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 [No Fee Required]
For the fiscal year ended December 31, 1996
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.)
850 Third Avenue, Nineteenth Floor
New York, New York 10022
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (212) 822-2246
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: $1,824,269
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, 1996 - 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 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), Table Mesa (one-half interest in a
joint venture) and 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.
SPA has entered into an agreement to sell the Hotel for $6,300,000 to CapStar
Management Company, L.P. ("CapStar"), the Hotel's management company. The
closing date shall be no later than March 20, 1997. A $750,000 nonrefundable
deposit is required, as is payment of interest on the sales price at the prime
rate. In addition, CapStar shall be entitled to collect and retain all accrued
receivables and shall assume all outstanding payables, as defined, with respect
to the Hotel as of December 31, 1996. It is expected that the proceeds from the
sale of the Hotel will be used first to satisfy the $3,963,777 mortgage payable
on the Hotel and that the balance will be paid to Almanzil in accordance with
the terms of the joint venture agreement. As the result of the sale, the
Partnership will be relieved of its share of the recourse liabilities of SPA.
Therefore, the Partnership is expected to recognize an extraordinary gain of
approximately $812,291 in its 1997 statement of operations.
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.
All of the outstanding stock of the General Partner is owned by 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, 1996. 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.
Item 2. Description of Properties
The following table sets forth the Registrant's investments in properties:
Date of
Property Purchase Type of Ownership Use
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 Apartments
North Miami Beach, FL to first mortgage 203 units
Schedule of Properties:
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Tax Basis
Wendover II $ 4,232,859 $ 2,099,666 3-25 yrs $ 871,807
Presidential House 7,400,206 4,963,571 5-31.5 yrs 2,371,600
$11,633,065 $ 7,063,237 $ 3,243,407
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:
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1996 Rate Amortized Date Maturity
Wendover II $ 1,260,436 7.75% 20 years 02/01/01 $1,091,466
Presidential House 3,459,235 8.00% 20 years 08/01/00 3,047,227
Total $ 4,719,671 $4,138,693
Schedule of Rental Rates and Occupancy:
Average Annual Average Annual
Rental Rates Occupancy
1996 1995 1996 1995
Wendover II $6.32/sq.ft. $6.39/sq.ft. 91% 90%
Presidential House $6,713/unit $6,535/unit 97% 97%
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 in which they operate. 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
1997-2005:
Number of % of Gross
Wendover II Expirations Square Feet Annual Rent Annual Rent
1997 7 27,427 $ 158,800 35.1%
1998 8 24,534 154,209 34.1%
1999 5 20,847 120,712 26.7%
2000-2005 -- -- -- --
In addition, one tenant, who rents their space on a month-by-month basis,
occupied 3,510 square feet and contributed annual lease payments of $11,992 or
approximately 2.65% of gross annual rent for 1996.
Schedule of Real Estate Taxes:
1996 1995
Wendover II $ 49,766 $ 54,724
Presidential House 143,217 143,985
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 1996.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS
As of December 31, 1996, the Partnership included approximately 1,718 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 1995 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 1996. A cash distribution of $279,548 was also declared in December
1996 to be paid in March 1997. As of December 31, 1996, the remaining unpaid
preferred return arrearage totaled $13,119,480 or $351.98 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, 1996, the Partnership realized a net loss of
$89,038 compared to a net loss of $289,039 for the corresponding period of 1995.
The decrease in net loss is primarily attributable to a decrease in equity loss
recognized on the SPA joint venture. The Partnership has limited the equity in
the loss of SPA joint venture to the Partnership's share of recourse
liabilities. The Partnership reached its limit in the loss of the SPA joint
venture with the recognition of a $96,983 loss in 1995. No similar loss has
been recognized in 1996 (see "Note 3" of the Notes to Financial Statements). In
addition, the decrease in net loss was impacted by an increase in rental
revenues and a decrease in depreciation expense. Rental revenue increased due
to Presidential House raising rental rates in 1996. Depreciation expense
decreased as a result of a depreciation rate change under ACRS from 5% to 4%.
Effective in 1996, the Partnership accounts for its 50% investment in Table Mesa
using the equity method. The Partnership had previously accounted for its 50%
share in the assets, liabilities, revenues and expenses on a pro-rata basis.
The 1995 statements of operations and cash flows have been restated to present
the Partnership's 50% investment in Table Mesa using the equity method. There
was no change in the Partnership's net loss and Partner's equity for the year
ended 1995; however, the balance of cash and cash equivalents at December 31,
1995, was reduced by $83,082 and cash paid for interest for the year ended 1995
was reduced by $390,970 as the result of this restatement.
