UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996 Commission file number 2-89185
GULLEDGE REALTY INVESTORS II, L.P.
State of Organization: VIRGINIA I.R.S. Employer Identification No. 54-1191237
ONE NORTH JEFFERSON AVENUE
ST. LOUIS, MISSOURI 63103
Registrant's telephone number, including area code: (314) 955-3006
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or of 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
GULLEDGE REALTY INVESTORS II, L.P.
(A LIMITED PARTNERSHIP)
INDEX
PART I. FINANCIAL INFORMATION:
Balance Sheets
Statements of Operations
Statements of Changes in Partners' Capital
Statements of Cash Flows
Notes to Financial Statements
Management's Financial Discussion
PART II. OTHER INFORMATION
SIGNATURES
GULLEDGE REALTY INVESTORS II, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
ASSETS 1996 1995
Cash $ 389,580 $ 371,220
Advances to Project Partnerships 61,766 50,033
Intangible assets,
net of accumulated amortization 23,005 27,602
Total Assets $ 474,351 $ 448,855
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable $ 10,700 $ 14,200
Payable to affiliates 1,143,215 1,030,203
Capital contributions payable 50,000 50,000
Total Liabilities 1,203,915 1,094,403
Partners' Capital (Deficit) (729,564) (645,548)
Total Liabilities and
Partners' Capital (Deficit) $ 474,351 $ 448,855
See notes to financial statements.
GULLEDGE REALTY INVESTORS II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Revenue:
Interest income $ 4,746 $ 5,443 $ 13,791 $ 14,065
Distributions 26,763 59,955
Miscellaneous revenue 4,274
4,746 5,443 40,554 78,294
Expenses:
Asset management fee 28,644 28,644 85,932 85,932
Professional fees 17,526 3,500 24,526 10,500
Amortization 1,532 1,532 4,597 4,597
Operating expenses 9,018 51 9,515 412
56,720 33,727 124,570 101,441
Net loss $(51,974 $(28,284) $(84,016) $(23,147)
See notes to financial statements.
GULLEDGE REALTY INVESTORS II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Special
Total General Limited Limited
Balances at January 1, 1995 $(596,534) $(15,153) $(27,346) $(554,035)
Net loss for nine months
ended September 30, 1995 (23,147) (255) (440) (22,452)
Balances at September 30, 1995 $(619,681) $(15,408) $(27,786) $(576,487)
Balances at January 1, 1996 $(645,548) $(15,692) $(28,277) $(601,579)
Net loss for nine months
ended September 30, 1996 (84,016) (924) (1,596) (81,496)
Balances at September 30, 1996 $(729,564) $(16,616) $(29,873) $(683,075)
Number of ownership units 11,814 131 225 11,458
See notes to financial statements.
GULLEDGE REALTY INVESTORS II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(84,016) $(23,147)
Adjustments to reconcile net loss
to net cash used in operating activities:
Distributions from
Project Partnerships (26,763) (59,955)
Amortization 4,597 4,597
Change in assets and liabilities:
Increase in advances to Project Partnerships (11,733) (25,457)
Decrease in accounts payable (3,500) (8,200)
Increase in payable to affiliates 113,012 87,642
Net Cash Used In Operating Activities (8,403) (24,520)
Cash Flows From Investing Activities:
Distributions from Project Partnerships 26,763 59,955
Increase In Cash 18,360 35,435
Cash Beginning of Period 371,220 352,192
Cash End of Period $389,580 $387,627
</TABLE>
See notes to financial statements.
GULLEDGE REALTY INVESTORS II, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
Note A Summary of Significant Accounting Policies
Partnership Organization
Gulledge Realty Investors II, L.P. (the Registrant) is a limited partnership
organized in December 1983 under the laws of the Commonwealth of Virginia for
the purpose of acquiring limited partner interests in real estate limited
partnerships (Project Partnerships). These Project Partnerships are known as
Camelot Housing Limited Partnership, Colony Place Associates, Ltd., Country Oaks
Apartments Limited Partnership, Florence Housing Limited Partnership, Greentree
Housing Limited Partnership, Hawthorn Housing Limited Partnership, Olympic
Housing Limited Partnership, Pine West Ltd., and Rancho Vista Associates. Each
of the Project Partnerships owns an operating real estate project which receives
mortgage interest subsidies and/or rental assistance from the United States
Department of Housing and Urban Development (HUD) or Farmer's Home
Administration. The Registrant commenced operations in March 1984.
The financial statements include only those assets, liabilities, and results of
operations which relate to the business of the Registrant and do not include any
assets, liabilities, or operating results attributable to the partners'
individual activities. These financial statements should be read in conjunction
with the Registrant's annual report for the year ended December 31, 1995. All
adjustments which, in the opinion of management, are necessary for a fair
presentation of the results of operations for the interim period have been
reflected. All such adjustments consist of normal recurring accruals, unless
otherwise disclosed in these interim financial statements. The results of
operations, for the nine months ended September 30, 1996, are not necessarily
indicative of the results for the year ending December 31, 1996.
