<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-14437
PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
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(Exact name of Registrant as specified in its charter)
Delaware 13-3236335
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Seaport Plaza, New York, N.Y. 10292-0116
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-1016
Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of class)
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 CK No__
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K [CK]
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Annual Report to Limited Partners for the year ended December
31, 1996 is incorporated by reference into Parts I, II and IV of this Annual
Report on Form 10-K
Amended and Restated Agreement of Limited Partnership included as part of the
Registration Statement filed with the Securities and Exchange Commission
pursuant to Rule 424(b) under the Securities Act of 1933, and amended on January
1, 1987, is incorporated by reference into Part IV of this Annual Report on Form
10-K
Index to exhibits can be found on pages 9 and 10.
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CAUTIONARY STATEMENT FOR PURPOSES OF
THE ``SAFE HARBOR'' PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this Annual Report on Form 10-K, the words ``Believes,''
``Anticipates,'' ``Expects'' and similar expressions are intended to identify
forward-looking statements. Statements looking forward in time are included in
this Annual Report on Form 10-K pursuant to the ``Safe Harbor'' provision of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially, including, but not limited to, those set forth in ``Management's
Discussion and Analysis of Financial Condition and Results of Operations.''
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Registrant undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.
2
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PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
(a limited partnership)
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
PART I
Item 1 Business........................................................................ 4
Item 2 Properties...................................................................... 4
Item 3 Legal Proceedings............................................................... 4
Item 4 Submission of Matters to a Vote of Limited Partners............................. 4
PART II
Item 5 Market for the Registrant's Units and Related Limited Partner Matters........... 5
Item 6 Selected Financial Data......................................................... 5
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 6
Item 8 Financial Statements and Supplementary Data..................................... 6
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................... 6
PART III
Item 10 Directors and Executive Officers of the Registrant
Prudential-Bache Properties, Inc................................................ 6
Prudential Realty Partnerships, Inc............................................. 7
Item 11 Executive Compensation.......................................................... 8
Item 12 Security Ownership of Certain Beneficial Owners and Management.................. 8
Item 13 Certain Relationships and Related Transactions.................................. 8
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
Financial Statements and Financial Statement Schedules.......................... 9
Exhibits........................................................................ 9
Reports on Form 8-K............................................................. 10
SIGNATURES................................................................................... 14
</TABLE>
3
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PART I
Item 1. Business
General
Prudential Realty Acquisition Fund II, L.P. (the ``Registrant ''), a Delaware
limited partnership, was formed on August 10, 1984 and will terminate in
accordance with a vote of the limited partners as described below. The
Registrant was formed to acquire and manage income-producing commercial real
estate with proceeds raised from the initial sale of 44,503 limited partnership
units (``Units''). The Registrant's fiscal year for book and tax purposes ends
on December 31.
The Registrant had invested in and operated a real estate investment
portfolio which consisted of four properties and a mortgage loan. These
commercial real estate properties consisted of an office building, an industrial
warehouse and two shopping centers. The shopping centers were acquired through a
joint venture agreement with Prudential Acquisition Fund I, L.P., an affiliated
limited partnership (``Joint Venture''). All of the Registrant's properties have
been sold as of December 31, 1996, as described below.
In January 1996, the General Partners mailed to all limited partners a
Consent Solicitation Statement (the ``Statement'') asking for their written
consent to approve (i) a plan of sale of the remaining assets of the Registrant
and (ii) the complete liquidation and dissolution of the Partnership, as more
fully described in the Statement. On March 11, 1996, the limited partners
holding a majority of the Units approved the plan of sale and complete
liquidation and dissolution of the Registrant. Pursuant to the approval of the
plan of liquidation, the general partners sold all the properties of the
Partnership in the year ended December 31, 1996, as discussed below.
The two shopping centers owned by the Joint Venture were sold on March 26,
1996 for a gross sales price of $15,500,000 less costs to sell and pro-rations.
On December 18, 1996, an agreement was signed by and between the Registrant and
Prudential Acquisition Fund I, L.P., an affiliated limited partnership,
outlining the terms of the dissolution of the Joint Venture. As of December 31,
1996, all remaining assets of the Joint Venture were distributed in liquidation
in accordance with this agreement.
The Eight Forge Park office building was sold on August 30, 1996 for a gross
sales price of $5,060,000 less costs to sell and pro-rations, and the TASH
industrial warehouse was sold on December 17, 1996 for a gross sales price of
$5,245,000 less costs to sell and pro-rations. The first mortgage loan was
assigned in April 1996 for net proceeds, after selling expenses, of $361,000.
See Notes C, D and F to the financial statements of the Registrant's Annual
Report to Limited Partners for the year ended December 31, 1996 (``Registrant's
Annual Report'') for further information.
General Partners
The general partners of the Registrant are Prudential-Bache Properties, Inc.
(``PBP'') and Prudential Realty Partnerships, Inc. (``PRP'') (collectively, the
``General Partners'').
Employees
The Registrant has no employees. Management and administrative services for
the Registrant are performed by the General Partners and their affiliates
pursuant to the Partnership Agreement. See Note G to the financial statements in
the Registrant's Annual Report for further information.
Item 2. Properties
All of the Registrant's properties were sold as of December 31, 1996. See
Notes C, D and F to the financial statements of the Registrant's Annual Report
for further information.
Item 3. Legal Proceedings
This information is incorporated by reference to Note H of the financial
statements in the Registrant's Annual Report which is filed as an exhibit
hereto.
Item 4. Submission of Matters to a Vote of Limited Partners
None
4
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PART II
Item 5. Market for the Registrant's Units and Related Limited Partner Matters
As of March 3, 1997, there were 5,829 holders of record owning 44,503 Units.
A significant secondary market for the Units has not developed, and it is not
expected that one will develop in the future. There are also certain
restrictions set forth in the Partnership Agreement limiting the ability of a
Limited Partner to transfer Units. Consequently, holders of Units may not be
able to liquidate their investments in the event of an emergency or for any
other reason.
The following per Unit cash distributions were paid to Limited Partners
during the quarter indicated:
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Quarter Ended 1996 1995
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March 31 $ 9.50 $8.50
June 30 $159.34 $9.50
September 30 $100.00 $9.50
December 31 $113.86 $9.50
</TABLE>
As a result of the approval by the limited partners holding a majority of the
Units of the plan of sale and liquidation of the Registrant, all properties of
the Registrant were sold during the year ended December 31, 1996. The increase
in distributions during the year ended December 31, 1996 was primarily the
result of the distribution of net proceeds from the sales of the properties. See
Item 1 Business for further information. The Registrant intends to make a final
liquidating distribution in 1997. The distributions paid to limited partners
during 1996 and 1995 represent a return of capital on a generally accepted
accounting principles (GAAP) basis. (The return of capital on a GAAP basis is
calculated as limited partner distributions less net income allocated to limited
partners.)
Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the financial statements of the
Registrant and the notes thereto contained on pages 2 through 9 in the
Registrant's Annual Report which is filed as an exhibit hereto.