Liquidity and Capital Resources
At December 31, 1996, the Partnership had cash on hand (including shares of
money market funds) of $674,942. 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 91% occupied. The Table Mesa Joint Venture is discussing the
refinancing or extension of the existing first mortgage which matures in early
1998. The Hotel owned by SP Associates in Cherry Hill, New Jersey, is currently
under contract of sale. At the projected sales proceeds, it is not expected
that the Partnership will receive any of the proceeds.
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, 1996. In March of 1997, the Partnership paid a
distribution to it limited partners of $7.50 per unit or a total of $279,548.
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, 1996
Statement of Operations for the Years Ended
December 31, 1996 and 1995
Statement of Partners' Equity for the Years Ended
December 31, 1996 and 1995
Statement of Cash Flows for the Years Ended
December 31, 1996 and 1995
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, 1996, and the
related statements of operations, partners' equity and cash flows for each of
the two years in the period ended December 31, 1996. 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, 1996, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
As described in note 2, the Partnership restated its 1995 financial statements
to reflect its investment in a joint venture on the equity method.
Pannell Kerr Forster PC
January 31, 1997
New York, NY
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
Balance Sheet
December 31, 1996
Assets
Cash and cash equivalents $ 674,942
Accounts receivable 50,210
Escrow and other deposits 57,186
Prepaid expenses 14,612
Investment in joint venture (note 3) 685,749
Real and personal property - at cost (notes 2 and 4)
Land $ 1,578,313
Buildings and improvements 8,967,751
Furniture, fixtures and equipment 1,087,001
11,633,065
Less accumulated depreciation (7,063,237) 4,569,828
Restricted cash - tenants' security deposits 65,923
Deferred rent receivable (note 2) 7,200
Deferred charges (note 2) 138,043
$ 6,263,693
Liabilities and Partners' Equity
Liabilities
Accounts payable $ 16,014
Accrued liabilities
Interest $ 32,057
Professional fees 44,500
Other 19,065 95,622
Distribution payable (note 5) 279,548
Accountability to joint venture (note 3) 812,291
Deposits payable 101,581
Mortgage indebtedness (note 4) 4,719,671
Total liabilities 6,024,727
Partners' equity (deficit) (note 5)
General partner (100,880)
Limited partners (37,273 units issued and 339,846
outstanding)
Total partners' equity 238,966
$ 6,263,693
See notes to financial statements
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
Statement of Operations
Years Ended
December 31,
1996 1995
Revenue
Rental operations (note 6) $ 1,764,251 $ 1,726,858
Interest income 30,327 30,274
Other income 29,691 42,373
Total revenue 1,824,269 1,799,505
Expenses
Rental operations (note 7) 866,542 868,950
Equity in losses of joint ventures (note 3) 69,899 176,894
General and administrative 100,176 108,484
Interest expense (note 4) 380,049 390,750
Depreciation and amortization (note 2) 496,641 543,466
Total expenses 1,913,307 2,088,544
Net (loss) (note 8) $ (89,038) $ (289,039)
Allocation of net (loss)
General partner $ (890) $ (2,890)
Limited partners $ (88,148) $ (286,149)
Net (loss) per limited partner interest (note 5) $ (2.36) $ (7.68)
Distributions per limited partner interest (note 2)$ 7.50 $ 7.50
Average limited partner units outstanding (note 5) 37,273 37,273
See notes to financial statements
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
Statement of Partners' Equity
For Years Ended December 31, 1996 and 1995
<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, 1994 (9,809,854) (98,100) (9,711,754)
Cumulative distributions to limited partners
through December 31, 1994 (5,597,328) -- (5,597,328)
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
Net (loss) for the year ended December 31, 1996 (89,038) (890) (88,148)
Distribution to partners (note 5) (279,548) -- (279,548)
Other distribution (3,360) -- (3,360)
Balance - December 31, 1996 $ 238,966 $ (100,880)$ 339,846
<FN>
See notes to financial statements
</TABLE>
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
Statements of Cash Flows
Year Ended
December 31,
1996 1995
Cash flows from operating activities
Net (loss) $ (89,038) $ (289,039)
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation 450,483 495,015
Amortization 46,158 48,444
Equity in losses of joint ventures 69,899 176,894
Changes in certain other accounts:
Tenants' security deposits (19,044) 1,407
Accounts receivable 11,953 (57,808)
Deferred rent receivable 1,262 6,182
Escrow and other deposits 3,579 17,429
Prepaid expenses (2,014) (1,389)
Deferred charges (1,321) (11,381)
Accounts payable 4,198 (4,114)
Accrued liabilities (17,074) 21,414
Deposits payable (2,049) (16,374)
Net cash provided by operating activities 456,992 386,680
Cash flows from investing activities
Additions to real and personal property (76,082) (49,137)
Distribution from equity investee -- 75,000
Net cash provided (used) by investing (76,082) 25,863
activities
Cash flows from financing activities
Principal payments on mortgage and other
indebtedness (129,348) (119,513)
Distributions paid to partners (282,908) (279,548)
Net cash (used) by financing activities (412,256) (399,061)
Increase (decrease) in cash and cash (31,346) 13,482
equivalents
Cash and cash equivalents at beginning of year 706,288 692,806
Cash and cash equivalents at end of year $ 674,942 $ 706,288
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 380,049 $ 389,884
See notes to financial statements
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, DBL Properties Corporation ("General Partner"), is owned by
The Wynnewood Company, Inc. ("Wynnewood").
