FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 2-85829
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(Exact name of small business issuer as specified in its charter)
New York 13-3202289
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
850 Third Avenue, Nineteenth Floor
New York, New York 10022
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (212) 822-2246
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
BALANCE SHEET
(Unaudited)
March 31, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 468,783
Restricted--tenant security deposits 74,218
Accounts receivable 39,032
Escrow and other deposits 102,970
Prepaid expenses 9,340
Investment in joint venture 688,217
Deferred charges 128,477
Deferred rent receivable 6,195
Investment properties:
Land $ 1,578,313
Buildings and improvements 8,967,751
Furniture, fixtures and equipment 1,100,851
11,646,915
Less accumulated depreciation (7,176,647) 4,470,268
$ 5,987,500
Liabilities and Partners' Equity (Deficit)
Liabilities
Accounts payable $ 14,777
Accrued liabilities:
Interest $ 32,057
Property taxes 50,658
Professional fees 40,600
Other 17,653 140,968
Deposits payable 101,456
Mortgage and other indebtedness 4,685,761
Total liabilities 4,942,962
Partners' equity (deficit)
General partner (92,824)
Limited partners (37,273 units issued
and outstanding) 1,137,362 1,044,538
$ 5,987,500
See Notes to Financial Statements
b) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Revenues:
Rental operations $ 441,844 $ 454,900
Interest income 6,846 8,370
Other income 11,471 6,357
Equity in income of joint venture (note 4) 2,465 62,202
Total revenues 462,626 531,829
Expenses:
Rental operations 229,241 232,873
General and administrative 22,357 24,297
Interest expense 93,439 95,965
Depreciation and amortization 124,308 124,635
Total expenses 469,345 477,770
(Loss) Income before extraordinary item (6,719) 54,059
Extraordinary item - gain on disposal of property 812,291 --
Net income $ 805,572 $ 54,059
Net income per limited partnership unit:
Net (loss) income before extraordinary item $ (.18) $ 1.44
Extraordinary item - gain on disposal of property 21.58 --
Net income per limited partnership interest $ 21.40 $ 1.44
Average limited partner units outstanding 37,273 37,273
<FN>
See Notes to Financial Statements
</TABLE>
c) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Three Months Ended March 31, 1997
General Limited
Partner Partners Total
Partners' equity (deficit) at
December 31, 1996 $ (100,880) $ 339,846 $ 238,966
Net income for the three months
ended March 31, 1997 8,056 797,516 805,572
Partners' equity (deficit) at
March 31, 1997 $ (92,824) $1,137,362 $1,044,538
See Notes to Financial Statements
d) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 805,572 $ 54,059
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 124,308 124,635
Equity in loss of joint venture (2,465) (62,202)
Extraordinary item - gain on disposal of property (812,291) --
Change in accounts:
Restricted cash (8,295) 1,506
Accounts receivable 11,178 11,225
Deferred rent receivable 1,005 --
Escrow and other deposits (45,784) (50,903)
Prepaid expenses 5,272 3,607
Deferred charges (1,333) (1,321)
Accounts payable (1,237) 18,612
Accrued liabilities 45,345 39,652
Deposits payable (125) (599)
Net cash provided by operating activities 121,150 138,271
Cash flows from investing activities:
Additions to real and personal property (13,850) (9,039)
Net cash used in investing activities (13,850) (9,039)
Cash flows from investing activities:
Principal payments on mortgage and other
indebtedness (33,911) (31,384)
Distributions to partners (279,548) (279,548)
Net cash used in financing activities (313,459) (310,932)
Net decrease in cash and cash equivalents (206,159) (181,700)
Cash and cash equivalents at beginning of period 674,942 706,288
Cash and cash equivalents at end of period $ 468,783 $ 524,588
Supplemental disclosure of cash flow information:
Cash paid during period for interest $ 93,439 $ 95,965
<FN>
See Notes to Financial Statements
</TABLE>
e) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b)of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1997,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1997. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-KSB for the fiscal year ended December 31, 1996.
NOTE 2 - BASIS OF ACCOUNTING
The financial statements include the Partnership's operating divisions, Wendover
Business Park - Phase II ("Wendover II") and Presidential House at Sky Lake
("Presidential").