<TABLE>
<CAPTION>
Year ended December 31,
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1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
Rental income $ 442,636 $ 1,286,758 $ 1,380,623 $ 1,340,207 $ 1,312,628
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Joint venture equity income
(loss) (a) $ (537,955) $ (609,162) $ 113,565 $(6,665,416) $(1,356,061)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Provision for loan loss $ 89,000 $ -- $ -- $ 884,852 $ --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Provision for loss on
impairment of assets $ -- $ 1,000,000 $ 1,400,000 $ -- $ --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Gain on sale of properties $ 591,668 $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Estimated liquidation costs $ 277,000 $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net loss $ (112,219) $(1,149,484) $ (558,669) $(6,799,543) $ (488,508)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net loss per limited
partnership unit $ (3.58) $ (29.94) $ (16.33) $ (156.57) $ (14.59)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total assets $ 1,564,479 $18,331,682 $21,017,985 $23,266,408 $31,725,482
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total limited partnership
distributions $17,031,298 $ 1,646,613 $ 1,513,605 $ 1,512,631 $ 1,446,349
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Limited partner distributions
per unit $ 382.70 $ 37.00 $ 34.00 $ 34.00 $ 32.50
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
(a) Includes $1,081,000, $6,463,000 and $1,426,000 provisions for loss on
impairment of assets in 1995, 1993 and 1992, respectively.
5
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 10 through 11 of the
Registrant's Annual Report which is filed as an exhibit hereto.
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 9
of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The
Registrant is managed by the General Partners.
The Registrant, the Registrant's General Partners and their directors and
executive officers, and any persons holding more than ten percent of the
Registrant's Units are required to report their initial ownership of such Units
and any subsequent changes in that ownership to the Securities and Exchange
Commission on Form 3, 4 and 5. Such executive officers, directors and persons
who own greater than ten percent of the Registrant's Units are required by
Securities and Exchange Commission regulations to furnish the Registrant with
copies of all Forms 3, 4 or 5 they file. All of these filing requirements were
satisfied on a timely basis. In making these disclosures, the Registrant has
relied solely on written representations of the General Partners' directors and
executive officers and persons who own greater than ten percent of the
Registrant's Units, if any, or copies of the reports they have filed with the
Securities and Exchange Commission during and with respect to its most recent
fiscal year.
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP and their positions with regard
to managing the Registrant are as follows:
Name Position
Thomas F. Lynch, III President, Chief Executive Officer,
Chairman of the Board of Directors and Director
Barbara J. Brooks Vice President--Finance and Chief Financial Officer
Eugene D. Burak Vice President and Chief Accounting Officer
Chester A. Piskorowski Senior Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
THOMAS F. LYNCH, III, age 38, is the President, Chief Executive Officer,
Chairman of the Board of Directors and a Director of PBP. He is a Senior Vice
President of Prudential Securities Incorporated (``PSI''), an affiliate of PBP.
Mr. Lynch also serves in various capacities for other affiliated companies. Mr.
Lynch joined PSI in November 1989.
BARBARA J. BROOKS, age 48, is the Vice President-Finance and Chief Financial
Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in
various capacities for other affiliated companies. She has held several
positions within PSI since 1983. Ms. Brooks is a certified public accountant.
EUGENE D. BURAK, age 51, is a Vice President of PBP. He is a First Vice
President of PSI. Prior to joining PSI in September 1995, he was a management
consultant for three years and was with Equitable Capital Management Corporation
from March 1990 to May 1992. Mr. Burak is a certified public accountant.
CHESTER A. PISKOROWSKI, age 53, is a Senior Vice President of PBP. He is a
Senior Vice President of PSI and is the Senior Manager of the Specialty Finance
Asset Management area. Mr. Piskorowski has held
6
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several positions within PSI since April 1972. Mr. Piskorowski is a member of
the New York and Federal Bars.
FRANK W. GIORDANO, age 54, is a Director of PBP. He is a Senior Vice
President of PSI and an Executive Vice President and General Counsel of
Prudential Mutual Fund Management LLC, an affiliate of PSI. Mr. Giordano also
serves in various capacities for other affiliated companies. He has been with
PSI since July 1967.
NATHALIE P. MAIO, age 46, is a Director of PBP. She is a Senior Vice
President and Deputy General Counsel of PSI and supervises non-litigation legal
work for PSI. She joined PSI's Law Department in 1983; presently, she also
serves in various capacities for other affiliated companies.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and executive officers have
indefinite terms.
Prudential Realty Partnerships, Inc.
The directors and executive officers of Prudential Realty Partnerships, Inc.
and their positions are as follows:
Name Position
Joel W. Stoesser Chairman of the Board of Directors
David Bradford President and Director
Kevin R. Smith Vice President and Director
Jose Gener Vice President and Comptroller
C. Edward Chaplin Treasurer
Roger S. Pratt Director
Joseph D. Margolis Secretary
JOEL W. STOESSER, age 56, is a Managing Director of Prudential Real Estate
Investors. He is head of Investment Advisory Services, which includes
responsibility for portfolio management and asset management of separate
accounts and certain co-investment programs and commingled funds. Prior to his
current assignment, Mr. Stoesser served as a Senior Vice President of Prudential
Realty Group. Prior to joining Prudential in 1988, he also served as a Senior
Vice President in Real Estate Investment Management at CIGNA Corporation and
held assignments with Connecticut General Life Insurance Company as head of real
estate operations and as Director of strategic planning for all investment
operations.
DAVID BRADFORD, age 43, is a Managing Director of Prudential Real Estate
Investors. He is the portfolio manager of PRISA, a large commingled fund. Prior
to joining Prudential in 1995, Mr. Bradford was a Senior Vice President in
Portfolio Management at Equitable Real Estate. His 13-year tenure at Equitable
included positions in pension investment marketing across all asset classes,
real estate product management and portfolio operations and investment. Most
recently (1991-1995), Mr. Bradford was Assistant Portfolio Manager for
Equitable's Prime Property Fund.
KEVIN R. SMITH, age 39, is a Vice President of Prudential Real Estate
Investors. He is a portfolio manager for three separate accounts and two
commingled funds. Mr. Smith has been employed by Prudential since 1981 and has
experience in asset management, development, property acquisitions and sales,
and mortgage loans as a result of field office assignments in Cleveland,
Houston, and Northern New Jersey.
JOSE GENER, age 46, is a Vice President, Operations and Systems, with
Prudential Asset Management Group. In his present assignment, he is responsible
for reporting for the institutional real estate management arm of PAMG. Mr.
Gener has been with Prudential since 1977, serving in a series of
comptrollership assignments. Since 1986 he has worked primarily with the
investment management units of Prudential.
C. EDWARD CHAPLIN, age 40, is Vice President and Treasurer of Prudential
Insurance Company of America. He is responsible for all borrowings, cash
management and securities custody activities of The Prudential. Mr. Chaplin
joined Prudential in the Realty Group in August 1983. In May 1992, he
transferred to the Treasurer's Department as Vice President and Assistant
Treasurer, with responsibility for Banking and Cash Management. In October 1993,
he was promoted to Managing Director and Assistant Treasurer, with
7
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responsibility for managing Prudential's debt issuance, its relationships with
the major credit rating agencies and financial counterparty credit analysis. In
November 1995, Mr. Chaplin was appointed to Vice President and Treasurer.
ROGER S. PRATT, age 44, is Managing Director of Prudential Real Estate
Investors. He is the portfolio manager of PRISA II, a large commingled fund. Mr.
Pratt joined the Prudential Realty Group in June 1982 as an asset manager in the
Atlanta regional office and subsequently has served in a variety of positions
for Prudential. Prior to assuming his current position in February 1992, Mr.
Pratt was Vice President in charge of the New Jersey regional office.
