UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended July 31, 1994
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: 0-18150
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
(Exact name of registrant as specified in governing instrument)
Delaware 13-3244091
(State of organization) (IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (212) 392-1054
Former name, former address and former fiscal year, if changed since last
report: not applicable
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
Page 1 of 13<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 31,
1994 October 31,
(Unaudited) 1993
ASSETS
<S> <C> <C>
Cash and short-term investments, at cost
which approximates market $ 10,878,064 $ 7,465,589
Real estate, at cost:
Land 18,121,935 18,121,935
Buildings and improvements 145,591,989 144,867,183
163,713,924 162,989,118
Accumulated depreciation 42,207,275 37,630,627
121,506,649 125,358,491
Investment in joint venture 2,754,905 2,646,935
Deferred expenses, net 1,491,838 1,776,242
Other assets 3,761,188 4,500,860
$140,392,644 $141,748,117
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities $ 752,740 $ 1,023,493
Security deposits 264,388 340,408
Deferred distributions 3,712,556 3,712,556
Minority interests in joint ventures 8,683,932 9,064,548
13,413,616 14,141,005
Partners' capital (deficiency):
General partners (3,000,505) (2,937,697)
Limited partners ($1,000 per Unit,
177,023 Units issued) 129,979,533 130,544,809
Total partners' capital 126,979,028 127,607,112
$140,392,644 $141,748,117
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three and nine months ended July 31, 1994 and 1993
(Unaudited)
Three months ended Nine months ended
July 31, July 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Rental $4,522,688 $4,546,636 $13,585,788 $13,915,787
Equity in earnings of joint venture 92,228 35,247 252,789 136,969
Interest and other 113,138 87,602 420,065 360,472
4,728,054 4,669,485 14,258,642 14,413,228
Expenses:
Property operating 1,696,836 1,711,705 5,037,827 5,135,150
Depreciation 1,569,198 1,541,498 4,576,648 4,670,227
Amortization 138,811 131,959 390,415 420,673
Interest - 40,870 - 183,130
General and administrative 179,500 191,708 523,794 560,199
3,584,345 3,617,740 10,528,684 10,969,379
Income before minority interest 1,143,709 1,051,745 3,729,958 3,443,849
Minority interest 135,341 141,486 424,198 449,441
Income before gain on sale of real
estate 1,008,368 910,259 3,305,760 2,994,408
Gain on sale of real estate - 794,007 - 794,007
Net income $1,008,368 $1,704,266 $ 3,305,760 $ 3,788,415
Net income per Unit of limited
partnership interest $5.13 $9.11 $16.81 $19.71
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Nine months ended July 31, 1994
(Unaudited)
Limited General
Partners Partners Total
<S> <C> <C>
Partners' capital (deficiency)
at November 1, 1993 $130,544,809 $(2,937,697) $127,607,112
Net income 2,975,184 330,576 3,305,760
Cash distributions (3,540,460) (393,384) (3,933,844)
Partners' capital (deficiency)
at July 31, 1994 $129,979,533 $(3,000,505) $126,979,028
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended July 31, 1994 and 1993
(Unaudited)
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,305,760 $ 3,788,415
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on sale of real estate - (794,007)
Depreciation 4,576,648 4,670,227
Amortization 390,415 420,673
Minority interests in joint ventures' operations 424,198 449,441
Equity in earnings of joint venture (252,789) (136,969)
Decrease (increase) in operating assets:
Deferred expenses (106,011) (380,472)
Other assets 739,672 368,233
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities (270,753) 189,605
Security deposits (76,020) 28,161
Net cash provided by operating activities 8,731,120 8,603,307
Cash flows from investing activities:
Additions to real estate (724,806) (685,012)
Additional investment by minority interest 8,239 7,349
Investment in joint venture (204,082) (96,296)
Minority interests in joint ventures' distributions (813,053) (740,393)
Distributions from joint venture 348,901 404,296
Proceeds from sale of real estate - 6,379,216
Net cash (used in) provided by investing
activities (1,384,801) 5,269,160
Cash flows from financing activities:
Cash distributions to partners (3,933,844) (2,311,133)
Bank loan repayment - (4,250,035)
Net cash used in financing activities (3,933,844) (6,561,168)
Increase in cash and short-term investments 3,412,475 7,311,299
Cash and short-term investments at beginning of period 7,465,589 1,527,258
Cash and short-term investments at end of period $10,878,064 $ 8,838,557
Supplemental disclosure of cash paid for interest: - $ 183,130
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Notes to Consolidated Financial Statements
(Unaudited)
1. The Partnership
Dean Witter Realty Income Partnership II, L.P. (the
"Partnership") is a limited partnership organized under the
laws of the State of Delaware in 1984. The Partnership's
fiscal year ends on October 31.