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 1996 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 income and Partners' equity for the three
months ended March 31, 1996; however, the balance of cash and cash equivalents
at March 31, 1996, was reduced by $153,207 and cash paid for interest for the
three months ended March 31, 1996, was reduced by $96,199 as the result of this
restatement.
Certain reclassifications have been made to the 1996 balances to conform to the
1997 presentation.
NOTE 3 - RELATED PARTY TRANSACTIONS
For the three months ended March 31, 1997 and 1996, amounts paid to related
parties are as follows:
1997 1996
The Wynnewood Company, Inc.
Management Fees $ 12,050 $ 12,392
W.W. Reynolds Company
Management Fees 5,700 5,700
$ 17,750 $ 18,092
NOTE 4 - INVESTMENT
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. As a result, no losses were recognized
for the periods ended March 31, 1997 and 1996.
On March 19, 1997, SPA sold the Hotel for $6,300,000 to CapStar Management
Company, L.P. ("CapStar"), the Hotel's management company. In addition, under
the sale agreement, CapStar was 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.
The proceeds from the sale of the Hotel were used first to satisfy the
$3,963,777 mortgage payable on the Hotel and the balance was paid to Almanzil in
accordance with the terms of the joint venture agreement. As the result of the
sale, the Partnership was relieved of its share of the recourse liabilities of
SPA. Accordingly, the Partnership recognized an extraordinary gain of $812,291
in its statement of operations for the quarter ended March 31, 1997.
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 income of $2,465 for the three months ended
March 31, 1997, and $62,202 for the three months ended March 31, 1996.
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. The annual preference is not cumulative.
Summarized financial information for Table Mesa at March 31, 1997, is as
follows:
Assets:
Real and personal property net
of accumulated depreciation 5,979,178
Other assets 1,071,960
Total assets 7,051,138
Liabilities:
Mortgage payable 6,970,116
Other liabilities 434,063
Total liabilities 7,404,179
Gross revenue 568,710
Net income 55,419
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
For the three months ended March 31, 1997, the Partnership realized net income
of $805,572, compared to net income of $54,059 for the corresponding period of
1996. The increase in net income was primarily due to the extraordinary gain
recognized on the sale of the Sheraton Poste Inn Hotel in Cherry Hill, New
Jersey, in which the Partnership had a subordinated interest. The Partnership
did not receive any proceeds due to the senior position of one of the partners.
However, the Partnership was relieved of certain recourse liabilities, and
recognized an extraordinary gain of $812,291 during the first quarter 1997.
Liquidity and Capital Resources
At March 31, 1997, the Partnership held cash (including shares of money market
funds) of $468,783. 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. At March 31, 1997, the Presidential Apartments, Table
Mesa Shopping Center and Wendover Business Park Phase II all had occupancy
levels approximating 95%. The Table Mesa Joint Venture is discussing the
refinancing, or extension of maturity, of its existing first mortgage which
matures in early 1998.
Other than normal leasing and capital improvement programs, the Partnership has
not entered into any material commitment for capital expenditures at any of its
properties as of March 31, 1997. Management has authorized a roof and parking
lot repair program at the Wendover II property to be performed during the
current fiscal year at an estimated cost of $37,000. On March 14, 1997, the
Partnership paid a distribution to its limited partners of $279,548 or $7.50 per
unit.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
(b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(Registrant)
By: DBL Properties Corporation
(General Partner)
By: /s/William D. Clements
William D. Clements
President
Date: May 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Drexel
Burnham Lambert Real Estate Associates II 1997 First Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000725646
<NAME> DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 468,783
<SECURITIES> 0
<RECEIVABLES> 39,032
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,646,915
<DEPRECIATION> 7,176,647
<TOTAL-ASSETS> 5,987,500
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,685,761
0
0
<COMMON> 0
<OTHER-SE> 1,044,538
<TOTAL-LIABILITY-AND-EQUITY> 5,987,500
<SALES> 0
<TOTAL-REVENUES> 462,626
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 469,345
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,439
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 812,291
<CHANGES> 0
<NET-INCOME> 805,572
<EPS-PRIMARY> 21.40
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