JOSEPH D. MARGOLIS, age 36, is Assistant General Counsel responsible for the
provision and coordination of legal services to Prudential Real Estate Investors
as well as other Prudential Asset Management Group Real Estate entities. His
assignments with Prudential have included counsel to The Prudential Mortgage
Capital Company, Inc. and Associate Regional Counsel in the Boston Realty Group
office. Prior to joining Prudential, Mr. Margolis was employed by Nutter,
McClennen & Fish in Boston, Massachusetts.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing executive officers and directors have
indefinite terms.
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the General Partners for their
services. Certain executive officers and directors of the General Partners
receive compensation from affiliates of the General Partners, not from the
Registrant, for services performed for various affiliated entities, which may
include services performed for the Registrant; however, the General Partners
believe that any compensation attributable to services performed for the
Registrant is immaterial. See Item 13 Certain Relationships and Related
Transactions for information regarding compensation to the General Partners.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 3, 1997, no director or executive officer of either of the
General Partners owns directly or beneficially any interest in the voting
securities of the General Partners.
As of March 3, 1997, no director or executive officer of either of the
General Partners owns directly or beneficially any of the Units issued by the
Registrant.
As of March 3, 1997, no limited partner beneficially owns more than five
percent (5%) of the outstanding Units issued by the Registrant.
Item 13. Certain Relationships and Related Transactions
The Registrant has and will continue to have certain relationships with the
General Partners and their affiliates. However, there have been no direct
financial transactions between the Registrant and the directors or executive
officers of the General Partners.
Reference is made to Notes A and G to the financial statements of the
Registrant's Annual Report which is filed as an exhibit hereto, which identify
the related parties and discuss the services provided by these parties and the
amounts paid or payable for their services.
8
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PART IV
<TABLE>
<CAPTION>
Page
in Annual
Report
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
<S> <C> <C> <C>
(a) 1. Financial Statements and Independent Auditors' Report--Incorporated by
reference to the Registrant's Annual Report which is filed as an exhibit
hereto
Independent Auditors' Report 2
Financial Statements:
Statement of Net Assets--December 31, 1996 3
Statement of Financial Condition--December 31, 1995 3
Statements of Operations--Three Years Ended December 31, 1996 4
Statements of Changes in Partners' Capital--Three Years Ended December 31,
1996 4
Statements of Cash Flows--Three Years Ended December 31, 1996 5
Notes to Financial Statements 6
2. Financial Statement Schedules and Independent Auditors' Report
Independent Auditors' Report on Schedules
Schedules:
III--Real Estate and Accumulated Depreciation--December 31, 1996
IV--Mortgage Loan on Real Estate--December 31, 1996
All other schedules have been omitted because they are not applicable or
the required information is included in the financial statements and notes
thereto.
3. Exhibits
Description:
2 Consent Solicitation Statement dated January 26, 1996 (13)
3 and 4 Amended and Restated Agreement of Limited Partnership (1)
Amendment to Limited Partnership Agreement Dated as of January 1, 1987 (2)
10 Material Contracts:
A. Real Property and Mortgage Management and Supervisory Services Agreement
(3)
B. Joint Venture Agreement dated May 8, 1985 between The Prudential Insurance
Company of America (``Prudential'') and Prudential Acquisition Fund I, L.P.
(``PAF'') (4)
C. Purchase Agreement and First Amendment to Joint Venture Agreement dated
June 28, 1985 between PAF and Prudential (5)
D. Amended and Restated Joint Venture Interest Acquisition and Option
Agreement dated June 28, 1985 between Prudential and Registrant (5)
E. Amended and Restated Acquisition Fee Agreement dated June 28, 1985 among
Prudential Realty Partnerships, Inc., Prudential-Bache Properties, Inc.,
Registrant, PAF, Prudential, and Ridge Plaza Joint Venture (5)
F. First Amendment to Amended and Restated Joint Venture Interest Acquisition
and Option Agreement dated October 25, 1985 between Prudential and
Registrant (6)
G. Second Amendment to Joint Venture Agreement of Ridge Plaza Joint Venture
and Second Amendment to Amended and Restated Joint Venture Interest
Acquisition and Option Agreement and First Amendment to Amended and
Restated Acquisition Fee Agreement dated January 14, 1986 among PAF,
Prudential, and Registrant (7)
H. Third Amendment to Joint Venture Agreement of Ridge Plaza Joint Venture
dated as of May 15, 1986 among PAF, Prudential and Registrant (8)
I. Promissory Note Due May 15, 1993 dated May 6, 1988 (9)
J. Mortgage and Security Agreement Dated May 6, 1988 (9)
</TABLE>
9
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<TABLE>
<S> <C> <C> <C>
K. Purchase & Sale Agreement with Exhibits dated November 1, 1995 by and
between Ridge Plaza Joint Venture and PIRP, Inc. (10)
L. First Amendment to Purchase & Sale Agreement made as of March 4, 1996, by
and between Ridge Plaza Joint Venture and PIRP, Inc. (10)
M. Real Estate Sale Contract dated July 3, 1996 by and between the Registrant
and MGI Properties (11)
N. First Amendment to Real Estate Contract dated August 27, 1996 by and
between the Registrant and MGI 8 Forge Park, Inc. (11)
O. Purchase and Sale Agreement dated December 11, 1996 by and between the
Registrant and Delphinidae/White Birch (12)
P. Agreement for Dissolution of Joint Venture/Partnership dated December 18,
1996 by and between the Registrant and Prudential Acquisition Fund I, L.P.
(filed herewith)
13 Registrant's 1996 Annual Report to Limited Partners (with the exception of
the information and data incorporated by reference in Items 3, 7 and 8 of
this Annual Report on Form 10-K, no other information or data appearing in
the Registrant's 1996 Annual Report is to be deemed filed as part of this
report.)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
Registrant's Current Report on Form 8-K dated December 17, 1996, as filed
with the Securities and Exchange Commission on December 27, 1996, relating
to Item 2 regarding to the sale of the TASH property.
- ---------------
(1) Incorporated by reference to Prospectus dated February 14, 1985, as filed with the Commission
pursuant to Rule 424(b) under the Securities Act of 1933
(2) Incorporated by reference to Exhibits 3 and 4 of Registrant's Annual Report on Form 10-K for
the year ended December 31, 1988
(3) Incorporated by reference to Exhibit 10C to Amendment No. 1 to Registration Statement No.
2-93027 filed February 12, 1985
(4) Incorporated by reference to Exhibit 10(c) of Registrant's Current Report on Form 8-K dated May
23, 1985
(5) Incorporated by reference to Exhibit 10(d) of Post-Effective Amendment No. 1 to Registration
Statement No. 2-93027 filed July 5, 1985
(6) Incorporated by reference to Exhibit 10(a) of Post-Effective Amendment No. 2 to Registration
Statement No. 2-93027 filed December 19, 1985
(7) Incorporated by reference to Exhibit 10(a) of Registrant's Current Report on Form 8-K dated
January 14, 1986
(8) Incorporated by reference to Exhibit 10(a) of Registrant's Current Report on Form 8-K dated May
15, 1986
(9) Incorporated by reference to Exhibit 10 of Registrant's Annual Report on Form 10-K for the year
ended December 31, 1988
(10) Incorporated by reference to Exhibits 10(k) and 10(l) of Registrant's Current Report on Form
8-K dated March 26, 1996
(11) Incorporated by reference to Exhibits 10(m) and 10(n) of Registrant's Current Report on Form
8-K dated August 30, 1996
(12) Incorporated by reference to Exhibit 10(o) of Registrant's Current Report on Form 8-K dated
December 17, 1996
(13) Incorporated by reference to Proxy Statement on Schedule 14A as filed with the Commission on
January 26, 1996
</TABLE>
10
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Deloitte &
Touche LLP
--------------------------------------------------------
Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Prudential Realty Acquisition Fund II, L.P.