The financial statements include the accounts of the
Partnership and the Century Square and Framingham Corporate
Center joint ventures on a consolidated basis. The equity
method of accounting has been applied to the Partnership's
15% interest in the Taxter Corporate Park property because of
its continuing ability to exert significant influence over
Taxter.
The Partnership's records are maintained on the accrual basis
of accounting for financial reporting and tax purposes.
Net income per Unit of limited partnership amounts are
calculated by dividing net income allocated to Limited
Partners in accordance with the Partnership Agreement by the
weighted average number of Units outstanding.
In the opinion of management, the accompanying financial
statements, which have not been audited, reflect all
adjustments necessary to present fairly the results for the
interim period.
2. Real Estate
In fiscal 1994, the Century Square joint venture settled a
lawsuit with the developer of the property relating to
certain defects in the parking structure and heating,
ventilation and air conditioning systems. Pursuant to the
settlement, the joint venture received $835,000 in 1994. The
proceeds were distributed to the co-venturers according to
their interests; accordingly, the Partnership received
$626,250. The joint venture will receive an additional
$100,000 in each of fiscal years 1995 and 1996. The
Partnership recorded these proceeds, which represent the
recovery of costs incurred and capitalized to correct the
defects, as a reduction of buildings and improvements.
3. Related Party Transactions
An affiliate of the Managing General Partner provided
property management services for four properties for the
three and nine months ended July 31, 1994 and five properties
for the comparable periods ended July 31, 1993. The
Partnership paid the affiliate management fees of
approximately $225,000 and $236,000 for the nine months ended
July 31, 1994 and 1993, respectively.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Notes to Consolidated Financial Statements
(Unaudited)
Another affiliate of the Managing General Partner performs
administrative functions, processes investor transactions and
prepares tax information for the Partnership. For the nine
months ended July 31, 1994 and 1993, the Partnership incurred
approximately $392,000 and $393,000, respectively for these
services.
As of July 31, 1994 the affiliate was owed a total of
approximately $162,000 for these services.
At July 31, 1994 aggregate deferred distributions to the
General Partners totalled $3,712,556. Amounts deferred have
been charged against partners' capital and recorded as
liabilities owing to the General Partner.
4. Subsequent Event
On August 30, 1994, the Partnership paid a cash distribution
of $10.00 per Unit to the Limited Partners. The cash
distribution aggregated $1,966,867 with $1,770,180
distributed to the Limited Partners and $196,687 distributed
to the General Partners.
Additionally, on August 30, 1994, the Partnership repaid
$928,139 of deferred distributions owed to the General
Partners. The Partnership expects to repay this liability in
full over the next three quarters.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Partnership raised $177,023,000 in a public offering which
was terminated in 1985. The Partnership has no plans to raise
additional capital.
The Partnership has purchased six properties (one of which was
sold in May 1993) and made three investments in partnerships on
an all-cash basis. The Partnership's acquisition program has
been completed. No additional investments are planned.
Many real estate markets are stabilizing; however, the
recovery of office properties will be slow. Continued absence
of significant construction activity is the primary reason for
improvement. Increased consumer spending has helped the retail
property market although increased interest rates have slowed
spending. Most geographic regions of the country are improving,
with the exception of Southern California, where the impact of
the defense industry reductions has not been offset by growth in
other industries.
