FORM 10KSB-ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(d)
(As last amended by 34-31905, eff. 4/26/93)
FORM 10-KSB
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 [Fee Required]
For the fiscal year ended December 31, 1995
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required]
For the transition period.........to.........
Commission file number 2-85829
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(Name of small business issuer in its charter)
New York 13-3202289
(State or other jurisdiction of (I.R.S. 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
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $2,848,339
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1995 - Not Applicable.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Prospectus of Registrant dated December 30, 1983 (included
in Registration Statement, No. 2-85829, of Registrant) are incorporated by
reference into Parts I and III.
PART I
Item 1. Description of Business
Drexel Burnham Lambert Real Estate Associates II (the "Partnership" or
"Registrant") is a limited partnership which was formed on November 2, 1983,
pursuant to the Partnership Law of the State of New York. The Partnership is
engaged in the business of acquiring, operating and holding real properties for
investment. The Partnership acquired five existing properties during 1984 and
1985 and has been operating them since that time with the exception of the
Sheraton Inn (a two-thirds interest in a joint venture) and, as described below,
the 123 Office Building (a 22.47% interest), which was sold on March 14, 1994,
in a foreclosure proceeding. SP Associates ("SPA"), a joint venture between the
Partnership and Coreal N.V., Inc. acquired the Sheraton Inn on May 7, 1985. In
October 1992, SPA admitted a new investment group into the Joint Venture. The
new investment group has the exclusive authority to manage the operations and
affairs and to make all decisions regarding the business. See "Notes 2 and 6"
to the financial statements, included in "Item 7" of this Form 10-KSB regarding
this transaction.
Commencing in February 1984 pursuant to the Prospectus, the Partnership
offered $20,000,000 in Limited Partnership Interests (the "Interests"). A total
of 37,273 Interests were sold to the public at $500 per Interest. The offering
closed on October 10, 1984. No Limited Partner has made any additional capital
contribution after that date. The Limited Partners of the Partnership share in
the benefits of ownership of the Partnership's real property investments
according to the number of Interests held.
The Interests were registered under the Securities Act of 1933 via
Registration Statement No. 2-85829 (the "Registration Statement"). Reference is
made to the Prospectus of registrant dated December 30, 1983 (the "Prospectus")
contained in said Registration Statement, which is incorporated herein by
reference thereto.
A further description of the Partnership's business is included in
Management's Discussion and Analysis or Plan of Operation included in "Item 6"
of this Form 10-KSB.
The business in which the Partnership is engaged is highly competitive
and the Partnership is not a significant factor in its industry. The
Partnership's remaining investments in real property are subject to competition
from similar properties in the vicinity in which they are located.
The terms of agreements between the Partnership and affiliates of the
General Partner of the Partnership are set forth in "Item 12" below to which
reference is hereby made for a description of such terms.
In February 1993, all of the outstanding stock of the General Partner was
sold to the Wynnewood Company, Inc. ("Wynnewood"), a corporation which is owned
by the principal operating officer of the General Partner.
The Partnership had no employees as of December 31, 1995. Management and
administrative services are performed by Wynnewood, the General Partner, and by
IFGP Corporation ("Insignia") and affiliates. Pursuant to a management
agreement between them, Insignia affiliates provide property management
services, partnership administration, and registrar and transfer services to the
Partnership.
Disposition of the 123 Office Building:
Tyson's Corner was formed on August 22, 1985, pursuant to the Uniform
Partnership Act of the Commonwealth of Virginia for the purpose of acquiring,
operating and leasing a 40,727 square foot office building known as the 123
Office Building located in Fairfax County, Virginia. The Partnership owned a
22.47% interest in Tyson's Corner, while Drexel Burnham Lambert Real Estate
Associates III, an affiliated entity, owned the remaining 77.53% interest.
In March 1994, the mortgagee concluded foreclosure proceedings on the
property and on November 15, 1994, the Tyson's Corner joint venture was
liquidated with the remaining assets distributed to the joint venturers.
Item 2. Description of Properties
The following table sets forth the Registrant's investments in properties:
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership Use
<S> <C> <C> <C>
Wendover Business Park 04/01/84 Fee ownership subject Office/Warehouse
Phase II to first mortgage 80,410 sq.ft.
Greensboro, NC
Presidential House Apartments 10/22/84 Fee ownership subject Apartment
North Miami Beach, FL to first mortgage 203 units
Table Mesa Shopping Center 05/07/85 Partnership has a 50% Retail Center
Boulder, CO interest in the joint 179,125 sq.ft.
venture which has fee
ownership subject to
first mortgage
</TABLE>
Schedule of Properties:
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Tax Basis
Wendover II $ 4,218,737 $ 1,924,861 3-25 yrs $ 1,029,680
Presidential House 7,338,246 4,701,094 5-31.5 yrs 2,621,140
Table Mesa 7,814,154 3,488,805 5-31.5 yrs 4,129,133
$19,371,137 $10,114,760 $ 7,779,953
See "Note 2" of the financial statements included in "Item 7" for a
description of the Partnership's depreciation policy. Depreciation of real and
personal property is being computed on straight-line and accelerated methods
over estimated service lives.