New York, New York
We have audited the statement of net assets in process of liquidation of
Prudential Realty Acquisition Fund II, L.P. (a Delaware Limited Partnership) as
of December 31, 1996, the statement of financial condition of Prudential Realty
Acquisition Fund II, L.P. as of December 31, 1995, and the related statements of
operations, changes in partner's capital and cash flows for each of the three
years in the period ended December 31, 1996, and have issued our report thereon
dated March 24, 1997; such financial statements and report thereon are included
in your 1996 Annual Report to Limited Partners and are incorporated herein by
reference. Our audits also included the financial statement schedules of
Prudential Realty Acquisition Fund II, L.P., listed in Item 14. These financial
statement schedules are the responsibility of the General Partners. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
/s/ Deloitte & Touche LLP
March 24, 1997
- -----------------
Deloitte Touche
Tohmatsu
International
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11
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PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
(a limited partnership)
Schedule III--Real Estate and Accumulated Depreciation
December 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Costs Gross Amounts at which
Initial Cost (A) Capitalized Carried at Close of Period
---------------------------- (Sold) --------------------------------------------
Buildings Subsequent Buildings
and to and
Description Land Improvements Acquisition Land Improvements Total(B)
- ---------------------- ---------- ------------- ------------ ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rancho Cucamonga, CA
Tash Distribution
Warehouse $2,119,710 $ 5,559,861 $ (7,679,571) $ -- $ -- $ --
Franklin, MA
Thermo Instruments
Office/Research
Facility 626,746 5,650,632 (6,277,378) -- -- --
---------- ------------- ------------ ---------- ------------- -----------
Total $2,746,456 $11,210,493 $(13,956,949) $ -- $ -- $ --
---------- ------------- ------------ ---------- ------------- -----------
---------- ------------- ------------ ---------- ------------- -----------
<CAPTION>
Accumulated
Description Depreciation(C)
- ---------------------- ---------------
<S> <C>
Rancho Cucamonga, CA
Tash Distribution
Warehouse $ --
Franklin, MA
Thermo Instruments
Office/Research
Facility --
---------------
Total $ --
---------------
---------------
</TABLE>
(A) Initial cost represents the initial purchase price of the properties
including acquisition fees.
(B) Reconciliation of Real Estate Owned:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance at Beginning of Year $12,102,685 $12,800,501 $14,200,501
Allocation of accumulated depreciation
against the carrying amount of the
properties based upon the
reclassification of the properties as
held for sale (3,009,417) -- --
Additions During Year 285,463 302,184 --
Write-downs During Year -- (1,000,000) (1,400,000)
Property Sold During Year (9,378,731) -- --
----------- ----------- -----------
Balance at End of Year $ -- $12,102,685 $12,800,501
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
(C) Reconciliation of Accumulated Depreciation:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance at Beginning of Year $ 3,009,417 $ 2,629,911 $ 2,250,387
Additions During Year -- 379,506 379,524
Allocation of accumulated depreciation
against the carrying amount of the
properties based upon the
reclassification of the properties as
held for sale (3,009,417) -- --
----------- ----------- -----------
Balance at End of Year $ -- $ 3,009,417 $ 2,629,911
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Effective December 31, 1995, the Registrant reclassified its properties from
held for use to held for sale and ceased depreciating the properties for
financial statement purposes only.
12
<PAGE>
PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
(a limited partnership)
Schedule IV--Mortgage Loan on Real Estate
December 31, 1996
<TABLE>
<CAPTION>
-------------------------------------------------------
Carrying
Interest Amount
Description Rate 12/31/96(a)
------------------------ -------- ------------
<S> <C> <C>
First Mortgage:
Golden Valley,
Minnesota 9% $ --
-------- ------------
-------- ------------
</TABLE>
The first mortgage loan on property in Golden Valley, Minnesota was assigned
to Mendelssohn Industries Properties, L.L.C. in April 1996. A provision for loss
of $89,000 was recorded as of March 31, 1996 to reflect the net proceeds
received by the Partnership, after selling expenses, of approximately $361,000.
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1996 1995 1994
-------- -------- ----------
<S> <C> <C> <C> <C>
(a) Balance at Beginning of Year $450,000 $450,000 $ 505,000
Deductions:
Collection of principal -- -- (55,000)
Allowance for loan loss (89,000) -- --
Proceeds from assignment (361,000) -- --
-------- -------- ----------
Balance at End of Year $ -- $450,000 $ 450,000
-------- -------- ----------
-------- -------- ----------
</TABLE>
13
<PAGE>
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.
PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Eugene D. Burak Date: March 27, 1997
----------------------------------------
Eugene D. Burak
Vice President and Chief Accounting
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partners) and on
the dates indicated.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Thomas F. Lynch, III Date: March 27, 1997
----------------------------------------
Thomas F. Lynch, III
President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
By: /s/ Barbara J. Brooks Date: March 27, 1997
----------------------------------------
Barbara J. Brooks
Vice President-Finance and Chief
Financial Officer
By: /s/ Eugene D. Burak Date: March 27, 1997
----------------------------------------
Eugene D. Burak
Vice President
By: /s/ Frank W. Giordano Date: March 27, 1997
----------------------------------------
Frank W. Giordano
Director
By: Nathalie P. Maio Date: March 27, 1997
----------------------------------------
Nathalie P. Maio
Director
14
<PAGE>
By: Prudential Realty Partnerships, Inc.
A Delaware corporation, General Partner
By: /s/ Joel W. Stoesser Date: March 27, 1997
----------------------------------------
Joel W. Stoesser
Chairman of the Board of Directors
By: /s/ David Bradford Date: March 27, 1997
----------------------------------------
David Bradford
President and Director
By: /s/ Kevin R. Smith Date: March 27,, 1997
----------------------------------------
Kevin R. Smith
Vice President and Director
By: /s/ Jose Gener Date: March 27, 1997
----------------------------------------
Jose Gener
Vice President and Comptroller
By: /s/ C. Edward Chaplin Date: March 27, 1997
----------------------------------------
C. Edward Chaplin
Treasurer
By: /s/ Roger S. Pratt Date: March 27, 1997
----------------------------------------
Roger S. Pratt
Director
By: /s/ Joseph D. Margolis Date: March 27, 1997
----------------------------------------
Joseph D. Margolis
Secretary
15
<PAGE>
AGREEMENT FOR DISSOLUTION OF JOINT VENTURE/PARTNERSHIP
THIS AGREEMENT FOR DISSOLUTION OF JOINT VENTURE/PARTNERSHIP (this
"Agreement") is made effective as of the 18th day of December, 1996, by and
between Prudential Acquisition Fund I, L.P. ("PAF") and Prudential Realty
Acquisition Fund II, L.P. ("PRAF").
