FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 312905, eff. 4/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period.........to.........
(Amended by Exchange Act Rel. No. 312905, eff. 4/26/93.)
Commission file number 0-14177
MRI BUSINESS PROPERTIES FUND, LTD. II
(Exact name of small business issuer as specified in its charter)
California 94-2935565
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
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 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) MRI BUSINESS PROPERTIES FUND, LTD. II
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(Unaudited)
(in thousands)
June 30, 1996
Assets
Cash and cash equivalents $ 1,742
Other assets 1,384
Accounts receivable 260
Total assets 3,386
Liabilities
Accrued expenses 1,538
Estimated costs during the
period of liquidation 13
1,551
Net assets in liquidation $ 1,835
See Notes to Consolidated Financial Statements
a) MRI BUSINESS PROPERTIES FUND, LTD. II
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
September 30, 1995
ASSETS
Cash and cash equivalents $ 4,813
Accounts receivable and other assets 2,712
Due from affiliate 170
Real Estate:
Real estate 92,497
Accumulated depreciation (37,814)
Allowance for impairment of value (10,948)
Real estate, net 43,735
Total assets $ 51,430
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and other liabilities $ 2,407
Due to an affiliate of the joint venture
partner 55
Due to unconsolidated joint venture 618
Notes payable 36,610
Minority interest in joint venture 2,937
Commitments and Contingencies
Partners' Equity:
General partners 2
Limited partners (91,083 assignee units
outstanding at September 30, 1995) 8,801
Total partners' equity 8,803
Total liabilities and partners' equity $ 51,430
See Notes to Consolidated Financial Statements
b) MRI BUSINESS PROPERTIES FUND, LTD. II
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(Unaudited)
(in thousands)
June 30, 1996
Net assets in liquidation
at March 31, 1996 $ 1,837
Changes in net assets in liquidation
attributed to:
Increase in cash 412
Decrease in accounts receivable (300)
Increase in other assets 1,384
Increase in accrued expenses (1,503)
Decrease in estimated costs during the
period of liquidation 5
Net assets in liquidation at
June 30, 1996 $ 1,835
See Accompanying Note to Financial Statements
b) MRI BUSINESS PROPERTIES FUND, LTD. II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
June 30, June 30,
1995 1995
Revenues:
Room revenue $ 10,092 $ 26,998
Food and beverage revenue 4,852 14,235
Other operating revenues 834 2,307
Interest 125 348
Gain on sale of properties 18,497 18,497
Equity in unconsolidated joint
venture's operations 14 --
Total revenues 34,414 62,385
Expenses:
Room expenses 2,058 6,081
Food and beverage expenses 3,597 10,775
Other operating expenses 5,843 16,467
Interest 1,396 4,861
Depreciation and amortization 1,363 4,160
Equity in unconsolidated joint
venture's operations -- 93
General and administrative 117 356
Total expenses 14,374 42,793
Income before minority interest
in joint venture's operations and
adjustment to liquidation basis 20,040 19,592
Minority interest in joint venture's
operations (56) (137)
Net income $ 19,984 $ 19,455
Net income allocated to
general partners $ 3,547 $ 3,536
Net income allocated to
limited partners 16,437 15,919
$ 19,984 $ 19,455
Net income per limited
partnership unit $ 180.46 $ 174.77
See Notes to Consolidated Financial Statements
c) MRI BUSINESS PROPERTIES FUND, LTD. II
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1995
<S> <C>
Cash flows from operating activities:
Net income $ 19,455
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 4,464
Minority interest in joint venture's operations 137
Equity in unconsolidated joint venture's operations 93
Gain on sale of properties (18,497)
Change in accounts:
Accounts receivable and other assets (1,014)
Accounts payable, other liabilities and due to an
affiliate of the joint venture partner (434)
Net cash provided by operating activities 4,204
Cash flows from investing activities:
Property improvements and replacements (7,034)
Net proceeds from sale of properties 30,000
Unconsolidated joint venture distributions (170)
Restricted cash decrease 1,465
Cash provided by investing activities 24,261
Cash flows from financing activities:
Mortgage principal payments (601)
Satisfaction of mortgages payable (19,874)
Proceeds from mortgage financing 19,400
Financing costs paid (211)
Cash used in financing activities (1,286)
Net increase in cash and cash equivalents 27,179
Cash and cash equivalents at beginning of period 9,346
Cash and cash equivalents at end of period $ 36,525
Supplemental information:
Interest paid $ 4,399
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
d) MRI BUSINESS PROPERTIES FUND, LTD. II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information under the liquidation basis of accounting and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. 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 NPI Equity
Investments II, Inc. ("NPI Equity" or the "Managing General Partner"), all
adjustments considered necessary for a fair presentation on the liquidation
basis have been included. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's annual report on
Form 10-K for the fiscal year ended September 30, 1995.