Schedule of Mortgages and Note Payable:
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1995 Rate Amortized Date Maturity
<S> <C> <C> <C> <C> <C>
Wendover II $1,294,307 7.75% 20 years 02/01/01 $1,091,466
Presidential House 3,554,712 8.00% 20 years 08/01/00 3,047,227
Table Mesa(a)
1st mortgage 3,601,017 10.50% 20 years 03/01/98 3,389,130
Note payable 62,945 8.50% 7.75 years 12/01/96 48,445
Total $8,512,981 $7,576,268
<FN>
(a) Amounts shown represent the Partnership's 50% share.
</TABLE>
Schedule of Rental Rates and Occupancy:
Average Annual Average Annual
Rental Rates Occupancy
1995 1994 1995 1994
Wendover II $6.39/sq.ft. $6.70/sq.ft. 90%(1) 80%
Table Mesa $9.08/sq.ft. $8.81/sq.ft. 93% 91%
Presidential House $6,979/unit $6,608/unit 97% 97%
(1) Occupancy as of December 31, 1995, was 94%. The increase is due to a new
tenant occupying approximately 3,510 square feet moving into Wendover II in
1995. In addition, three existing tenants were able to expand their
current leasable space by approximately 4,500 square feet.
As noted under "Item 1. Description of Business", the real estate industry
is highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes, retail space and
commercial buildings in the areas. Management believes that all of the
properties are adequately insured. The multi-family residential property's
lease terms are for one year or less. No residential or commercial tenant
leases 10% or more of the available rental space.
The following is a schedule of the lease expirations by property for the
years 1996-2005:
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
Wendover II
1996 5 19,404 $ 93,590 20.9%
1997 6 21,133 154,820 34.5%
1998 6 19,170 93,915 20.9%
1999 3 12,927 78,641 17.5%
2000-2005 -- -- -- --
Table Mesa
1996 15 23,809 217,712 14.5%
1997 9 19,544 185,277 12.4%
1998 10 19,137 167,614 11.2%
1999 7 25,153 224,405 15.0%
2000 7 22,922 150,518 10.1%
2001 2 5,836 47,279 3.2%
2002 2 15,534 72,051 4.8%
2003 1 6,655 103,282 6.9%
2004 2 17,956 139,797 9.3%
2005 1 5,267 40,927 2.7%
In addition, six tenants, who rent their space on a month-by-month basis,
contributed $63,533 to annual rental income for the Partnership. One tenant, at
Wendover II, occupied 3,510 square feet and contributed annual lease payments of
$11,992 or approximately 2.67% of gross annual rent for 1995. Five tenants, at
Table Mesa, occupied 6,513 square feet and contributed annual lease payments of
$51,541 or approximately 3.44% of gross annual rent for 1995.
Schedule of Real Estate Taxes:
1995 1994
Wendover II $ 54,724 $ 56,072
Presidential House 143,985 145,968
Table Mesa Shopping Center (50% Share) 150,529 133,106
Item 3. Legal Proceedings
The Partnership is not a party to, nor are any of its properties subject to,
any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of 1995.
PART II
Item 5. Market for the Partnership Equity and Related Partner Matters
As of December 31, 1995, the Partnership included approximately 1,796 limited
partners, holding a total of 37,273 Interests, and one General Partner. No
public trading market has developed for the Interests and it is not anticipated
that such a market will develop in the future.
Cash distributions were made quarterly from April 1985 until October 1987 and
then were suspended until the December 1989 distribution of $5.00 per Interest.
In December 1994 the General Partner approved a cash distribution to the Limited
Partners in the amount of $279,548 ($7.50 per Interest) which was paid in
February 1995. A cash distribution of $279,548 was also declared in December
1995 to be paid in February 1996. As of December 31, 1995, the remaining unpaid
preferred return arrearage totalled $11,972,098 or $321.20 per interest.
Reference is made to "Item 6" for a description of liquidity and capital
resources.
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
For the year ended December 31, 1995, the Partnership realized a net loss of
$289,039 compared to a net loss of $712,262 for the corresponding period of
1994. The decrease in net loss is partially due to increased rental revenues.
Presidential House Apartments realized higher rental revenues due to rental rate
increases implemented at the property since 1994. Wendover II also had an
increase in rental revenues due to average occupancy increasing from 80% for the
year ended December 31, 1994, to 90% for the year ended December 31, 1995. In
addition, new 1995 leases at Table Mesa achieved higher base rents. Also
contributing to the revenue increase was an increase in interest income
resulting from higher interest rates earned on investments in short-term
certificates of deposit and from interest earned on a tenant note receivable at
Wendover II. This note receivable resulted from a tenant exercising a
construction reimbursement option whereby the Partnership financed $57,000 in
construction costs to be repaid with interest over the term of the lease.