BACKGROUND
On May 8, 1985, PAF and The Prudential Insurance Company of America
("Prudential") entered into a certain Joint Venture Agreement, thereby
creating a joint venture/partnership under Florida law, which operated under
the name of "Ridge Plaza Joint Venture" ("Ridge Plaza"). The purpose of Ridge
Plaza was to enter into contracts to purchase two shopping centers located in
Broward County, Florida (the "Centers"), and to acquire and operate for
investment purposes, the Centers.
As of May 15, 1986, Prudential sold its entire interest in Ridge Plaza to
PRAF as documented in that certain Third Amendment to Joint Venture Agreement
of Ridge Plaza Joint Venture dated as of May 15, 1986.
On March 26, 1996, Ridge Plaza sold the Centers and distributed the proceeds
of such sale to its joint venture partners.
The parties have agreed that since Ridge Plaza has distributed substantially
all of its assets, Ridge Plaza should be dissolved as of December 18th, 1996,
and that any remaining joint venture/partnership assets should be distributed
between the parties hereto.
NOW THEREFORE, in consideration of the promises and agreements herein
contained and for other good and valuable consideration, the receipt and
adequacy of which are acknowledged, the parties agree as follows:
AGREEMENT
1. Dissolution. Effective on the date first above written, Ridge Plaza is
hereby dissolved. Accordingly the business of Ridge Plaza shall be wound up
and all its assets distributed in liquidation in accordance with its Joint
Venture Agreement and this Agreement.
2. Closing of Books. The partnership books of Ridge Plaza will be closed and
an accounting will be completed on or before December 31, 1996.
1
<PAGE>
3. Distribution of the Assets. All remaining assets of Ridge Plaza shall be
distributed in accordance with Section 13.5 of the Joint Venture Agreement.
4. Final Partnership Return. Ridge Plaza will (i) file its final Form 1065,
U.S. Partnership Return of Income, and (ii) distribute Schedule K-1's,
Partner's Share of Income, Credits, Deductions, etc., to PAF and PRAF,
respectively, for the calendar year 1996, on or before April 15, 1997.
5. Retention of the Joint Venture/Partnership Books. The joint
venture/partnership books will be retained by Prudential Securities, as
agent for PAF and PRAF for a period of six (6) years. PAF and PRAF and
their agents will have access to the joint venture/partnership books during
said six (6) year period for all reasonable purposes.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
WITNESSES:
PAF
Prudential Acquisition Fund I, L.P.,
a Delaware limited partnership, partner
By: Prudential Realty Partnerships, Inc.,
general partner
/s/ Ellen T. Kendall By: /s/ Kevin R. Smith
- ------------------------------- -------------------------
Name: Ellen T. Kendall (print) Name: Kevin R. Smith
Its: Vice President
/s/ Kelly A. Arrigo
- -------------------------------
Name: Kelly A. Arrigo (print)
PRAF
Prudential Realty Acquisition Fund II, L.P.,
a Delaware limited partnership, partner
By: Prudential Realty Partnerships, Inc.,
general partner
/s/ Ellen T. Kendall By: /s/ Kevin R. Smith
- ------------------------------- -------------------------
Name: Ellen T. Kendall (print) Name: Kevin R. Smith
Its: Vice President
/s/ Kelly A. Arrigo
- -------------------------------
Name: Kelly A. Arrigo (print)
2
<PAGE>
1996
- ------------------------------------------------------------------------------
Prudential Realty Acquisition Annual
Fund II, L.P. Report
<PAGE>
PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
LETTER TO THE UNITHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1996
1
<PAGE>
Deloitte &
Touche LLP
--------------------------------------------------------
Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Prudential Realty Acquisition Fund II, L.P.
New York, New York
We have audited the accompanying statement of net assets in process of
liquidation of Prudential Realty Acquisition Fund II, L.P. (a Delaware Limited
Partnership) as of December 31, 1996. In addition, we have audited the
accompanying statement of financial condition of Prudential Realty Acquisition
Fund II, L.P. as of December 31, 1995, and the related statements of operations,
changes in partners' capital and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the General Partners. 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 the
General Partners, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As discussed in Notes A and B to the financial statements, the Partnership's
limited partners have approved the dissolution and ultimate liquidation of the
Partnership. As a result, the Partnership has changed its basis of accounting
from the going-concern basis to the liquidation basis effective December 31,
1996.
In our opinion, such financial statements present fairly, in all material
respects, (1) the net assets in process of liquidation of Prudential Realty
Acquisition Fund II, L.P. at December 31, 1996, (2) its financial condition at
December 31, 1995 and (3) the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles on the bases described in the preceding
paragraph.
/s/ Deloitte & Touche LLP
March 24, 1997
- -----------------
Deloitte Touche
Tohmatsu
International
- -----------------
2
<PAGE>
PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
(a limited partnership)
STATEMENT OF NET ASSETS
(in process of liquidation)
December 31, 1996
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 1,074,383
Due from General Partners at liquidation 448,015
Other assets 42,081
------------
Total assets 1,564,479
------------
LIABILITIES
Estimated liquidation costs 277,000
Due to affiliates 32,823
Other liabilities 130,302
------------
Total liabilities 440,125
------------
Contingencies
Net assets available to Limited and General Partners $ 1,124,354
------------
------------
Limited partnership units issued and outstanding 44,503
------------
------------
- --------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF FINANCIAL CONDITION
(going concern basis)
December 31, 1995
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
ASSETS
Property held for sale $ 9,093,268
Investment in joint venture, net 8,475,910
Cash and cash equivalents 164,475
Mortgage loan receivable, net 450,000
Other assets 148,029
------------
Total assets $18,331,682
------------
------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 412,851
Tenant security deposits 52,000
------------
Total liabilities 464,851
------------
Partners' capital
Limited partners (44,503 units issued and outstanding) 17,866,831
General partners --
------------
Total partners' capital 17,866,831
------------
Total liabilities and partners' capital $18,331,682
------------
------------
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
(going concern basis)
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1996 1995 1994
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
REVENUES
Rental income $ 442,636 $ 1,286,758 $1,380,623
Recovery of expenses 67,343 125,065 152,486
Other income 61,819 52,773 3,895
Interest income 55,272 27,608 17,368
Joint venture equity income (loss) (537,955) (609,162) 113,565
--------- ----------- ----------
89,115 883,042 1,667,937
--------- ----------- ----------
EXPENSES
Property operating 55,419 85,278 38,005
Real estate taxes 114,254 88,244 143,612
General and administrative 257,329 479,498 265,465
Provision for loan loss 89,000 -- --
Provision for loss on impairment of assets -- 1,000,000 1,400,000
Depreciation and amortization -- 379,506 379,524
--------- ----------- ----------
516,002 2,032,526 2,226,606
--------- ----------- ----------
Loss-going concern basis (426,887) (1,149,484) (558,669)
Gain on sale of properties 591,668 -- --
Estimated liquidation costs (277,000) -- --
--------- ----------- ----------
Net loss $(112,219) $(1,149,484) $ (558,669)
--------- ----------- ----------
--------- ----------- ----------
ALLOCATION OF NET LOSS
Limited partners $(159,194) $(1,332,441) $ (726,812)
--------- ----------- ----------
--------- ----------- ----------
General partners $ 46,975 $ 182,957 $ 168,143
--------- ----------- ----------
--------- ----------- ----------
Net loss per limited partnership unit $ (3.58) $ (29.94) $ (16.33)
--------- ----------- ----------
--------- ----------- ----------
- ----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(going concern basis)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Partners' capital--December 31, 1993 $23,086,302 $ -- $23,086,302
Net income (loss) (726,812) 168,143 (558,669)
Distributions (1,513,605) (168,143 ) (1,681,748)
----------- --------- -----------
Partners' capital--December 31, 1994 20,845,885 -- 20,845,885