Investment in Project Partnerships
The investment in Project Partnerships is accounted for using the equity method
of accounting. Under the equity method, investments are reflected at cost,
adjusted for the Registrant's share of the Project Partnerships' income or loss
and distributions, if any. The Registrant is under no obligation to contribute
additional capital or to lend monies necessary to fund cash flow deficiencies of
the Project Partnerships because the Registrant is a limited partner in such
partnerships. As a result, the investment account was not reduced below zero.
As of December 31, 1992, all nine of the Project Partnership investment accounts
had reached zero. Losses in subsequent years will be maintained separately for
tax purposes. These losses are available to be applied toward any possible
future income from these partnerships. Any distributions from the Project
Partnerships will be recognized as income in the year received.
Income Taxes
No provision has been made for income taxes as they are the responsibility of
each partner. Profits (or gains) and losses of the Registrant are allocated to
the partners in accordance with the partnership agreement.
GULLEDGE REALTY INVESTORS II, L.P.
(A LIMITED PARTNERSHIP)
MANAGEMENT'S FINANCIAL DISCUSSION
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
The Registrant's investments in the Project Partnerships are recorded using the
equity method of accounting (see Note A). Due to all nine investments having
reached zero by the year ended December 31, 1992, additional losses will not be
reported for financial reporting purposes, consequently no fluctuations will
occur in future financial statements from recognizing equity in the income of
Project Partnerships. However, losses in subsequent years will continue to be
maintained separately for tax reporting purposes. The major source of future
revenue to the Registrant will be distribution income received from the Project
Partnerships. The Project Partnerships' ability to pay distributions is
dependent upon the operating results and cash flow of each project. Other than
that described below, no significant events occurred during the three month
periods or nine month periods ended September 30, 1996, and September 30, 1995,
that altered the Project Partnerships' ability to pay distributions to the
Registrant. Distribution income decreased in the current nine month period as
compared to the nine month period in the prior year primarily due to a decrease
in distributions received from one Project Partnership that made a large
interest payment to its secondary noteholder in the current year. For the three
month and nine month periods ended September 30, 1996, compared to the same
periods in the prior year, Professional fees increased primarily due to legal
expenses regarding the refinancing of promissory notes and Operating expenses
increased primarily due to the printing and mailing of investor ballots.
The Registrant's ownership interest in six of the Project Partnerships (Camelot
Housing, Colony Place, Florence Housing, Greentree Housing, Hawthorn Housing and
Olympic Housing) is pledged as collateral in connection with promissory notes
issued by the Project Partnerships. The notes on three of the Project
Partnerships came due on December 31, 1995: Colony Place, Florence Housing and
Olympic Housing. Colony Place's note was extended for one year and a sale of
the project is being pursued under the Low Income Housing Preservation and
Resident Homeownership Act ("LIHPRHA"). Sale proceeds would then be used to pay
the noteholder. LIHPRHA is a program administered by the Department of Housing
and Urban Development ("HUD").
Florence Housing's note was extended for one year while a longer-term extension
is being negotiated. Olympic Housing's note is still in the process of
finalizing an initial extension with further extension to December 31, 2000.
All of these negotiations are subject to the approval of the limited partners of
the Registrant. The limited partners granted their approval of these
negotiations as of October 31, 1996.
The Registrant could lose its ownership interest in the Project partnerships if
it is unsuccessful in refinancing these notes. Though the Registrant's
investment in these Project Partnerships is zero, the impact on future
operations could be significant as distributions from Project Partnerships is
the primary source of revenue for the Registrant.
As previously reported, Camelot Housing defaulted on its mortgage in June, 1995.
The mortgage was assigned to HUD and HUD initiated foreclosure proceedings. In
July, 1996, HUD sold the project in satisfaction of the mortgage. The affect on
the Registrant's financial statements is negligible because the investment in
Camelot Housing was reduced to zero several years ago and Camelot Housing was
not expected to pay distributions in the foreseeable future. Any tax gain
caused by the foreclosure sale of Camelot Housing should be offset by losses
from other Project Partnerships and suspended losses from prior years.
GULLEDGE REALTY INVESTORS II, L.P.
(A LIMITED PARTNERSHIP)
PART II OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K - There were no reports filed on Form 8-K for
the quarter ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GULLEDGE REALTY INVESTORS II, L.P.
By:GULL-AGE Properties, Inc.
Managing General Partner
Date: November 13, 1996 By: /s/
David Mesker
President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 389,580
<SECURITIES> 0
<RECEIVABLES> 61,766
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 451,346
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 474,351
<CURRENT-LIABILITIES> 1,203,915
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (729,564)
<TOTAL-LIABILITY-AND-EQUITY> 474,351
<SALES> 0
<TOTAL-REVENUES> 40,554
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 124,570
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (84,016)
<INCOME-TAX> 0
<INCOME-CONTINUING> (84,016)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (84,016)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