Offsetting the revenue increases was a decrease in other income due to a non-
recurring $37,000 property tax refund received in 1994 for Presidential House.
Other income also decreased due to a lease termination settlement of
approximately $36,000 received in 1994 from a former tenant at Table Mesa.
Also, contributing to the decreased net loss were lower total expenses. The
decrease in total expenses was primarily due to the decrease in the
Partnership's share of equity in the loss of the 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 6" of the Notes to
Financial Statements).
Liquidity and Capital Resources
At December 31, 1995, the Partnership held cash on hand (including shares of
money market funds) of $789,370. The present cash reserves of the Partnership
are believed to be sufficient to meet 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 is almost fully occupied
and the Wendover Business Park Phase II is currently 94% occupied. Presidential
Apartments continues to have occupancy levels approximating 95%. The Sheraton
Inn, which has been recently renovated, has recently executed a new franchise
agreement with ITT Sheraton whereby it will operate as a Four Points Hotel.
Because of a difficult operating environment for hotels in the area, the
Sheraton has not achieved the results anticipated from the renovation.
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 December 31, 1995. In February 1996, the Partnership paid
a distribution of $7.50 per partnership interest, totalling approximately
$279,500, from existing cash reserves.
Inflation
Inflation in the future may increase rental revenues as well as operating
expenses, all subject to general market trends. Certain Table Mesa and Wendover
II leases provide for rent increases based upon the Consumer Price Index.
Item 7. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report
Balance Sheet at December 31, 1995
Statements of Operations for the Years Ended
December 31, 1995 and 1994
Statements of Partners' Equity (Deficit) for the Years Ended
December 31, 1995 and 1994
Statements of Cash Flows for the Years Ended
December 31, 1995 and 1994
Notes to Financial Statements
Independent Auditor's Report
To the Partners
Drexel Burnham Lambert Real Estate Associates II
We have audited the accompanying balance sheet of Drexel Burnham Lambert Real
Estate Associates II (a limited partnership) as of December 31, 1995, and the
related statements of operations, partners' equity (deficit) and cash flows for
each of the two years in the period ended December 31, 1995. These financial
statements 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 audit 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 Drexel Burnham Lambert Real
Estate Associates II (a limited partnership) at December 31, 1995, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/Pannell Kerr Forster PC
February 2, 1996
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
<TABLE>
<CAPTION>
Balance Sheet
December 31, 1995
Assets
<S> <C> <C>
Cash and cash equivalents $ 789,370
Accounts and note receivables-net of allowance for
doubtful accounts of $9,500 (Note 7) 141,739
Escrow and other deposits 145,701
Prepaid expenses 17,245
Real and personal property - at cost (notes 2 and 4)
Land $ 3,188,684
Buildings and improvements 15,171,534
Furniture, fixtures and equipment 1,010,919
19,371,137
Less accumulated depreciation (10,114,760) 9,256,377
Restricted cash - tenants' security deposits 46,879
Deferred rent receivable (note 2) 8,462
Deferred charges (note 2) 240,926
$ 10,646,699
Liabilities and Partners' Equity
Liabilities
Accounts payable - including $21,732 to related $ 33,435
entities (note 9)
Accrued liabilities
Interest $ 32,057
Property taxes 150,529
Professional fees 44,500
Other 36,139 263,225
Distributions payable (note 5) 279,548
Accountability to partnership (note 6) 812,291
Deposits payable 134,307
Mortgage and other indebtedness (note 4) 8,512,981
Total liabilities 10,035,787
Partners' equity (deficit) (note 5)
General partner (99,990)
Limited partners 710,902
Total partners' equity 610,912
$ 10,646,699
<FN>
See notes to financial statements
</TABLE>
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
Statements of Operations
<TABLE>
<CAPTION>
Years Ended
December 31
1995 1994
<S> <C> <C>
Revenue
Rental operations (note 7) $2,753,528 $2,537,129
Interest income 30,274 17,972
Other income 64,537 129,508
Total revenue 2,848,339 2,684,609
Expenses
Rental operations (note 3) 1,173,091 1,171,220
Equity in loss of joint venture (note 6) 96,983 368,489
General and administrative 108,484 106,281
Management fees to related parties (note 9) 70,602 61,567
Interest expense (note 4) 781,721 799,602
Depreciation and amortization (note 2) 906,497 889,712
Total expenses 3,137,378 3,396,871
Net (loss) (note 8) $ (289,039) $ (712,262)
Net (loss) per limited partner interest (note 5) $ (7.68) $ (18.92)
Distributions per limited partner interest (note 5) $ 7.50 $ 7.50
<FN>
See notes to financial statements
</TABLE>
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
Statements of Partners' Equity (Deficit)
For Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
General Limited
Total Partner Partners
