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 January 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
(State of organization)
13-3244091
(IRS Employer Identification No.)
2 World Trade Center, New York, NY
(Address of principal executive offices)
10048
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>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED BALANCE SHEETS
January 31,
1994 October 31,
(Unaudited) 1993
ASSETS
Cash and short-term investments, at cost
which approximates market $ 8,577,086 $ 7,465,589
Real estate, at cost:
Land 18,121,935 18,121,935
Buildings and improvements 145,589,083 144,867,183
163,711,018 162,989,118
Accumulated depreciation 39,120,644 37,630,627
124,590,374 125,358,491
Investment in joint venture 2,707,983 2,646,935
Deferred expenses, net 1,675,985 1,776,242
Other assets 4,183,225 4,500,860
$141,734,653 $141,748,117
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities $ 885,935 $ 1,023,493
Security deposits 305,158 340,408
Deferred distributions 3,712,556 3,712,556
Minority interests in joint ventures 9,013,763 9,064,548
13,917,412 14,141,005
Partners' capital (deficiency):
General partners
Capital contributions 1,000 1,000
Cumulative net income 4,378,576 4,259,217
Cumulative distributions (7,296,260) (7,197,914)
(2,916,684) (2,937,697)
Limited partners ($1,000 per Unit,
177,023 Units issued)
Capital contributions, net of
offering costs 159,752,986 159,752,986
Cumulative net income 48,791,881 47,717,650
Cumulative distributions (77,810,942) (76,925,827)
130,733,925 130,544,809
Total partners' capital 127,817,241 127,607,112
$141,734,653 $141,748,117
See accompanying notes to consolidated financial statements.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended January 31, 1994 and 1993
(Unaudited)
1994 1993
Revenues:
Rental $ 4,570,333 $ 4,649,995
Equity in earnings of joint
venture 79,414 56,167
Interest and other 105,510 257,699
4,755,257 4,963,861
Expenses:
Property operating 1,641,935 1,751,262
Depreciation 1,490,017 1,555,358
Amortization 125,388 146,029
Interest - 72,309
General and administrative 160,613 162,791
3,417,953 3,687,749
Income before minority interests 1,337,304 1,276,112
Minority interests 143,714 154,436
Net income $ 1,193,590 $ 1,121,676
Net income per Unit of limited
partnership interest $ 6.07 $ 5.70
See accompanying notes to consolidated financial statements.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Three months ended January 31, 1994
(Unaudited)
Limited General
Partners Partners Total
Partners' capital (deficiency)
at November 1, 1993 $130,544,809 $(2,937,697) $127,607,112
Net income 1,074,231 119,359 1,193,590
Cash distributions (885,115) (98,346) (983,461)
Partners' capital (deficiency)
at January 31, 1994 $130,733,925 $(2,916,684) $127,817,241
See accompanying notes to consolidated financial statements.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended January 31, 1994 and 1993
(Unaudited)
1994 1993
Cash flows from operating activities:
Net income $ 1,193,590 $ 1,121,676
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 1,490,017 1,555,358
Amortization 125,388 146,029
Minority interests in joint ventures'
operations 143,714 154,436
Equity in earnings of joint venture (79,414) (56,167)
Decrease (increase) in operating assets:
Deferred expenses (25,131) (106,796)
Other assets 317,635 (112,603)
Increase (decrease) in operating liabilities:
Accounts payable and accrued
liabilities (137,558) 87,383
Security deposits (35,250) 44,710
Net cash provided by operating
activities 2,992,991 2,834,026
Cash flows from investing activities:
Additions to real estate (721,900) (148,186)
Additional investment by minority
interest - 1,860
Investment in joint venture (100,141) (5,737)
Minority interests in joint ventures'
distributions (194,499) (168,039)
Distributions from joint venture 118,507 225,458
Net cash used in investing activities (898,033) (94,644)
Cash flows from financing activities:
Cash distributions to partners (983,461) (663,836)
Increase in cash and short-term
investments 1,111,497 2,075,546
Cash and short-term investments at beginning
of period 7,465,589 1,527,258
Cash and short-term investments at end
of period $ 8,577,086 $ 3,602,804
Supplemental disclosure of cash flow information:
Cash paid for interest $ - $ 72,309
See accompanying notes to consolidated financial statements.
<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. Related Party Transactions
An affiliate of the Managing General Partner provided property
management services for five properties for the three months
ended January 31, 1994 and 1993. The Partnership paid the
affiliate management fees of approximately $89,000 and $84,000
for the three months ended January 31, 1994 and 1993,
respectively.
Another affiliate of the Managing General Partner performs
administrative functions, processes investor transactions and
prepares tax information for the Partnership. For the three
months ended January 31, 1994 and 1993, the Partnership
incurred approximately $131,000 and $110,000, respectively for
these services.
As of January 31, 1994 the affiliate was owed a total of
approximately $162,000 for these services.
At January 31, 1993 aggregate deferred distributions to the
General Partners totalled $3,712,556. Amounts deferred are
charged against partners' capital and recorded as liabilities
owing to the General Partner.
