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, 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>
January 31,
1995 October 31,
(Unaudited) 1994
ASSETS
<S> <C> <C>
Cash and short-term investments, at cost
which approximates market $ 8,316,095 $ 9,812,279
Real estate, at cost:
Land 18,121,935 18,121,935
Buildings and improvements 146,719,685 146,235,433
164,841,620 164,357,368
Accumulated depreciation 45,275,516 43,775,258
119,566,104 120,582,110
Investment in joint venture 2,741,452 2,759,347
Deferred expenses, net 2,133,677 1,328,063
Other assets 3,984,630 3,472,192
$136,741,958 $137,953,991
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities $ 787,881 $ 740,683
Security deposits 255,003 271,331
Deferred general partner distributions 1,856,278 2,784,417
Minority interests in joint ventures 8,616,464 8,489,748
11,515,626 12,286,179
Partners' capital (deficiency):
General partners (3,175,774) (3,131,626)
Limited partners ($1,000 per Unit,
177,023 Units issued) 128,402,106 128,799,438
Total partners' capital 125,226,332 125,667,812
$136,741,958 $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 months ended January 31, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Revenues:
Rental $ 4,528,212 $ 4,570,333
Equity in earnings of joint venture 77,803 79,414
Interest and other 501,278 105,510
5,107,293 4,755,257
Expenses:
Property operating 1,620,048 1,641,935
Depreciation 1,500,258 1,490,017
Amortization 143,962 125,388
General and administrative 148,639 160,613
3,412,907 3,417,953
Income before minority interests 1,694,386 1,337,304
Minority interests 168,944 143,714
Net income $ 1,525,442 $ 1,193,590
Net income per Unit of limited
partnership interest $ 7.76 $ 6.07
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Three months ended January 31, 1995
(Unaudited)
<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 1,372,898 152,544 1,525,442
Cash distributions (1,770,230) (196,692) (1,966,922)
Partners' capital (deficiency)
at January 31, 1995 $128,402,106 $(3,175,774) $125,226,332
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended January 31, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,525,442 $ 1,193,590
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 1,500,258 1,490,017
Amortization 143,962 125,388
Minority interests in joint ventures'
operations 168,944 143,714
Equity in earnings of joint venture (77,803) (79,414)
Decrease (increase) in operating assets:
Deferred expenses (949,576) (25,131)
Other assets (512,438) 317,635
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities 47,198 (137,558)
Security deposits (16,328) (35,250)
Net cash provided by operating activities 1,829,659 2,992,991
Cash flows from investing activities:
Additions to real estate (484,252) (721,900)
Additional investment by minority interest 240,608 -
Minority interests in joint ventures'
distributions (282,836) (194,499)
Distributions from joint venture 120,771 118,507
Investment in Taxter joint venture (25,073) (100,141)
Net cash used in investing activities (430,782) (898,033)
Cash flows from financing activities:
Cash distributions to partners (1,966,922) (983,461)
Repayment of deferred distributions (928,139) -
Net cash used in financing activities (2,895,061) (983,461)
Increase (decrease) in cash and short-term
investments (1,496,184) 1,111,497
Cash and short-term investments at beginning
of period 9,812,279 7,465,589
Cash and short-term investments at end
of period $ 8,316,095 $ 8,577,086
<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. Related Party Transactions
An affiliate of the Managing General Partner provides property
management services for four properties. The Partnership
incurred management fees of approximately $73,500 and $89,000
for the three months ended January 31, 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
three months ended January 31, 1995 and 1994, the Partnership
incurred approximately $131,000 for these services.
As of January 31, 1995 the affiliates were owed a total of
approximately $180,000 for these services.
3. Subsequent Event
On February 28, 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 repaid an additional $928,139
of deferred distributions owed to the General Partners. The
Partnership expects to repay the remaining deferred
distributions with the May 1995 cash distribution.
<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, expenditures for tenant improvements
and leasing commissions in connection with the leasing of vacant
space. During the three months ended January 31, 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 first quarter of 1995, payments for tenant
improvements and leasing commissions, 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
$1,496,000. 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 three months ended January 31, 1995, the Partnership
incurred approximately $1.2 million for tenant improvements and
leasing commissions (net of capital contributions by the minority
interest), including approximately $700,000 at the Century Square
building, and approximately $320,000 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 February 28, 1995, the Partnership paid the first quarter cash
distribution of $10.00 per Unit to the Limited Partners. The total
distribution aggregated $1,966,922 with $1,770,230 distributed to
the Limited Partners and $196,692 to the General Partners. The
Partnership also repaid an additional $928,139 of deferred
distributions owed to the General Partners. The Partnership expects
to repay the remaining deferred distributions with the May 1995
cash distribution.
Operations
Fluctuations in the Partnership's operating results for the
three-month period ended January 31, 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 for approximately 18% of the property's space. 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 as of January 31, 1995 is
approximately 6%. At January 31, 1995, the property is 100% leased
(including two tenants which will move into their space in the
second quarter). Leases covering approximately 12% and 23% 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 experienced a significant decline.
The current vacancy level in the Westchester office market is
approximately 25%. It is unlikely that this vacant space will be
absorbed in the market for several years. During the first quarter
of 1995, occupancy at the property remained stable at 99%. Leases
covering 21% 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 will cause the office market to
deteriorate. During the first quarter of 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 office market overall vacancy rate is
approximately 15%, and it is expected to deteriorate in the near
term, primarily, as a result of the downsizing of Countrywide and
another large employer in the market. However, Century Square
remained 100% leased as of January 31, 1995. Countrywide's
occupancy at the property remained at approximately 83%.
The office market in Bellevue, Washington, the location of the
United Services Life Building, has experienced minimal space
absorption recently, primarily as a result of a slowdown in the
local economy and the availability of sub-lease space. During the
first quarter of 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 31% 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 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 83% during the first quarter of 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 both the recession and new retail development. As a result,
rental levels, which have already experienced a decline, may
experience further downward pressure. During the first quarter of
1995, occupancy at the property remained at 86%. No significant
leases are scheduled to expire in the near future.
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 - None
<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: March 17, 1995 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: March 17, 1995 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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-1
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 8,316,095
<SECURITIES> 0
<RECEIVABLES> 3,420,440
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 136,741,958<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 125,226,332<F2>
<TOTAL-LIABILITY-AND-EQUITY> 136,741,958<F3>
<SALES> 0
<TOTAL-REVENUES> 5,107,293<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,581,851
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,525,442
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,525,442
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,525,442
<EPS-PRIMARY> 7.76<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $119,566,104, investment in joint ventures of $2,741,452,
net deferred expenses of $2,133,677 and other assets of $564,190.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of
$787,881, minority interest in joint venture of $8,616,464, and other
liabilities of $2,111,281.
<F4>Total revenue includes rent of $4,528,212, equity in earnings of joint
venture of $77,803, and interest and other revenues of $501,278.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