<S> <C> <C> <C>
Original capital contribution (note 5) $18,637,500 $ 1,000 $18,636,500
Less offering costs 2,050,819 -- 2,050,819
16,586,681 1,000 16,585,681
Cumulative net (loss) through December 31, 1993 (9,097,592) (90,977) (9,006,615)
Cumulative distributions to limited partners
through December 31, 1993 (5,317,780) -- (5,317,780)
Balance - December 31, 1993 2,171,309 (89,977) 2,261,286
Net (loss) for the year ended December 31, 1994 (712,262) (7,123) (705,139)
Distribution to partners (note 5) (279,548) -- (279,548)
Balance - December 31, 1994 1,179,499 (97,100) 1,276,599
Net (loss) for the year ended December 31, 1995 (289,039) (2,890) (286,149)
Distribution to partners (note 5) (279,548) -- (279,548)
Balance - December 31, 1995 $ 610,912 $(99,990) $ 710,902
<FN>
See notes to financial statements
</TABLE>
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended
December 31
1995 1994
<S> <C> <C>
Cash flows from operating activities
Net (loss) $ (289,039) $ (712,262)
Adjustments to reconcile net (loss) to net cash
operating activities
Depreciation 834,802 826,451
Amortization 71,695 63,261
Accrued interest expense added to principal -- 16,695
Equity in loss of joint venture 96,983 368,489
Bad debt expense 7,000 2,500
Changes in certain other accounts
Tenants' security deposits 1,407 (16,009)
Accounts and note receivables (104,590) 66,340
Deferred rent receivable 6,182 -
Escrow and other deposits 9,195 19,177
Prepaid expenses 2,379 (8,283)
Deferred charges (37,851) (122,248)
Accounts payable 4,331 10,564
Accrued liabilities 38,737 17,060
Deposits payable (12,034) (1,168)
Other (663) (9,507)
Net cash provided by operating activities 628,534 521,060
Cash flows from investing activities
Additions to real and personal property (127,849) (220,264)
Cost basis adjustment to land and building -- 34,685
Net cash (used) by investing activities (127,849) (185,579)
Cash flows from financing activities
Cash overdraft -- (31,236)
Principal payments on mortgage and other indebtedness (239,540) (185,027)
Proceeds from mortgage refinancing -- 1,350,000
Repayment of mortgage payable -- (1,236,725)
Distribution paid to partners (279,548) --
Net cash (used) by financing activities (519,088) (102,988)
Increase (decrease) in cash and cash (18,403) 232,493
Cash and cash equivalents at beginning of year 807,773 575,280
Cash and cash equivalents at end of year $ 789,370 $ 807,773
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 780,854 $ 762,354
<FN>
See notes to financial statements
</TABLE>
Note 1 - Organization
Drexel Burnham Lambert Real Estate Associates II (Partnership) was organized as
a limited partnership under the laws of the State of New York pursuant to a
Certificate of Limited Partnership dated November 2, 1983. The general partner
of the Partnership is DBL Properties Corporation (General Partner). In February
1993, all of the outstanding stock of the General Partner was sold to The
Wynnewood Company, Inc. (Wynnewood), a corporation which is owned by the
principal operating officer of the General Partner.
The Partnership owns and operates Wendover Business Park - Phase II (Wendover)
an office and warehouse complex located in Greensboro, North Carolina and
Presidential House at Sky Lake (Presidential) a residential apartment complex
located in North Miami Beach, Florida. The Partnership also owns joint venture
interests in Table Mesa Shopping Center (Table Mesa) located in Boulder,
Colorado and SP Associates (SPA), which owns a hotel in Cherry Hill, New Jersey.
Note 2 - Significant accounting policies
Basis of accounting
The financial statements include the accounts of the Partnership and its
operating divisions, Wendover and Presidential, in addition to its pro rata
share of assets, liabilities, equity, income and expenses of its joint venture
in Table Mesa, a 50% interest; and, through November 15, 1994 (see note 3), its
pro rata share of the income and expenses of its joint venture in the 123 Office
Building ("Tyson's Corner"), a 22.47% interest.
The Partnership accounts for its joint venture investment in SPA under the
equity method of accounting (see note 6).
Estimates
The financial statements of the Partnership are prepared in conformity with
generally accepted accounting principles which require 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 and the reported amounts of revenues and expenses
during the reporting period. The most significant areas which require the use
of management's estimates relate to the service lives and recoverability of
costs of real property and its accountability to SP Associates. Actual results
could differ from those estimates.
Note 2 - Significant accounting policies (continued)
Long-lived assets
Effective January 1, 1995, the Partnership adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of." Accordingly, the
Partnership evaluates its long-lived assets, which consists primarily of its
investments in real property, for impairment based on the recoverability of
their carrying amounts. When it is probable that undiscounted cash flows will
not be sufficient to recover the carrying amounts, the assets will be written-
down to their fair value. No such write-downs were required in 1995.