The balance sheet at September 30, 1995, was derived from audited financial
statements at such date.
During the first quarter of fiscal 1996, the Partnership sold its remaining
properties. As a result, the Partnership changed its basis of accounting as of
March 31, 1996, to a liquidation basis. Consequently, assets have been valued
at estimated net realizable value and liabilities are presented at their
estimated settlement amounts, including estimated costs associated with carrying
out the liquidation. The valuation of assets and liabilities necessarily
requires many estimates and assumptions and there are substantial uncertainties
in carrying out the liquidation. The actual realization of assets and
settlement of liabilities could be higher or lower than amounts indicated and is
based on the estimates as of the date of the financial statements.
The statement of consolidated net assets in liquidation as of June 30, 1996,
includes approximately $13,000 of costs, net of income, that the Managing
General Partner estimates will be incurred during the period of liquidation,
based on the assumption that the liquidation process will be completed by
September 30, 1996. These costs include anticipated legal fees, administrative
expenses, and mailing costs. Because the success in realization of assets and
the settlement of liabilities is based on the Managing General Partner's best
estimates, the liquidation period may be shorter than projected or it may be
extended beyond the projected period.
Note B - Transactions with Affiliated Parties
MRI Business Properties Fund, Ltd. II (the "Partnership") has no employees
and is dependent on its general partners and affiliates for the management and
administration of all partnership activities. The Partnership Agreement
provides for payments to affiliates for services and as reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
The following transactions with affiliates of Insignia Financial Group,
Inc.("Insignia"), National Property Investors, Inc.("NPI"), and affiliates of
NPI were charged to expense in 1996 and 1995:
<TABLE>
<CAPTION>
For the Nine Months Ended
June 30,
1996 1995
<S> <C> <C>
Reimbursement for services of affiliates (included
in general and administrative expenses) $46,000 $ 78,000
</TABLE>
An affiliate of the Managing General Partner was paid a fee of $49,000
relating to a successful real estate tax appeal on the Partnership's Somerset
Marriott Hotel during the nine months ended June 30, 1996.
The general partner of the Partnership is Montgomery Realty Company-84
("Montgomery"), a general partnership, and the associate general partner is MRI
Associates, Ltd. II ("MRI"), a limited partnership. Fox Realty Investors
("FRI") is the managing general partner of Montgomery and a general partner of
MRI.
On December 6, 1993, NPI Equity became the managing general partner of FRI.
As a result, the Managing General Partner became responsible for the operation
and management of the business and affairs of the Partnership and the other
investment partnerships sponsored by FRI and its affiliates. The individuals
who had served previously as partners of FRI contributed their general
partnership interests in FRI to a newly formed limited partnership, Portfolio
Realty Associates, L.P. ("PRA"), in exchange for limited partnership interests
in PRA. In the foregoing capacity, such partners continue to hold, indirectly,
certain economic interests in the Partnership and such other partnerships, but
have ceased to be responsible for the operation and management of the
Partnership and such other partnerships. The Managing General Partner is a
wholly-owned subsidiary of NPI.
On August 17, 1995, the stockholders of NPI entered into an agreement to sell
to IFGP Corporation, a Delaware corporation and an affiliate of Insignia, a
Delawere corporation, all of the issued and outstanding common stock of NPI for
an aggregate purchase price of $1,000,000. The closing of the transactions
contemplated by the above mentioned agreement (the "Closing") occurred on
January 19, 1996.