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Notes to Consolidated Financial Statements
(Unaudited)
3. Subsequent Event
On February 25, 1994, the Partnership paid a cash distribution of
$5.00 per Unit to the Limited Partners. The cash distribution
aggregated $983,461 with $885,115 distributed to the Limited
Partners and $98,346 distributed to the General Partners.
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.
Real estate, in general, has been negatively affected by a major
cyclical downturn. The downturn has been caused by a variety of
factors including an oversupply of office and retail properties,
continued downsizing by many major corporations and lack of credit
availability for real estate financings and purchases.
These factors have contributed to a general decrease in market
rental rates, an increase in vacancy rates and an increase in
concessions such as free rent and tenant improvement expenditures
for both new and existing tenants. As a result, there has been an
overall decline in the liquidity and market values of real estate
investments.
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 also 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 three months ended January 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.
In the first quarter of 1994, the Partnership's cash flow from
operations and distributions received from joint venture exceeded
distributions to investors and capital expenditures for tenant
improvements, leasing commissions and building improvements. The
Partnership expects that such cash flows for the remainder of 1994
will be sufficient to fully fund capital improvements and
distributions to Limited and General Partners.
During the first quarter of 1994, the Partnership incurred
approximately $747,000 for building improvements, tenant
improvements and leasing commissions, including approximately
$464,000 in tenant improvements primarily for a significant
expansion by an existing tenant at the United Services Life
Building, and approximately $196,000 in tenant improvements
primarily for the renewal of the lease of the largest tenant at the
Glenhardie Corporate Center.
On February 25, 1994, the Partnership paid a cash distribution of
$5.00 per Unit to the Limited Partners. The total distribution
aggregated $983,461 with $885,115 distributed to the Limited
Partners and $98,346 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
three-month period ended January 31, 1994 compared to the comparable
period ended January 31, 1993 are primarily attributable to the
following:
The decrease in rental income is primarily due to the sale of the
Sardis Crossing property in May 1993.
The decrease in interest and other income primarily relates to a
payment in the first quarter of 1993 by a major tenant at Glenhardie
I to exercise its option to cancel its lease effective January 1994.
The decrease in property operating expenses is attributable to
decreased operating expenses at the Glenhardie and Framingham office
buildings and the sale of the Sardis Crossing property, partially
offset by increased professional fees incurred in connection with a
lawsuit against a construction contractor at the Century Square
office building.
The decrease in depreciation and amortization 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, the sale of the
Sardis Crossing property, partially offset by amortization and
depreciation on leasing commissions and tenant improvements incurred
at the United Services Life Building and Glenhardie Corporate Center
in fiscal 1993 and 1994.
The decrease in interest expense is 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, has experienced a significant decline, and a high
vacancy level which is expected to persist throughout the next
several years. Occupancy at the Framingham property remained at 97%
during the first 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 27%, as many major tenants in the market are
consolidating their operations. During the first quarter of 1994,
occupancy at the property remained stable at 97%. No significant
leases expire before 1996. One of the tenants acquired a long-term
leasehold interest in approximately 20% of the space at the property
in 1988. 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 has decreased to approximately 13% as a result of
significant absorption in the market since January 31, 1993.
However, the market is extremely price-competitive. The market is
characterized by many smaller tenants who demand and receive
extremely favorable lease terms. Larger tenants in this market have
less flexibility due to the lack of construction during the last
four years. Occupancy at Glenhardie increased slightly from 96% to
97% during the first quarter of 1994.
In Pasadena California, the location of the Century Square office
building, the office market overall vacancy rate remained at
approximately 14% during the first quarter of 1994. However, the
vacancy rate is expected to increase during 1994 due to anticipated
downsizing by two large corporations headquartered in Pasadena.
Century Square remained 100% leased during the first quarter of 1994
and its leases with Countrywide Credit, which rents over 90% of the
leasable space at the property, do not begin to expire until 1998.
The office market in Bellevue, Washington, the location of the
United Services Life Building, has weakened as growth of the
market's major tenants has slowed down. However, occupancy at the
United Services property increased slightly from 95% to 96% during
the first quarter of 1994. No significant leases expire until 1995.
Retail properties througout the country have been adversely affected
by overbuilding and the financial weakness of several large and midsize
retailers. Although many of the anchor tenants in the Partnership's retail
properties have signed long-term leases, they may face increasing competition
from large specialty or discount retail stores. This increased competition
could also affect the peformance of smaller tenants.
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 has eroded as the recession has
lingered. 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 remained at 86% during
the first quarter of 1994. The lease of A&P, the anchor tenant, is
in place until 2006; no other significant leases expire prior to
1995.
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 first quarter of 1994, occupancy at the
property decreased from 96% to 87%. The leases of the two anchor
tenants are in place until 2006; no other significant leases expire
until 1996.
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.
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 - Not applicable
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: March 15, 1994 By: /s/E. Davison Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: March 15, 1994 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