Disclosure about fair value of financial instruments
In 1995, the Partnership implemented Statement of Financial Accounting Standards
No. 107, "Disclosure about Fair Value of Financial Instruments," which requires
disclosure of the fair value of financial instruments for which it is
practicable to estimate that value. The carrying amount of the Partnership's
cash and cash equivalents and short-term note payable approximates fair value
due to their short-term nature. The Partnership estimates the fair value of its
fixed rate mortgages based on the discounted amount of future cash flows using
an 8% borrowing rate. At December 31, 1995, the fair value of its mortgages
payable approximates $8,600,000.
Real and personal property
The agreement under which the Partnership purchased Wendover contained
provisions for a future adjustment to the purchase price based on certain cash
flow criteria. In August 1994, the Partnership received $34,685 as a purchase
price adjustment and reduced its basis in the Wendover land and buildings.
Depreciation of real and personal property is being computed on straight-line
and accelerated methods over estimated service lives ranging from 3 to 31-1/2
years.
Amortization
Deferred charges are presented net of accumulated amortization of $161,212 and
are being amortized as follows:
Leasing - computed on a straight-line basis over the
commissions term of the respective leases.
Loan costs - computed on a straight-line basis over the
term of the respective mortgages payable.
Revenue recognition
The straight-line basis is used to recognize minimum rental income under leases
which provide for varying rents over their terms.
Income taxes
No provision has been made for income taxes since such taxes, if any, are
payable by the partners individually.
Cash and cash equivalents
For purposes of financial reporting, cash and cash equivalents includes cash on
hand and in banks, including money market funds, and certificates of deposit
with original maturities of three months or less.
Supplemental disclosure of non-cash financing activities
In December 1995, the Partnership approved a cash distribution to limited
partners in the amount of $279,548 ($7.50 per interest) to be paid in February
1996. A similar distribution was declared in December 1994 and paid in February
1995.
Concentration of credit risk
A substantial portion of the Partnership's cash is on deposit with one bank and
consists of demand deposits and money market accounts. The Partnership has not
experienced any losses on its cash deposits.
Note 3 - Tyson's Corner Foreclosure
Tyson's Corner was formed on August 22, 1985, pursuant to the Uniform
Partnership Act of the Commonwealth of Virginia for the purpose of acquiring,
operating and leasing a 40,727 square foot office building known as the 123
Office Building located in Fairfax County, Virginia. The Partnership owned a
22.47% interest in Tyson's Corner, while Drexel Burnham Lambert Real Estate
Associates III, an affiliated entity, owned the remaining 77.53% interest.
In March 1994, the mortgagee concluded foreclosure proceedings on the property
and on November 15, 1994, the Tyson's Corner joint venture was liquidated with
the remaining assets distributed to the joint venturers.
The Partnership's pro rata share of the operations of Tyson's Corner for the
period January 1, 1994 through November 15, 1994 (date of liquidation) of $5,266
has been included in rental operations expense in the 1994 statement of
operations.
Note 4 - Mortgage and other indebtedness
At December 31, 1995, mortgage and other indebtedness consisted of:
Mortgages payable
Wendover - senior mortgage note (a) $1,294,307
Presidential - mortgage note payable (b) 3,554,712
Table Mesa - first mortgage note payable (c) 3,601,017
Total mortgages payable 8,450,036
Note payable
Table Mesa
Due in 1996, requires monthly installments of $1,718
(the Partnership's pro rata share) applied towards
principal and interest at 8.5% per annum. 62,945
Total mortgage and other indebtedness $8,512,981
(a) The mortgage matures on February 1, 2001, and requires monthly payments of
$11,292 to be applied first to interest at the rate of 7.75% per annum and
the balance to reduction of principal. In addition, monthly escrow
deposits are required to be made with the mortgagee for real estate taxes
and insurance.
(b) The mortgage matures August 1, 2000 and requires monthly payments of
$31,367 to be applied first to interest at the rate of 8% per annum and
the balance to reduction of principal. In addition, monthly escrow
deposits are required to be made with the mortgagee for real estate taxes
and insurance.
(c) The Table Mesa mortgage requires monthly payments of $38,777 (the
Partnership's 50% share) applied first to interest at the rate of 10.5%
per annum and the balance to reduction of principal through March 1998
when the outstanding principal balance becomes due. In addition, monthly
escrow deposits are required to be made with the mortgagee for real estate
taxes and insurance.
The following is a schedule of future mortgage and note amortization payments as
of December 31, 1995:
1996 $ 283,919
1997 241,543
1998 3,559,317
1999 163,979
2000 3,168,727
Thereafter 1,095,496
$8,512,981
Note 5 - Partners' equity
Pursuant to a public offering, 37,273 units were sold at $500 per interest. The
calculation of net (loss) per limited partner interest is based on 37,273
Interests outstanding.
For income tax purposes the limited partners share 99% and the general partner
1% (subordinated as defined in the partnership agreement) in all profits or
losses from operations until the limited partners have received an 8% cumulative
preferred return on their invested capital. Thereafter, the limited partners
share 90% and the general partner shares 10% in the profits or losses from
operations.