Upon the closing, the officers and directors of NPI and NPI Equity resigned
and IFGP Corporation caused new officers and directors of each of those entities
to be elected.
Note C - Investment in Unconsolidated Joint Venture
The following are the condensed balance sheets as of June 30, 1996, and
September 30, 1995, and condensed statements of operations for each of the nine
months ended June 30, 1996 and 1995, of the unconsolidated joint venture:
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED BALANCE SHEETS
(in thousands)
June 30, September 30,
1996 1995
(Unaudited)
Assets
Cash and cash equivalents $ 231 $ 887
Restricted cash -- 958
Accounts receivable and other assets -- 1,321
Real Estate:
Real estate -- 63,148
Accumulated depreciation -- (17,952)
Allowance for impairment of value -- (11,962)
Real estate, net -- 33,234
Total assets $ 231 $ 36,400
Liabilities and Partners' Deficiency
Accounts payable and other liabilities $ -- $ 1,805
Due to affiliates 231 3,069
Note payable -- 34,000
Total liabilities 231 38,874
Minority interest in joint venture -- (1,238)
Partners' Deficiency:
MRI BPF, Ltd. II -- (618)
MRI BPF, Ltd. III -- (618)
Total partners' deficiency -- (1,236)
Total liabilities and partners' deficiency $ 231 $ 36,400
Note: The balance sheet at September 30, 1995, was derived from audited
financial statements at such date.
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands)
For the Nine Months Ended
June 30, June 30,
1996 1995
Revenues $ 4,017 $ 15,730
Gain on sale of hotel 9,755 --
Total revenues 13,772 15,730
Expenses 2,553 16,102
Income (loss) before minority interest in
venture operations 11,219 (372)
Minority interest in joint venture
operations (5,107) 186
Net income (loss) $ 6,112 $ (186)
Allocation of net income (loss):
MRI BPF, Ltd. II $ 3,056 $ (93)
MRI BPF, Ltd. III 3,056 (93)
Net income (loss) $ 6,112 $ (186)
For the Three Months Ended
June 30, June 30,
1996 1995
Revenues $ 2 $ 5,608
Expenses 17 5,551
(Loss) income before minority interest in
joint venture's operations (15) 57
Minority interest in joint venture
operations -- (29)
Net (loss) income $ (15) $ 28
Allocation of net (loss) income:
MRI BPF, Ltd. II $ (8) $ 14
MRI BPF, Ltd. III (7) 14
Net (loss) income $ (15) $ 28
Note D - Sale of Investment Properties
On October 5, 1995, the Partnership's Somerset Marriott Hotel was sold to an
unaffiliated third party for $24,950,000. After satisfaction of notes payable
of approximately $21,830,000 (including accrued interest), a prepayment premium
of $500,000 and closing costs, the Partnership received approximately
$2,200,000. The sale resulted in a gain of $1,351,000. The Partnership had
previously recorded a $10,948,000 provision for impairment of value in 1992 and
1993.
On December 1, 1995, the joint venture (in which the Partnership had a
controlling interest) sold the Radisson South Hotel to an unaffiliated third
party for $31,840,000, which terminated the joint venture. After satisfaction
of mortgage notes of approximately $14,452,000 (including accrued interest) and
closing costs, the joint venture received approximately $17,000,000. In
accordance with the joint venture agreement, the Partnership was entitled to all
of the net proceeds of the sale. In addition, the Partnership received
approximately $990,000 of cash from operations, as well as approximately
$1,300,000 in outstanding receivables, of which approximately $48,000 was
outstanding at June 30, 1996. The sale resulted in a gain of approximately
$13,094,000, which included $2,978,000 of gain from termination of the joint
venture.
