three months ended June 30, 1996, the Partnership realized a net
loss of $16,669, compared to a net loss of $46,606 for the three months ended
June 30, 1995. Total revenues increased for both the three and six months ended
June 30, 1996, primarily due to increased rental revenues. Presidential House
Apartments collected higher rental revenues due to rental rate increases
implemented at the 97% occupied property. Wendover II also had increased rental
revenues resulting from occupancy increasing from 84% for the six months ending
June 30, 1995, to 92% for the six months ending June 30, 1996. Occupancy at
Table Mesa increased from 94% for the six months ending June 30, 1995, to 100%
for the six months ending June 30, 1996.
Also contributing to increased net income 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 June 30, 1996, the Partnership had unrestricted cash on hand (including
shares of money market funds and a certificate of deposit) of $752,803. 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 turnover. Table Mesa shopping center is currently 100% occupied
and Wendover Business Park Phase II is 92% occupied. Presidential Apartments
continues to maintain occupancy levels in excess of 96%.
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 June 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 June 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: August 5, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Drexel
Burnham Lambert Real Estate Associates II 1996 Second 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 752,803
<SECURITIES> 0
<RECEIVABLES> 142,525
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 19,403,218
<DEPRECIATION> (10,512,039)
<TOTAL-ASSETS> 10,283,544
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,398,361
0
0
<COMMON> 0
<OTHER-SE> 644,941
<TOTAL-LIABILITY-AND-EQUITY> 10,283,544
<SALES> 0
<TOTAL-REVENUES> 1,524,767
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,487,377
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 383,047
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,390
<EPS-PRIMARY> .99
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