Cash distributions from sales or refinancing, if any, shall be made to the
partners to the extent available and, as more fully described in the partnership
agreement, as follows: first, to each partner in an amount equivalent to the
positive amount of such partner's capital account on the date of distribution
after adjustment; second, to the limited partners, until the limited partners
have received an amount equal to their original invested capital; third, 99% to
the limited partners equal to any unpaid preferred return arrearage; and fourth,
any excess 85% to the limited partners and 15% to the general partner.
Distributions in liquidation to the partners shall be made pro rata in
accordance with the partners' capital accounts.
In accordance with the Agreement of Limited Partnership, limited partners are
entitled to receive an 8% cumulative preferred return on their unrecovered
invested capital. In December 1995, the Partnership approved a cash
distribution to limited partners in the amount of $279,548 ($7.50 per interest)
to be paid February 1996. A similar distribution was approved in 1994 and paid
in 1995. No distributions have been made or accrued to the general partner,
since the limited partners must receive their original invested capital plus any
preferred return arrearage before payment to the general partner. As of
December 31, 1995, the unpaid preferred return arrearage totaled $11,972,098.
Note 6 - 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.
Note 6 - Investment in SP Associates (continued)
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.
Summarized financial information of SPA at December 31, 1995, is as follows:
Assets
Real and personal property - net $ 4,957,998
Other assets 69,693
$ 5,027,691
Liabilities
Mortgage payable $ 4,058,553
Advances payable
Drexel Burnham Lambert Real Estate Associates II 575,608
Coreal N.V., Inc. 287,373
Due to SPV Corp. 1,052,818
Accrued liabilities 125,208
Total liabilities 6,099,560
Equity (deficit) (1,071,869)
$ 5,027,691
The net loss from the operations of SPA for the years ended December 31, 1995
and 1994 was $1,056,625 and $552,457, respectively. The Partnership's equity in
losses of SPA for the years ended 1995 and 1994 amounted to $96,983 and
$368,489, respectively. 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. Unrecognized losses at December 31, 1995, amounted to
$607,610. The 1994 equity in loss of SPA is reflected net of an extraordinary
item relating to the realization of a gain on forgiveness of debt in the amount
of $99,121.
Note 7 - Commitments and preferred returns
Operating leases
The Partnership leases office, warehouse and retail space to tenants of Wendover
and Table Mesa under operating lease agreements which expire on various dates
through 2005. Future minimum rental income, excluding escalation charges, under
these leases as of December 31, 1995, are as follows:
1996 $1,008,962
1997 765,781
1998 587,672
1999 388,162
2000 268,482
Thereafter 672,833
$3,691,892
In 1995, a tenant exercised a tenant reimbursement option whereby the
Partnership financed $57,000 in construction costs to be repaid with interest
over the lease term. At December 31, 1995, the remaining principal balance
amounted to $46,423.
Preferred returns
The Table Mesa joint venture agreement provides among other things, that the
Partnership shall be entitled to receive a cash flow preference, as defined, of
$252,000 per year, which is equivalent to a 9% return on the Partnership's
initial cash investment. This annual preference is not cumulative.
Note 8 - Reconciliation of financial and tax net (loss)
The following is a reconciliation of the Partnership's net (loss) for financial
and tax reporting purposes:
Years Ended
December 31
1995 1994
Financial net (loss) $ (289,039) $ (712,262)
Tax loss on liquidation of joint venture -- (445,689)
Preferred returns not recognized as income for tax
purposes (37,500) --
Excess of book over tax depreciation 130,159 2,639
Excess of tax loss over book loss of equity
investee (608,322) (123,192)
Prepaid rent 25,257 --
Other 11,725 (4,207)
Tax net (loss) $ (767,720) $(1,282,711)
Note 9 - Management and other fees
The Partnership has entered into an agreement with IFGP Corporation (Insignia),
which provides for Insignia or its affiliates to perform certain management and
administrative duties for the Partnership. Fees paid to Insignia affiliates for
these services amounted to $46,939 for both 1995 and 1994.
The operations of Wendover and Presidential are also managed by Insignia
affiliates under agreements which provide for management fees equal to 5% of
gross revenues. Insignia has assigned a portion of its fees to Wynnewood.
Management fees earned by Wynnewood during 1995 and 1994 amounted to $33,402 and
$31,567 respectively.
In addition, the operations of Table Mesa are managed by an affiliate of WW
Reynolds Companies, the co-venturer, and Wynnewood. The Partnership's pro-rata
share of fees paid to these affiliates during 1995 and 1994 amounted to $37,200
and $30,000, respectively. Included in accounts payable at December 31, 1995 is
$21,732 due to these affiliates. The Partnership's pro-rata share of leasing
commissions paid to WW Reynolds Companies amounted to $26,473 and $29,516 in
1995 and 1994, respectively.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the accountants on any
matter of accounting principles, practices or financial statement disclosure.