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 (see "Note 3").
Note 2 - Significant accounting policies
Basis of accounting
The financial statements include the accounts of the Partnership and its
operating divisions, Wendover and Presidential.
The Partnership accounts for its joint venture investments in Table Mesa and SPA
under the equity method of accounting (see "Note 3").
Restatement
Effective in 1996, the Partnership accounts for its 50% investment in Table Mesa
on the equity method. The Partnership had previously accounted for its 50%
share in the assets, liabilities, revenues and expenses on a pro rata basis.
The 1995 statements of operations and cash flows have been restated to present
the Partnership's 50% investment in Table Mesa on the equity method. There was
no change in the Partnership's net (loss) and Partners' equity for the year
ended 1995; however, the balance of cash and cash equivalents at December 31,
1995, was reduced by $83,082 and cash paid for interest for the year ended 1995
was reduced by $390,970 as the result of this restatement.
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 the Partnership's accountability to SPA (see "Note
3"). Actual results could differ from those estimates.
Long-lived assets
Management evaluates the Partnership's long-lived assets, which consist
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 amount of a specific
property, the assets will be written-down to its fair value. No such write-down
was required in 1996 and 1995.
Disclosure about fair value of financial instruments
The Company's cash and cash equivalents, and long-term debt represent financial
instruments as defined by "Statement of Financial Accounting Standards No. 107,
Disclosures About Fair Value of Financial Instruments". The carrying value of
these financial instruments is a reasonable approximation of fair value.
Depreciation and amortization
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.
Deferred charges are presented net of accumulated amortization of $137,542 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 include 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 1996, the Partnership approved a cash distribution to limited
partners in the amount of $279,548 ($7.50 per interest) to be paid in March
1997. A similar distribution was declared in December 1995 and paid in February
1996.
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 - Investment in joint ventures
SP Associates (SPA)
SPA was formed in 1984 as a joint venture to acquire the Sheraton Poste Inn
("Hotel"), a 220-room hotel located in Cherry Hill, New Jersey. The managing
partner of the SPA joint venture is Almanzil, Inc. ("Almanzil"), with a 50%
interest. The remaining interests are owned by the Partnership and Coreal N.V.,
Inc. ("Coreal"), owning 33.3% and 16.7%, respectively. Coreal is an affiliate
of Almanzil.
Under the terms of SPA's joint venture agreement, cash from operations and
capital transactions, as defined, are 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 of $1,953,970. Losses from operations of SPA are
allocated 66.7% to the Partnership and 33.3% to Coreal. At December 31, 1996,
the Partnership's accountability to the SPA joint venture, representing
management's estimate of the Partnership's share of recourse liabilities of SPA,
amounted to $812,291. Losses of SPA have been limited to the Partnership's
share of recourse liabilities of SPA and for the years ended 1996 and 1995
amounted to $-0- and $96,983, respectively. The Partnership's share of
unrecognized losses for the years ended December 31, 1996 and 1995, totaled
$182,000 and $608,000, respectively.
SPA has entered into an agreement to sell the Hotel for $6,300,000 to CapStar
Management Company, L.P. ("CapStar"), the Hotel's management company. The
closing date shall be no later than March 20, 1997. A $750,000 nonrefundable
deposit is required, as is payment of interest on the sales price at the prime
rate. In addition, CapStar shall be entitled to collect and retain all accrued
receivables and shall assume all outstanding payables, as defined, with respect
to the Hotel as of December 31, 1996.
