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 April 30, 1995
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>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 30, October 31,
1995 1994
ASSETS
<S> <C> <C>
Cash and cash equivalents, at cost
which approximates market $ 8,152,345 $ 9,812,279
Real estate, at cost:
Land 18,121,935 18,121,935
Buildings and improvements 146,784,709 146,235,433
164,906,644 164,357,368
Accumulated depreciation 46,777,003 43,775,258
118,129,641 120,582,110
Investment in joint venture 2,722,838 2,759,347
Deferred expenses, net 2,040,304 1,328,063
Other assets 3,420,197 3,472,192
$134,465,325 $137,953,991
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 509,992 $ 740,683
Security deposits 262,326 271,331
Deferred general partner distributions 928,139 2,784,417
Minority interest in joint venture 8,469,413 8,489,748
10,169,870 12,286,179
Partners' capital (deficiency):
General partners (3,268,861) (3,131,626)
Limited partners ($1,000 per Unit,
177,023 Units issued) 127,564,316 128,799,438
Total partners' capital 124,295,455 125,667,812
$134,465,325 $137,953,991
<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 six months ended April 30, 1995 and 1994
<CAPTION>
Three months ended Six months ended
April 30, April 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental $4,444,111 $4,492,767 $8,972,323 $9,063,100
Equity in earnings of joint venture 74,336 81,147 152,139 160,561
Interest and other 168,717 201,417 669,995 306,927
4,687,164 4,775,331 9,794,457 9,530,588
Expenses:
Property operating 1,680,383 1,699,056 3,300,431 3,340,991
Depreciation 1,501,487 1,517,433 3,001,745 3,007,450
Amortization 144,857 126,216 288,819 251,604
General and administrative 208,119 183,681 356,758 344,294
3,534,846 3,526,386 6,947,753 6,944,339
Income before minority interest 1,152,318 1,248,945 2,846,704 2,586,249
Minority interest 116,273 145,143 285,217 288,857
Net income $1,036,045 $1,103,802 $2,561,487 $2,297,392
Net income per Unit of limited
partnership interest $5.27 $5.61 $13.02 $11.68
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Six months ended April 30, 1995
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at November 1, 1994 $128,799,438 $(3,131,626) $125,667,812
Net income 2,305,338 256,149 2,561,487
Cash distributions (3,540,460) (393,384) (3,933,844)
Partners' capital (deficiency)
at April 30, 1995 $127,564,316 $(3,268,861) $124,295,455
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended April 30, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,561,487 $ 2,297,392
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 3,001,745 3,007,450
Amortization 288,819 251,604
Minority interest in joint venture's operations 285,217 288,857
Equity in earnings of joint venture (152,139) (160,561)
(Increase) decrease in operating assets:
Deferred expenses (1,001,060) (61,326)
Other assets 51,995 591,700
Decrease in operating liabilities:
Accounts payable and accrued liabilities (230,691) (369,484)
Security deposits (9,005) (54,076)
Net cash provided by operating activities 4,796,368 5,791,556
Cash flows from investing activities:
Additions to real estate (549,276) (468,270)
Additional investment by minority interest 240,608 6,466
Minority interest in joint venture's distributions (546,160) (633,977)
Distributions from joint venture 219,707 184,409
Investment in joint venture (31,059) (175,336)
Net cash used in investing activities (666,180) (1,086,708)
Cash flows from financing activities:
Cash distributions to partners (3,933,844) (1,966,922)
Payment of deferred distributions (1,856,278) -
Net cash used in financing activities (5,790,122) (1,966,922)
(Decrease) increase in cash and cash equivalents (1,659,934) 2,737,926
Cash and cash equivalents at beginning of period 9,812,279 7,465,589
Cash and cash equivalents at end of period $ 8,152,345 $10,203,515
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, include all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the results for
the interim periods.
2. Related Party Transactions
An affiliate of the Managing General Partner provides property management
services for four properties. The Partnership incurred management fees
of approximately $144,000 and $154,000 for the six months ended April 30,
1995 and 1994, respectively.
Another affiliate of the Managing General Partner performs administrative
functions, processes investor transactions and prepares tax information
for the Partnership. For each of the six-month periods ended April 30,
1995 and 1994, the Partnership incurred approximately $261,000 for these
services.
As of April 30, 1995, the affiliates were owed a total of approximately
$163,000 for these services.
3. Subsequent Event
On May 30, 1995, the Partnership paid a cash distribution of $10.00 per
Unit to the Limited Partners. The cash distribution aggregated
$1,966,922 with $1,770,230 distributed to the Limited Partners and
$196,692 distributed to the General Partners. The Partnership also paid
the remaining $928,139 of deferred distributions owed to the General
Partners. <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, primarily due to the continued
absence of significant construction activity. However, the recovery of
office properties has been, and may continue to be slow, because tenant
demand is weak as a result of continued downsizing by many major
corporations. Increased consumer spending has helped the retail property
market although increased interest rates have slowed spending recently.
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 and expenditures for tenant improvements and leasing
commissions in connection with the leasing of vacant space. During the
six months ended April 30, 1995, all of the Partnership's properties
generated positive cash flow from operations, and it is anticipated that
they will continue to do so.
However, during the six months ended April 30, 1995, payments for tenant
improvements and leasing commissions, net additional investments in real
estate and in joint ventures, partner distributions and deferred
distributions for the General Partners exceeded cash flow from operations
and distributions from joint ventures by approximately $1,660,000. The
shortfall was funded from existing cash reserves; such reserves had
accumulated in prior years due to the high occupancy level and limited
tenant turnover at the properties in the Partnership's portfolio.