Net income (loss) (1,332,441) 182,957 (1,149,484)
Distributions (1,646,613) (182,957 ) (1,829,570)
----------- --------- -----------
Partners' capital--December 31, 1995 17,866,831 -- 17,866,831
Net income (loss) (159,194) 46,975 (112,219)
Distributions (17,031,298) (46,975 ) (17,078,273)
Effect of restoration provision of
partnership agreement 448,015 -- 448,015
----------- --------- -----------
Net assets--December 31, 1996 $ 1,124,354 $ -- $ 1,124,354
----------- --------- -----------
----------- --------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(going concern basis)
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income received $ 487,924 $ 1,212,689 $ 1,472,176
Recovery of expenses received 128,003 65,299 151,592
Other income received 61,819 52,773 3,895
Interest received 55,272 27,608 17,368
Property operating expenses paid (49,311) (51,303) (29,517)
General and administrative expenses paid (406,161) (327,724) (281,959)
Real estate taxes paid (159,256) (43,242) (143,612)
Security deposit paid (52,000) -- --
Distributions from joint venture income -- -- 113,565
----------- ----------- -----------
Net cash provided by operating activities 66,290 936,100 1,303,508
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payments received on mortgage loan 361,000 -- 55,000
Capitalized property expenditures (347,462) (240,184) --
Distributions from joint venture in excess of income 7,937,954 920,000 323,435
Net proceeds from the sale of properties 9,970,399 -- --
----------- ----------- -----------
Net cash provided by investing activities 17,921,891 679,816 378,435
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners (17,078,273) (1,829,570) (1,681,748)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 909,908 (213,654) 195
Cash and cash equivalents at beginning of year 164,475 378,129 377,934
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,074,383 $ 164,475 $ 378,129
----------- ----------- -----------
----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net loss $ (112,219) $(1,149,484) $ (558,669)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Gain on sale of properties (591,668) -- --
Depreciation and amortization -- 379,506 379,524
Distributions from joint venture income -- -- 113,565
Joint venture equity (income) loss 537,955 609,162 (113,565)
Provision for loan loss 89,000 -- --
Provision for loss on impairment of assets -- 1,000,000 1,400,000
Changes in:
Estimated liquidation costs 277,000 -- --
Other assets 105,948 (133,835) 90,659
Accounts payable and accrued expenses (239,726) 230,751 (8,006)
----------- ----------- -----------
Total adjustments 178,509 2,085,584 1,862,177
----------- ----------- -----------
Net cash provided by operating activities $ 66,290 $ 936,100 $ 1,303,508
----------- ----------- -----------
----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
5
<PAGE>
PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
A. General
Prudential Realty Acquisition Fund II, L.P. (the ``Partnership''), a Delaware
limited partnership, was formed on August 10, 1984 and will terminate in
accordance with a vote of the limited partners as described below. The
Partnership was formed to acquire and manage income-producing commercial real
estate. The general partners of the Partnership are Prudential Realty
Partnerships, Inc. (``PRP'') and Prudential-Bache Properties, Inc. (``PBP'')
(collectively, the ``General Partners'').
The Partnership had invested in and operated a real estate investment
portfolio which consisted of an office building, an industrial warehouse, two
shopping centers and a mortgage loan. The shopping centers were acquired through
a joint venture agreement with Prudential Acquisition Fund I, L.P., an
affiliated limited partnership (``Joint Venture''). All of the Partnership's
properties have been sold as of December 31, 1996.
In January 1996, the General Partners mailed to all limited partners a
Consent Solicitation Statement (the ``Statement'') asking for their written
consent to approve (i) a plan of sale of the remaining assets of the Partnership
and (ii) the complete liquidation and dissolution of the Partnership, as more
fully described in the Statement. On March 11, 1996, the limited partners
holding a majority of the Units approved the plan of sale and complete
liquidation and dissolution of the Partnership. Pursuant to the approval of the
plan of liquidation, the General Partners sold all of the properties of the
Partnership during 1996. See Notes C, D and F for further information regarding
these sales.
B. Summary of Significant Accounting Policies
Basis of accounting
The Partnership adopted the liquidation basis of accounting effective
December 31, 1996. Accordingly, the net assets of the Partnership at December
31, 1996 are stated at liquidation value, i.e., the assets have been valued at
their estimated net realizable values and the liabilities include estimated
amounts to be incurred through the date of liquidation of the Partnership. The
actual remaining net proceeds from liquidation will depend upon a variety of
factors and are likely to differ from the amounts reflected in the accompanying
financial statements. Prior to December 31, 1996, the books and records of the
Partnership were maintained on a going concern accrual basis of accounting in
accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partners to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain reclassifications have been made to prior year balances to conform
with the current year's financial statement presentation.
Property
Prior to December 31, 1995, property investments were depreciated using the
straight-line method over their estimated economic lives ranging from 5 to 31.5
years, depending on the property type. As of December 31, 1995, the properties
were accounted for as assets held for sale and were recorded at the lower of
their carrying value or their estimated fair value less costs to sell. In
addition, depreciation ceased for financial reporting purposes as of December
31, 1995.
Investment in Joint Venture
The Partnership accounted for its investment in the Joint Venture which owned
two shopping centers (the ``Shopping Centers'') using the equity method.
Cash and cash equivalents
Cash and cash equivalents include short-term investments with original
maturities of three months or less. They are carried at cost plus accrued
interest, which approximates market value.
6
<PAGE>
Income taxes
The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the individual partners. The Partnership may be subject to other
state and local taxes in jurisdictions in which it operates.
Profit and loss allocations and distributions
Pursuant to Section 11 of the Partnership Agreement, as amended January 1,
1987, the General Partners have the right to specially allocate gross or net
income, in certain circumstances in an amount sufficient to restore the deficit
balances in their capital accounts. Allocations of income (loss) are 90% to the
limited partners and 10% to the General Partners for financial and tax reporting
purposes provided that depreciation for tax purposes is allocated 1% to the
General Partners and 99% to the units which were not originally owned by Tax
Exempt Holders. To the extent that cash distributions to the General Partners
exceed the 10% allocation of income for tax reporting purposes (creating deficit
capital account balances in excess of their allowable deficit capital account
balances), the General Partners receive a special allocation of additional
income for the difference. Distributions of cash are made in accordance with the
Partnership Agreement and are allocated 90% to the limited partners and 10% to
the General Partners.
Income from a Terminating Sale, as defined in the Partnership Agreement, is
allocated first to all partners having negative capital account balances, to the
extent of such balances, and then 1% to the General Partners and 99% to the
limited partners until the capital account balances of each limited partner is
equal to their Preferred Return, as defined in the Partnership Agreement. Loss
from a Terminating Sale is allocated 10% to the General Partners and 90% to the
limited partners. However, the deficiency in the capital accounts of the General
Partners cannot exceed $448,015 (the maximum obligation of the General Partners
upon the liquidation of the Partnership), as more fully described in Section 5.3
of the Partnership Agreement. Accordingly, at December 31, 1996, the Partnership
recorded a receivable from the General Partners of this amount. Sales proceeds
from a Terminating Sale are distributed to the partners having positive capital
account balances.