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act
Effective February 3, 1993, the General Partner of the Partnership, DBL
Properties Corporation, a New York Corporation, became a wholly-owned subsidiary
of The Wynnewood Company, Inc. which is wholly-owned by William D. Clements.
Prior to that date, DBLR had been the sole stockholder of the General Partner.
The General Partner has responsibility for all aspects of the Partnership's
operations.
The directors and executive officers of the General Partner are as follows:
Name Position
William D. Clements President, Treasurer, Assistant
Secretary, and Director
Robert A. Gauthier Vice President, Secretary and
Director
WILLIAM D. CLEMENTS, age 56. Mr. Clements has been President since February,
1993 and was Vice-President from 1990 until then. He was Chairman of the Board
from 1989 to 1990, and was a Vice-President in the Corporate Finance Department
of Drexel Burnham Lambert Incorporated from 1985-1990. Prior to that he was a
Senior Vice-President of DBLR from 1983 and a Vice-President from 1978. He
received his BA degree from Siena College and his MBA from the Wharton Graduate
School of the University of Pennsylvania.
ROBERT A. GAUTHIER, age 42. Mr. Gauthier has been Vice-President and
Secretary of the General Partner since February 1993. He is also Vice-President
of Operations, Rocky Mountain Division of Capstar Hotels, a hotel management
firm, since 1992. Prior to then he was the manager of two hotels owned by DBL
Airport Valley Limited Partnership from 1987 to 1992. He has spent his entire
career in the hotel industry after receiving a BA from California Polytechnical
State University.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
any person who owns more than ten percent of the outstanding limited partnership
interests and each of the officers and directors of the general partner, DBL
Properties Corporation, to file with the Securities and Exchange Commission and
the Partnership initial reports of ownership of limited partnership interests in
the Partnership within certain prescribed time periods (regardless of whether
the officers or directors of DBL Properties Corporation own any limited
partnership interests) and to file further reports within prescribed time
periods to report any change in such ownership. To the Partnership's knowledge,
all Section 16(a) filing requirements applicable to officers and directors of
DBL Properties Corporation or to greater than ten percent owners of limited
partnership interests were complied with.
Item 10. Executive Compensation
Officers and directors of the General Partner do not and will not receive any
direct compensation for services rendered by them in such capacities. Although
the Partnership is required to pay fees to the General Partner and/or its
affiliates upon property acquisition, for property management, and for real
estate commissions, and the General Partner is also entitled to receive cash
distributions from the operation and liquidation of the Partnership, no such
fees, payments or distributions were made to the General Partner in 1995.
Certain payments, including payments for management fees, were paid to
affiliates of the General Partner in 1995, as described under "Item 12" hereto.
As of January 1, 1992, the Partnership engaged IFGP Corporation to provide
management and administration services to the Partnership. For a complete
description of Management Compensation, see the discussion under the caption,
"Management Compensation" in the Prospectus, which discussion is hereby
incorporated by reference. The General Partner of the Partnership may be
reimbursed for its direct expenses relating to the offering, the administration
and the operations of the Partnership's real property investments. For a
further discussion of expenses incurred with related parties and with
management, see "Note 9" to the Financial Statements which are included in "Item
7" above, to which reference is hereby made.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of March 10, 1996, no person or group is known to own more than 5% of the
outstanding Interests of the Partnership.
No officer or director of the General Partner of the Partnership owns any
limited partnership Interests, nor do they possess a right to acquire beneficial
ownership of Interests.
The General Partner of the Partnership, DBL Properties Corporation, became a
wholly-owned subsidiary of The Wynnewood Company, Inc. in February 1993, which
is in turn a corporation wholly-owned by Mr. William D. Clements.
Item 12. Certain Relationships and Related Transactions
Reference is hereby made to "Note 9" to the financial statements which is
included in "Item 7", and "Items 9, 10 and 11" above for a description of
certain relationships and related transactions.
Item 13. Exhibits and Reports on Form 8-K:
(a) Exhibits: See Exhibit Index contained herein.
(b) Reports on Form 8-K filed during the fourth quarter of 1995: None
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
By: DBL Properties Corporation
General Partner
By: /s/William D. Clements
William D. Clements
President
Date: March 20, 1996
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/Robert A. Gauthier
Robert A. Gauthier Director March 20, 1996
/s/William D. Clements
William D. Clements President and Director March 20, 1996
INDEX TO EXHIBITS
Exhibit No. Description
3.1 Prospectus of the Partnership filed pursuant to rule 424(b), dated
December 30, 1983 is hereby incorporated herein by reference.
3.2 Supplement dated October 10, 1984 to Prospectus dated December 30,
1983 is hereby incorporated herein by reference.
3.3 Form of Agreement of Limited Partnership of the Partnership
reference is made to Exhibit A to the Prospectus.
3.4 Certificate of Limited Partnership of the Partnership, which
appears as Exhibit 3.2 to the Registration Statement is hereby
incorporated herein by the reference.