Real estate markets are generally divided into sub-markets by
geographic location and property type. Not all sub-markets have
been affected equally by the above factors.
The Partnership's liquidity depends upon the cash flow from
operations of its properties, expenditures for tenant
improvements and leasing commissions in connection with the
leasing of vacant space. During the nine months ended July 31,
1994, all of the Partnership's properties generated positive cash
flow from operations, and it is anticipated that they will
continue to do so.
During the first three quarters of 1994, the Partnership's
cash flow from operations and distributions received from joint
venture exceeded distributions to investors and capital
expenditures. The Partnership expects that such cash flows from
operations and distributions received from joint venture for the
remainder of 1994 will be sufficient to fully fund capital
improvements and distributions to Limited and General Partners.
The high occupancy level and limited turnover of leases at the
properties in the portfolio has resulted in an increase in the
Partnership's cash reserves. Consequently, the Partnership
increased the Limited Partners' distribution rate from 2% to 4%
per Unit beginning with the cash distribution paid on May 26,
1994. Additionally, on August 30, 1994, the Partnership repaid
$928,139 of the deferred distributions owed to the General
Partners. The Partnership expects to repay this liability in
full over the next three quarters.
During the nine months ended July 31, 1994, the Partnership
incurred approximately $1.7 million for building improvements,
tenant improvements and leasing commissions, including
approximately $759,000 at United Services Life Building, and
approximately $493,000 at the Glenhardie Corporate Center.
On August 30, 1994, the Partnership paid a cash distribution
of $10.00 per Unit to the Limited Partners. The total
distribution aggregated $1,966,867 with $1,770,180 distributed
to the Limited Partners and $196,687 to the General Partners.
Prior to 1993, the Partnership had borrowed $4,250,035 on a
$5,000,000 line of credit established with a bank. Interest on
such borrowings accrued at the prime rate plus three quarters
percent. The Partnership repaid the loan in June 1993.
Operations
Fluctuations in the Partnership's operating results for the
nine-month and three-month periods ended July 31, 1994 compared
to the comparable periods ended July 31, 1993 are primarily
attributable to the following:
The decreases in rental income are primarily due to the sale
of the Sardis Crossing property in May 1993 and lower rents
recognized at Glenhardie Corporate Center I and II and Wallkill
Plaza during the nine months ended July 31, 1994.
The increases in equity in earnings of joint venture are
primarily attributable to increased income from the Taxter
Corporate Park property as a result of lower depreciation
resulting from the writedown of the property in 1993.
The decrease in property operating expenses are attributable
to the Glenhardie office buildings and the sale of the Sardis
Crossing property, partially offset by increased professional
fees incurred in connection with the lawsuit against a
construction contractor at the Century Square office building.
The decrease in depreciation and amortization for the nine
months ended July 31, 1994 compared to 1993 is due to a
substantial portion of tenant improvements and leasing
commissions becoming fully depreciated or amortized in 1993 at
the United Services Life and Pavilions at East Lake properties,
and the sale of the Sardis Crossing property. These decreases
are partially offset by amortization and depreciation on leasing
commissions and tenant improvements incurred primarily at the
United Services Life Building and Glenhardie Corporate Center in
fiscal 1993 and 1994.
The decreases in interest expense are due to the repayment of
the bank loan in June 1993.
A summary of the markets in which the Partnership's office
properties are located and the leasing status of each property
is as follows:
The Boston suburban office market, the location of the
Framingham Corporate Center, is one of the most active markets
in the Boston area. The market vacancy level has declined from
approximately 17% to 10% over the past twelve months. Rents are
firming due to a lack of prime office space, no new construction
and growth in the health and medical industries which populate
the area. Occupancy at the Framingham property remained at 98%
during the third quarter of 1994. No significant space is up
for lease until 1996.
The office market in Westchester County, New York, the
location of Taxter Corporate Park, has experienced a significant
decline. The current vacancy level in the Westchester office
market is approximately 25%, as many major tenants in the market
are consolidating their operations. It is unlikely that this
vacant space will be absorbed in this market for several years.