C. Property
The Partnership's directly-owned properties at December 31, 1995 were:
<TABLE>
<S> <C>
Rancho Cucamonga, CA - Tash
Distribution Warehouse $5,552,419
Franklin, MA - Thermo Instruments
Office/Research facility 3,540,849
----------
$9,093,268
----------
----------
</TABLE>
Pursuant to the plan of sale and complete liquidation and dissolution of the
Partnership, the Partnership has sold all of its properties as of December 31,
1996.
Prior to December 31, 1995 the properties had been valued at the lower of the
carrying amount or estimated fair value less costs to sell based on third party
appraisals. As a result, provisions for loss on impairment of assets of
$1,000,000 and $1,400,000 were recorded for the years ended December 31, 1995
and 1994, respectively.
The Partnership sold, for cash, its interest in Eight Forge Park, a 102,000
square-foot single-story research and development building located in Franklin,
Massachusetts, on August 30, 1996 for a gross sales price of $5,060,000 less
costs to sell and pro-rations of approximately $135,000. The gross sales price
was in excess of the appraised value. The purchaser of the Eight Forge Park
property was MGI Properties, a Massachusetts business trust. A distribution was
made in September 1996 in the amount of $100.00 per $1,000 Unit from the sale of
the Eight Forge Park property with the remainder of the net proceeds being held
to meet future Partnership obligations and contingencies, if any.
The Partnership sold, for cash, its interest in TASH, a 201,000 square-foot
industrial warehouse located in Rancho Cucamonga, California, on December 17,
1996 for a gross sales price of $5,245,000 less costs to sell and pro-rations of
approximately $178,000. The gross sales price was 92.5% of the appraised value
of
7
<PAGE>
the property. The purchaser of the TASH property was Delphinidae/White Birch, a
California general partnership. A distribution was made on December 26, 1996 in
the amount of $113.86 per $1,000 Unit from the sale of the TASH property.
D. Mortgage Loan Receivable
The first mortgage loan on property in Golden Valley, Minnesota was assigned
to Medelssohn Industries Properties, L.L.C. in April 1996. A provision for loss
of $89,000 was recorded as of March 31, 1996 to reflect the net proceeds
received by the Partnership, after selling expenses, of approximately $361,000.
The Partnership made a distribution of $8.12 per unit from the net proceeds from
the sale of the loan.
The Partnership received $62,000 and $50,000 relating to the mortgage loan
for the years ended December 31, 1996 and 1995, respectively, from a court
appointed receiver which was recorded as other revenue in the financial
statements.
E. Income Taxes
The following is a reconciliation of net loss reported for financial
reporting purposes with net income (loss) reported for tax reporting purposes.
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------
1996 1995 1994
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------
Net loss per financial statements $ (112,219) $(1,149,484) $ (558,669)
Tax loss on sale of properties greater than
financial statement amount (1,965,260) -- --
Joint Venture financial statement income less
(greater) than income for tax purposes (6,858,795) 842,919 (7,186)
Provision for loan loss 89,000 -- --
Loss on sale of mortgage loan (967,005) -- --
Estimated liquidation costs recorded for
financial statement purposes only 277,000 -- --
Provision for loss on impairment of assets -- 1,000,000 1,400,000
Tax depreciation (more) less than depreciation
per financial statements (783,807) 11,137 15,858
------------ ----------- ----------
Tax basis net income (loss) $(10,321,086) $ 704,572 $ 850,003
------------ ----------- ----------
------------ ----------- ----------
</TABLE>
The differences between the tax basis and book basis of partners' capital are
primarily attributable to the cumulative effect of the book-to-tax income (loss)
adjustments and the initial charge to partners' capital of syndication costs for
book purposes, when the Partnership was formed.
F. Investment in Joint Venture
The Partnership had a 46% interest in the Joint Venture with an affiliated
limited partnership. The sale of the two shopping centers owned by the Joint
Venture occurred on March 26, 1996 for a gross sales price of $15,500,000 less
costs to sell and pro-rations resulting in a $56,000 loss on the sale. A
distribution was made in April 1996 in the amount of $135.00 per unit from the
sale of the Shopping Centers by the Joint Venture. In May 1996, an additional
distribution of $16.22 was made from the remaining proceeds from the sale of the
Shopping Centers.
Subsequently, on December 18, 1996 an agreement was signed by and between the
Partnership and Prudential Acquisition Fund I, L.P., an affiliated limited
partnership, outlining the terms of the dissolution of the Joint Venture. As of
December 31, 1996, all remaining assets of the Joint Venture were distributed in
liquidation in accordance with this agreement.
The total assets and partners' capital of the Joint Venture as of December
31, 1995 were $17,094,071 and $16,767,372, respectively. The total revenues for
the Joint Venture for the years ended December 31, 1995 and 1994 were $4,037,347
and $3,613,077, respectively. The net loss for the Joint Venture for the year
ended December 31, 1995 was $1,204,227 and the net income for the Joint Venture
for the year ended December 31, 1994 was $366,919.
8
<PAGE>
<PAGE>
Joint venture equity loss includes a write-off of $718,000 during the three
months ended March 31, 1996 of the remaining Partnership costs incurred in the
acquisition of the Joint Venture investment that were in excess of its basis in
the Joint Venture. These excess costs were previously being amortized over a
twenty-year period and were written-off as a result of the sale of the Joint
Venture properties.
The carrying value of the Joint Venture's properties was reduced by $850,000
during the second quarter of 1995 to reflect an impairment in value resulting
from lease defaults and market indications. In the fourth quarter of 1995, the
Joint Venture recorded a provision for loss on impairment of assets of
$1,500,000 to reflect the estimated net proceeds received from the sale of the
two shopping centers on March 26, 1996.
G. Related Parties
The General Partners and their affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management, registrar, transfer and assignment functions, asset management,
investor communications, printing and other administrative services. The amount
of reimbursement from the Partnership is limited by the provisions of the
Partnership Agreement. The costs and expenses incurred on behalf of the
Partnership which are reimbursable to the General Partners and their affiliates
are:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
<S> <C> <C> <C>
1996 1995 1994
- --------------------------------------------------------------------------------------
Prudential-Bache Properties, Inc. and affiliates
General and administrative $118,000 $104,900 $ 74,700
Estimated liquidation costs 110,000 -- --
-------- -------- --------
228,000 104,900 74,700
-------- -------- --------
Prudential Realty Partnerships, Inc. and
affiliates
General and administrative 41,400 45,100 30,400
Estimated liquidation costs 15,000 -- --
-------- -------- --------
56,400 45,100 30,400
-------- -------- --------
$284,400 $150,000 $105,100
-------- -------- --------
-------- -------- --------
</TABLE>
Expenses payable to the General Partners and their affiliates (which are
included in accounts payable and accrued expenses) as of December 31, 1996 and
1995 are $32,800 and $59,600, respectively.
In addition, the General Partners and their affiliates performed similar
services for the Joint Venture. The Partnership's allocable share of the costs
and expenses incurred on behalf of the Joint Venture which were reimbursable to
the General Partners and their affiliates was $11,700, $32,800 and $26,400 for
the years ended December 31, 1996, 1995 and 1994, respectively.
Prudential Securities Incorporated (``PSI''), an affiliate of the General
Partners, owns 1,117 limited
partnership units at December 31, 1996.