10.1 Agreement related to purchase by the Partnership of Wendover
Business Park Phase II in Greensboro, North Carolina, which
appears as Exhibit 2.1 to the Registration Statement of the
Partnership is hereby incorporated herein by reference.
10.2 Agreement related to purchase by the Partnership of an interest in
the Sheraton Poste Inn in Cherry Hill, New Jersey, which appears
as Exhibit 2.2 to the Registration Statement of the Partnership is
hereby incorporated herein by reference.
10.3 Agreement relating to purchase by the Partnership of Presidential
House at Sky Lake in North Miami Beach, Florida, for which a
Report on Form 8-K was filed with the Commission on November 5,
1984, is hereby incorporated herein by reference.
10.4 Agreement relating to purchase by the Partnership of an interest
in Table Mesa Shopping Center in Boulder, Colorado, for which a
Report on Form 8-K was filed with the Commission on May 21, 1985,
is hereby incorporated herein by reference.
10.5 Amendment No. 1, dated October 1, 1992, among the Partnership,
Coreal N.V., Inc. and Almanzil, Inc., to the Joint Venture
Agreements, dated April 4, 1984, between the Partnership and
Coreal relating to the Sheraton Poste Inn is incorporated by
reference to the Registrant's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1992.
10.6 Contracts related to refinancing of the debt of Wendover Business
Park Phase II were filed as Exhibit 10.6 to the report on Form 10-
KSB for the fiscal year ended December 31, 1993, and are hereby
incorporated herein by reference:
(a) Mortgage note dated January 13, 1994 between Drexel Burnham
Lambert Real Estate Associates II, a New York limited
partnership, and United Family Life Insurance Company, a
Georgia corporation.
(b) Deed of Trust and Security Agreement dated January 13, 1994
between Drexel Burnham Lambert Real Estate Associates II, a
New York limited partnership, and Stewart Title Guaranty
Company for the benefit of United Family Life Insurance
Company, a Georgia corporation.
(c) Assignment of Leases, Rents, Contracts, and Agreements dated
January 13, 1994 from Drexel Burnham Lambert Real Estate
Associates II, a New York limited partnership, to United
Family Life Insurance Company, a Georgia corporation.
(d) Hazardous Material Indemnification Agreement dated January
13, 1994 between Drexel Burnham Lambert Real Estate
Associates II, a New York limited partnership, and United
Family Life Insurance Company, a Georgia corporation.
(e) Escrow Agreement dated January 13, 1994 by and between United
Family Life Insurance Company, a Georgia corporation, Drexel
Burnham Lambert Real Estate Associates II, a New York limited
partnership, and Dickinson, Logan, Todd and Barber, Inc. (the
"Escrow Agent").
27 Financial Data Schedule.
99.1 Special Report/Acquisition Bulletin dated May 9, 1985 regarding
the Purchase by the Partnership of interests in Table Mesa
Shopping Center in Boulder, Colorado, and the 123 Office Building
in Tyson's Corner, Virginia is hereby incorporated herein by
reference.
99.2 Report on Form 8-K filed November 4, 1984 regarding the purchase
of Presidential House at Sky Lake in North Miami Beach, Florida is
hereby incorporated herein by reference.
99.3 Report on Form 8-K filed May 21, 1985 regarding the acquisition of
a 50% interest in Table Mesa Shopping Center in Boulder, Colorado
is hereby incorporated herein by reference.
99.4 On May 17, 1988, a report on Form 8-K was filed regarding the
refinancing of the four loans underlying the Presidential wrap
mortgage is hereby incorporated herein by reference.
99.5 On June 12, 1989, a report on Form 8-K was filed regarding the
modification of Table Mesa Promissory Note is hereby incorporated
herein by reference.
99.7 On October 11, 1989, a report on Form 8-K was filed regarding the
change in control of the parent company of the General Partner is
hereby incorporated herein by reference.
99.8 Second Note and Deed of Trust Revision Agreement dated December 3,
1990 regarding Table Mesa Shopping Center in Boulder, Colorado.
99.9 Report on Form 8-K filed February 3, 1993 regarding the sale of
the outstanding stock of the General Partner is hereby
incorporated herein by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Drexel
Burnham Lambert Real Estate Associates II 1995 Year-End 10-KSB and is qualified
in its entirety by reference to such 10-KSB.
</LEGEND>
<CIK> 0000725646
<NAME> DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 789,370
<SECURITIES> 0
<RECEIVABLES> 151,239
<ALLOWANCES> 9,500
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 19,371,137
<DEPRECIATION> 10,114,760
<TOTAL-ASSETS> 10,646,699
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,512,981
0
0
<COMMON> 0
<OTHER-SE> 610,912
<TOTAL-LIABILITY-AND-EQUITY> 10,646,699
<SALES> 0
<TOTAL-REVENUES> 2,848,339
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,137,378
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 781,721
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (289,039)
<EPS-PRIMARY> (7.68)
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