However, during the third quarter of 1994, occupancy at the
property remained at 99%. No significant leases expire before
1996. One of the tenants had purchased a long-term leasehold
interest in approximately 20% of the space at the property; this
tenant does not pay rent, but is responsible for its share of
real estate taxes and certain operating expenses.
Glenhardie Corporate Center I and II are located in the mid-
range office building market in Valley Forge, Pennsylvania, where
the vacancy rate is approximately 14%. Occupancy at Glenhardie
increased from 87% to 94% during the third quarter of 1994.
In Pasadena California, the location of the Century Square
office building, the office market overall vacancy rate was
approximately 15% during the third quarter of 1994, and it is
expected to increase in the near-term due to anticipated
downsizing by two large corporations headquartered in Pasadena.
However, Century Square remained 100% leased during the third
quarter of 1994. The occupancy of the property's largest tenant,
Countrywide Credit, remained at approximately 83%. No
significant space is up for lease until 2000.
The office market in Bellevue, Washington, the location of the
United Services Life Building, has experienced minimal space
absorption in 1994, primarily as a result of a slowdown in the
local economy and the availability of sub-lease space. However,
occupancy at the United Services property increased from 96% to
98% during the third quarter of 1994. The lease to United
Services Life, which occupies approximately 14% of the building's
net rentable space expires in April 1995.
A summary of the markets in which the Partnership's retail
properties are located, and the leasing status of each property,
is as follows:
Pavilions at East Lake is located in an area of suburban
Atlanta which experienced significant retail development in the
1980's. Retail occupancy in the area eroded during the
recession. Additionally, a new shopping center recently opened
which directly competes with the property. Increasing vacancies
and downward pressure on rents are expected to continue in the
near term. Occupancy at the Pavilions property increased
slightly from 87% to 89% during the third quarter of 1994. The
lease of A&P, the anchor tenant, is in place until 2006.
Wallkill Plaza, located in Wallkill, New York, has been
affected by both the recession and new retail development. A
regional mall opened in the area in mid-1992. As a result,
rental levels, which have already experienced a decline, may
experience further downward pressure. During the third quarter
of 1994, occupancy at the property decreased slightly from 87%
to 86%. The leases of the two anchor tenants are in place until
2006; no other leases expire until 1997.
Inflation
Inflation has been consistently low during the period
presented in the financial statements, and, as a result, has not
had a significant effect on the operations of the Partnership or
its properties.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - not applicable.
Item 2. Changes in Securities - not applicable.
Item 3. Defaults upon Senior Securities - not applicable.
Item 4. Submission of Matters to a Vote of Security Holders -
not applicable.
Item 5. Other Information - not applicable.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits - not applicable.
b) Reports on Form 8-K - Report dated May 10, 1994 of the
valuation per Unit of Limited Partnership interest at
December 31, 1993.
<PAGE>
SIGNATURES
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.
DEAN WITTER REALTY INCOME
PARTNERSHIP II, L.P.
By: Dean Witter Realty Income
Properties II Inc.
Managing General Partner
Date: September 13, 1994 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: September 13, 1994 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate and real
estate joint ventures. In accordance with industry practice, its balance
sheet is unclassified. For full information, refer to the accompanying
unaudited financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> JUL-31-1994
<CASH> 10,878,064
<SECURITIES> 0
<RECEIVABLES> 3,468,011
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 140,392,644<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 126,979,028<F2>
<TOTAL-LIABILITY-AND-EQUITY> 140,392,644<F3>
<SALES> 0
<TOTAL-REVENUES> 14,258,642<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,952,882
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,305,760
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,305,760
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,305,760
<EPS-PRIMARY> 16.81<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net
investments in real estate of $121,506,649,investment in joint venture
of $2,754,905, net deferred expenses of $1,491,838 and other assets of
$293,177.
<F2>Other Stockholder's Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $752,740,
minority interest in joint venture of $8,683,932, and other liabilities
of $3,976,944.
<F4>Total revenue includes rent of $13,585,788; equity in earnings of joint
venture of $252,789 and interest and other revenue of $420,065.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