H. Subsequent Event
On March 5, 1997, a lawsuit captioned Madison Partnership Liquidity Investors
VIII, LLC (``Madison'') v. Prudential-Bache Properties, Inc. was filed in the
Court of Chancery in the State of Delaware. The suit alleges a breach of
contract with Madison and a breach of fiduciary duty to Madison, as well as
intentional interference with the contract between Madison and the purported
tendering limited partners. The suit seeks injunctive and declaratory relief
demanding that the Partnership's transfer agent effectuate the purported
transfers to Madison pursuant to the tender offer made by Madison to the limited
partners. The lawsuit does not name the Partnership as a defendant but does name
PBP. The distribution amounts in excess of Madison's tender offer price, with
respect to the Units that are the subject of this lawsuit, have been escrowed by
the Partnership's transfer agent pending a resolution of this issue. PBP is
preparing an answer to the complaint at this time.
9
<PAGE>
<PAGE>
PRUDENTIAL REALTY ACQUISITION FUND II, L.P.
(a limited partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As more fully described in Notes A, C, D and F to the financial statements,
the Partnership sold all its properties in 1996 for net proceeds of
approximately $17 million. During 1996, the Partnership paid distributions from
the net proceeds from these sales aggregating $373.20 per unit. In addition,
distributions of $9.50 per unit were paid to the limited partners from prior
undistributed cash flow from operations. The Partnership has retained funds for
a contingency reserve and to meet current and future operating costs until the
liquidation of the Partnership. The Partnership intends to liquidate in 1997 and
will distribute any remaining funds at such time. Estimated costs expected to be
incurred through the date of liquidation of the Partnership have been accrued in
the accompanying financial statements.
At December 31, 1996, the Partnership recorded a receivable from the General
Partners in the amount of $448,015. This amount represents the maximum
obligation of the General Partners, payable upon the liquidation of the
Partnership, in accordance with the Partnership Agreement. See Note B for
further information.
Results of Operations
All significant fluctuations between 1995 and 1996 were due to the sale of
all of the Partnership's properties during 1996 and the accrual of estimated
costs relating to the liquidation of the Partnership.
1995 vs. 1994
The Partnership recorded net losses of $1,149,000 and $559,000 for the years
ended December 31, 1995 and 1994, respectively. As discussed in further detail
below, these losses were primarily the result of provisions for loss on
impairment of assets recorded for the Partnership and Joint Venture properties.
Provisions for losses on impairment of assets of $1,000,000 and $1,400,000 were
recorded in 1995 and 1994, respectively, to reflect the directly-owned
properties' estimated fair value. The Partnership's pro rata share of provisions
for loss on impairment of assets recorded for the Joint Venture properties was
$1,081,000 in 1995, respectively. Other fluctuations between periods are
discussed below.
Directly-Owned Properties
As of December 31, 1995 and 1994, the Eight Forge Park office building in
Franklin, Massachusetts was 100% leased by two subsidiaries of one company whose
lease was to expire in June 1997. One of the subsidiaries, representing 70% of
the leased space, vacated its space in the third quarter of 1995. However, the
tenant continued to honor its obligations under the lease. Rental income and
operating expenses for the year ended December 31, 1995 were comparable to 1994.
A $1,400,000 provision for loss on impairment of assets was recorded in 1994 to
reduce the Eight Forge Park property to its estimated fair value.
In December 1995, TASH, the sole tenant of the warehouse facility in Rancho
Cucamonga, California, became insolvent and closed down its operations. Rental
income for the year ended December 31, 1995 decreased $94,000 as compared to
1994 due to rent concessions provided in 1995. Operating expenses for the year
ended December 31, 1995 increased $30,000 mainly due to increased professional
fees. A $1,000,000 provision for loss on impairment of assets was recorded for
the year ended December 31, 1995 to reduce the Rancho Cucamonga property to its
estimated fair value.
Other income for the year ended December 31, 1995 increased $49,000 as
compared to 1994 due to the receipt of $50,000 from the mortgage loan. See Note
D in the financial statements.
Real estate taxes for the year ended December 31, 1995 decreased $55,000 as
compared to 1994 due to a refund received in the second quarter of 1995 from a
successful appeal of the 1992 and 1993 taxes at the Rancho Cucamonga warehouse
facility.
General and administrative expenses for the year ended December 31, 1995
increased $214,000 as compared to 1994 primarily due to costs relating to the
preparation and review of the Consent Solicitation Statement and increased costs
to administer the Partnership.
10
<PAGE>
Interest income for the year ended December 31, 1995 increased $10,000 as
compared to 1994 due to higher average cash balances during 1995.
Joint Venture Properties
As of December 31, 1995, Pine Island and Ridge Plaza were 94% and 81% leased
(88% and 71% occupied), respectively, as compared to 93% and 90% leased (93% and
80% occupied) as of December 31, 1994. Rental income for the year ended December
31, 1995 increased $230,000 compared to 1994 due to increased occupancy at Pine
Island and the expiration of free rent periods for several tenants during 1994
at Ridge Plaza.
Property operating expenses for the year ended December 31, 1995 increased
$66,000 as compared to 1994 primarily due to an increase in provisions for
doubtful accounts. Real estate taxes for the year ended December 31, 1995
increased $91,000 as compared to 1994 due to refunds received for prior periods
at both Pine Island and Ridge Plaza in the fourth quarter of 1994 as a result of
a lower assessment on the properties. Depreciation and amortization expense for
the year ended December 31, 1995 decreased $547,000 as compared to 1994 because
a vacated outparcel and related tenant improvements at Ridge Plaza were
demolished to provide additional parking at the Joint Venture's properties in
1994. General and administrative expenses for the year ended December 31, 1995
increased $35,000 as compared to 1994 primarily due to costs relating to the
Consent Solicitation Statement and increased costs to administer the Joint
Venture.
The carrying value of the Joint Venture's properties were reduced by $850,000
during the second quarter of 1995 to reflect an impairment in value resulting
from lease defaults and market indications. In the fourth quarter of 1995, the
Joint Venture recorded a provision for loss on impairment of assets of
$1,500,000 to reflect the estimated net proceeds received from the sale of the
two shopping centers on March 26, 1996.
11
<PAGE>
OTHER INFORMATION
The Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission is available to limited partners without charge upon written
request to:
Prudential Realty Acquisition Fund II, L.P.
c/o Prudential-Bache Properties, Inc.
Client Services Department
P.O. Box 2016
New York, New York 10272-2016
12
<PAGE>
<PAGE>
Peck Slip Station BULK RATE
P.O. Box 2016 U.S. POSTAGE
New York, NY 10272-2016 PAID
Automatic Mail
PRAF/170244
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Prudential Realty Acquisition
Fund II, LP and is qualified in its entirety
by reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000752292
<NAME> Prudential Realty Acquisition Fund II, LP
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Dec-31-1996
<PERIOD-TYPE> 12-Mos
<CASH> 1,074,383
<SECURITIES> 0
<RECEIVABLES> 490,096
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,564,479
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,564,479
<CURRENT-LIABILITIES> 440,125
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,124,354
<TOTAL-LIABILITY-AND-EQUITY> 1,564,479
<SALES> 680,783
<TOTAL-REVENUES> 680,783
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 793,002
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (112,219)
<EPS-PRIMARY> (3.58)
<EPS-DILUTED> 0
</TABLE>