It is expected that the proceeds from the sale of the Hotel will be used first
to satisfy the $3,963,777 mortgage payable on the Hotel and that the balance
will be paid to Almanzil in accordance with the terms of the joint venture
agreement. As the result of the sale, the Partnership will be relieved of its
share of the recourse liabilities of SPA. Therefore, the Partnership is
expected to recognize an extraordinary gain of $812,291 in its 1997 statement of
operations.
Table Mesa
Table Mesa Shopping Center Partnership was formed in 1985, as a joint venture to
own and operate a shopping center in Boulder, Colorado. The Partnership owns a
50% interest in this joint venture. The Partnership's equity in the operations
of Table Mesa, after an adjustment for allocation of depreciation based on its
basis in the property, amounted to losses of $69,899 in 1996 and $79,911 in
1995.
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.
Summarized financial information for Table Mesa at December 31, 1996, is as
follows:
Assets $ 6,981,946
Liabilities 7,390,407
Revenue 2,161,823
Net income 44,071
Note 4 - Mortgage indebtedness
At December 31, 1996, mortgage indebtedness consisted of:
Wendover - The mortgage payable matures on February 1, 2001,
and requires monthly payments of $11,083 to be applied first
to interest at the rate of 7.75% per annum and the balance
to reduction of principal. $ 1,260,436
Presidential - The mortgage payable 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. 3,459,235
Total mortgages payable $ 4,719,671
In addition, escrow deposits are required to be made with both mortgagees for
real estate taxes and insurance.
The following is a schedule of future mortgage amortization payments as of
December 31, 1996:
1997 $ 139,994
1998 151,514
1999 163,984
2000 3,168,705
2001 1,095,474
Total $ 4,719,671
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,
as to 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. 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, 1996, the unpaid preferred return arrearage totaled $13,119,480.
Note 6 - Operating leases
The Partnership leases office, warehouse and retail space to tenants of Wendover
under operating lease agreements which expire on various dates through 1999.
Future minimum rental income, excluding escalation charges, under these leases
as of December 31, 1996, are as follows:
1997 $ 360,414
1998 235,802
1999 75,504
Total $ 671,720
Note 7 - Management and other fees
The Partnership has entered into an agreement with IFGP Corporation
("Insignia"), which provides for Insignia to perform certain management and
administrative duties for the Partnership. Fees paid to Insignia for these
services amounted to $46,939 for both 1996 and 1995.
The operations of Wendover and Presidential are also managed by Insignia under
agreements which provide for management fees equal to 5% of gross revenues.
Insignia has assigned a portion of its fees to Wynnewood, an affiliated entity.
Management fees earned by Wynnewood during 1996 and 1995 amounted to $34,253 and
$33,402, respectively.
In addition, the operations of Table Mesa are managed by an affiliate of WW
Reynolds Companies, the co-venturer, and Wynnewood. Fees paid to these
affiliates by Table Mesa totaled $74,400 for each of the years ended 1996 and
1995. In addition, leasing commissions paid to WW Reynolds Companies amounted
to $28,691 and $52,947 in 1996 and 1995, respectively.
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,
1996 1995
Financial net (loss) $ (89,038) $(289,039)
Preferred returns not recognized as income for
tax purposes -- (37,500)
Book/tax depreciation and amortization differences (46,213) 130,159
Excess of tax loss over book loss of equity investees (52,298) (608,322)
Prepaid rent (15,812) 25,257
Other -- 11,725
$(203,361) $(767,720)
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 57. 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 43. Mr. Gauthier has been Vice-President and Secretary
of the General Partner since February 1993. He is also Senior Vice-President of
Operations 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 1996.
Certain payments, including payments for management fees, were paid to
affiliates of the General Partner in 1996, 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 7" 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, 1997, 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 except for Mr. William D. Clements who owns 4 partnership
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 7" 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:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report.
(b) Reports on Form 8-K filed during the fourth quarter of 1996: None
SIGNATURES
In accordance with Section 13 or 15(d) 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
By: DBL Properties Corporation
General Partner
By: /s/William D. Clements
William D. Clements
President
Date: March 25, 1997
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
/s/William D. Clements
William D. Clements
President and Director
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 1996 Year-End 10-KSB and is qualified
in its entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000725646
<NAME> DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 674,942
<SECURITIES> 0
<RECEIVABLES> 50,210
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,633,065
<DEPRECIATION> 7,063,237
<TOTAL-ASSETS> 6,263,693
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,719,671
0
0
<COMMON> 0
<OTHER-SE> 238,966
<TOTAL-LIABILITY-AND-EQUITY> 6,263,693
<SALES> 0
<TOTAL-REVENUES> 1,824,269
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,913,307
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 380,049
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,038)
<EPS-PRIMARY> (2.36)
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
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