On December 1, 1995, the Combined Fund sold the Holiday Inn Crowne Plaza
property to an unaffiliated third party for $44,000,000. After satisfaction of
the mortgage note of $34,000,000, closing costs and other expenses, the joint
venture received approximately $8,900,000. In accordance with the July 7, 1995,
agreement, the Combined Fund received $5,000,000. The Partnership's share of
net proceeds, after expenses, was $2,445,000. The Partnership has recognized a
gain on sale of $2,694,000. The Combined Fund had previously recorded an
approximate $11,900,000 provision for impairment of value in 1991 and 1992. A
former joint venture partner may be required to contribute certain funds to the
Partnership in accordance with the joint venture agreement. The amount of
contribution, if any, is not determinable at this time.
Note E - Distributions
The Partnership distributed $2,802,000 to the limited partners ($30.76 per
limited partnership assignee unit) and $57,000 to the general partners on
October 25, 1995.
On January 23, 1996, the Partnership distributed $20,580,000 to the limited
partners ($225.94 per limited partnership assignee unit) and $420,000 to the
general partners. The distributions were from sales proceeds and working
capital reserves.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
As of March 31, 1996, the Partnership adopted the liquidation basis of
accounting. As described in "Item 1, Notes to Financial Statements, Note D",
the Partnership sold its remaining properties during the first quarter of fiscal
year 1996. The aggregate sales price for its properties was $100,790,000.
After satisfaction of existing mortgages, closing costs and amounts distributed
to the Partnership's joint venture partners, net proceeds received by the
Partnership were approximately $22,000,000. In addition, the Partnership
received approximately $990,000 of cash from operations in December 1995 and
collected $1,245,000 in outstanding receivables in January and May 1996,
relating to the Radisson South Hotel. The Partnership recorded a gain of
$1,351,000 on the sale of the Somerset Marriott Hotel, a gain of $13,094,000 on
the sale of the Radisson South Hotel and a gain of $2,694,000 on the sale of its
unconsolidated joint venture property, the Holiday Inn Crowne Plaza.
The Partnership distributed $2,802,000 to the limited partners ($30.76 per
limited partnership assignee unit) and $57,000 to the general partners on
October 25, 1995. The Partnership distributed $20,580,000 to the limited
partners ($225.94 per limited partnership assignee unit) and $420,000 to the
general partners on January 23, 1996. The distributions were from sales
proceeds and working capital reserves. Since these were the Partnership's last
remaining properties, the Partnership expects to be terminated in 1996 after
collection of receivables, payment of outstanding liabilities and a final
distribution to the partners.
For the three months ended June 30, 1996, the Partnership recorded a net
decrease in net assets in liquidation of approximately $2,000. The Partnership
recorded an increase in other assets related to the requirement under Section
444 of the Internal Revenue Code to deposit funds with the Internal Revenue
Service due to its fiscal year end of September 30. This deposit of $1,350,000
with the Internal Revenue Service will be refunded upon termination of the
Partnership. The Partnership also recognized an increase in accrued expenses
during the three months ended June 30, 1996, related to state withholding taxes
due to Minnesota of approximately $1,505,000.
The Partnership's original investment objective of capital growth will not be
attained. Accordingly, a significant portion of invested capital will not be
returned to the limited partners. Upon termination of the Partnership, the
general partners may be required to contribute approximately $1,727,000 to the
Partnership in accordance with the partnership agreement.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: None filed during the quarter ended June 30,
1996.
SIGNATURE
Pursuant to the requirements 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.
MRI BUSINESS PROPERTIES FUND, LTD. II
By: MONTGOMERY REALTY COMPANY 84,
A California General Partnership,
its managing general partner
By: FOX REALTY INVESTORS,
A California General Partnership,
its managing general partner
By: NPI EQUITY INVESTMENTS II, INC.,
A Florida Corporation,
its managing partner
/s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
/s/ Ronald Uretta
Ronald Uretta
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: August 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from MRI Business
Properties Fund, Ltd. II 1996 Third Quarter 10-Q and is qualified in its
entirety by reference to such 10-Q filing.
</LEGEND>
<CIK> 0000745289
<NAME> MRI BUSINESS PROPERTIES FUND, LTD. II
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,742
<SECURITIES> 0
<RECEIVABLES> 260
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,386
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,835
<TOTAL-LIABILITY-AND-EQUITY> 3,386
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has a statement of net assets in liquidtion.
</FN>
</TABLE>