The Partnership expects that for the remainder of 1995, capital
expenditures and distributions will be funded from operating cash flows,
distributions from joint ventures and existing cash reserves.
During the six months ended April 30, 1995, the Partnership incurred
approximately $1.3 million for tenant improvements and leasing
commissions (net of capital contributions by the minority interest),
including approximately $937,000 at the Century Square building, and
approximately $339,000 at the Framingham Corporate Center.
Effective January 1, 1995, the lease term of Countrywide Credit
Industries, Inc., the largest tenant at the Century Square office
building, was extended from March 2000 to March 2010. The rental rate
will remain at the 1994 rate through 2004, rather than increasing, as
provided for under the original leases. After 2004, rents will increase
ten percent for the remainder of the lease term. Considering the current
market and economic conditions in Pasadena, CA, as discussed below under
Operations, and the credit-worthiness of Countrywide, the Managing
General Partner considers the terms of the new agreement favorable. The
cash flow from this property is expected to be stable for a total of
fifteen years at a higher level than comparable current market rents.
On May 30, 1995, the Partnership paid a cash distribution of $10.00 per
Unit to the Limited Partners. The cash distribution aggregated
$1,966,922 with $1,770,230 distributed to the Limited Partners and
$196,692 distributed to the General Partners. The Partnership also paid
the remaining $928,139 of deferred distributions owed to the General
Partners.
Operations
Fluctuations in the Partnership's operating results for the three and
six-month periods ended April 30, 1995 compared to 1994 are primarily
attributable to the following:
The increase in interest and other income is primarily due to lease
termination income of approximately $354,000 from the largest tenant at
Framingham Corporate Center, which terminated certain of its leases,
occupying approximately 18% of the property's space, in the first quarter
of 1995. This space was released to new tenants prior to January 31,
1995.
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 current market vacancy rate is approximately 6%. At April 30, 1995,
the property is 95% leased. Leases covering approximately 12% and 21%
of the property's space are scheduled to expire during the remainder of
1995 and 1996, respectively.
The office market in Westchester County, New York, the location of Taxter
Corporate Park, has a current vacancy level of approximately 22%. It is
unlikely that this vacant space will be absorbed for several years.
During the second quarter of 1995, average occupancy at the property
decreased slightly to 98%. Leases covering 23% of the property's space
expire in 1996.
Glenhardie Corporate Center I and II are located in Valley Forge,
Pennsylvania, a market in which the vacancy rate is currently 14%. New
construction in this area may cause the office market to weaken. During
the six months ended April 30, 1995, occupancy at the property remained
stable at 98%. No significant leases are scheduled to expire before
1998.
In Pasadena, California, the location of the Century Square office
building, the overall office market vacancy rate is approximately 15%,
and it is expected to increase in the near term, primarily as a result
of the downsizing of employers in the market. However, Century Square
remained 100% leased as of April 30, 1995. Countrywide Credit occupies
approximately 82% of the property's space.
Although the office market in Bellevue, Washington, the location of the
United Services Life Building, has recently experienced minimal space
absorption, the availability of sub-lease space is steadily declining
which is expected to result in increases in effective rents. The market
is currently experiencing a 7% vacancy rate. During the six months ended
April 30, 1995, occupancy at the United Services property decreased
slightly to 96%. United Services Life, which occupies approximately 14%
of the building, has informed the Partnership that it will vacate its
space upon expiration of its lease in June 1995. Asymetrix Corporation,
which occupies approximately 30% of the property's space and whose leases
expire in 1996 and 1998, has announced that they will significantly
reduce their work force. The effect of this restructuring on Asymetrix's
leases at the property is unclear at this time.
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. Currently, the vacancy rate in this market is 20%; increasing
vacancies and downward pressure on rents are expected to continue in the
near term. Occupancy at the Pavilions property decreased from 91% to 87%
during the six months ended April 30, 1995. In 1994, A&P, the anchor
tenant, vacated its space; it is obligated to continue to pay rent until
its lease expires in 2006. A&P is actively seeking a replacement tenant.
Wallkill Plaza, located in Wallkill, New York, has been affected by the
lingering effects of the recession and new retail development. As a
result, rental levels, which have already experienced a decline, may
experience further downward pressure. During the six months ended April
30, 1995, occupancy at the property remained at 86%. No significant
leases are scheduled to expire before 2006.
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 6. Exhibits and Reports on Form 8-K.
a) Exhibits - not applicable.
b) Reports on Form 8-K -
Report, dated April 3, 1995, of the valuation per Unit of
Limited Partnership interest at December 31, 1994.
<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: June 14, 1995 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: June 14, 1995 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>
<CIK> 0000752744
<NAME> DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> APR-30-1995
<CASH> 8,152,345
<SECURITIES> 0
<RECEIVABLES> 2,943,095
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 134,465,325<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 124,295,455<F2>
<TOTAL-LIABILITY-AND-EQUITY> 134,465,325<F3>
<SALES> 0
<TOTAL-REVENUES> 9,794,457<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,232,970
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,561,487
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,561,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,561,487
<EPS-PRIMARY> 13.02<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $118,129,641, investment in joint venture of $2,722,838,
net deferred expenses of $2,040,304 and other assets of $477,102.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of
$509,992, minority interest in joint venture of $8,469,413, and other
liabilities of $1,190,465.
<F4>Total revenue includes rent of $8,972,323, equity in earnings of joint
venture of $152,139, and interest and other revenues of $669,995.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
