UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 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 its charter)
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(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 X 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. [X]
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant. Not Applicable
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I.<PAGE>
ITEM 1. BUSINESS.
The Registrant, Dean Witter Realty Income Partnership II, L.P. (the
"Partnership"), is a limited partnership formed in September 1984 under
the Uniform Limited Partnership Act of the State of Delaware for the
purpose of investing primarily in income-producing office, industrial and
retail properties.
The Managing General Partner of the Partnership is Dean Witter
Realty Income Properties II Inc. (the "Managing General Partner"), a
Delaware corporation which is wholly-owned by Dean Witter Realty Inc.
("Realty"). The Associate General Partner is Dean Witter Realty Income
Associates II, L.P. (the "Associate General Partner"), a Delaware limited
partnership, the general partner of which is Dean Witter Realty Income
Associates II Inc., a wholly-owned subsidiary of the Managing General
Partner. The Managing General Partner manages and controls all aspects
of the business of the Partnership. The terms of transactions between
the Partnership and its affiliates are set forth in Item 13 below.
The Partnership issued 177,023 units of limited partnership interest
(the "Units") with gross proceeds from the offering of $177,023,000. The
offering has been terminated and no additional Units will be sold.
The proceeds from the offering were used to make equity investments
in six office properties and three retail properties (one of which was
sold in May 1993, and one sold subsequent to fiscal year end) which were
acquired without mortgage debt. The properties are described in Item 2
below.
The Partnership considers its business to include one industry
segment, investment in real property. Financial information regarding
the Partnership is in the Partnership's financial statements in Item 8
below.
The Partnership's real property investments are subject to
competition from similar types of properties in the vicinities in which
they are located. Further information regarding competition and market
conditions where the Partnership's properties are located is set forth
in Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
The Partnership has no employees.
All of the Partnership's business is conducted in the United States.
ITEM 2. PROPERTIES
The Partnership's principal offices are located at Two World Trade
Center, New York, New York 10048. The Partnership has no other offices.
The Partnership owns directly or through a partnership interest
the following eight property interests, none of which is encumbered by
mortgage debt. Generally, the leases pertaining to the properties
provide for pass-throughs to the tenants of their pro-rata share of
certain operating expenses. In the opinion of the Managing General
Partner, all of the properties are adequately covered by insurance.
<TABLE>
<CAPTION>
Year(s) Acquisition Net Rentable Type of Ownership
Completed/ Cost Area of land and
Property, location and type Acquired ($000) (000 sq. ft.) Improvements
<S> <C> <C> <C> <S>
Framingham Corporate Center 1984/1985,92 $16,073 166 95% general part-
Framingham, MA nership interest1
Office building
Glenhardie Corporate Center
I and II 1979,82/1985 $17,792 126 Fee Interest
Valley Forge, PA
Two office buildings
Century Square, Pasadena, CA 1984/1985 $29,100 206 75% general part-
Office building nership interest2
Wallkill Plaza, Orange County, NY 1986/1986 $18,775 203 Fee Interest3
Shopping center
United Services Life Building 1982/1986 $27,000 212 Fee Interest
Bellevue, Washington
Office building
Pavilions at East Lake, Atlanta, GA 1986/1986 $15,600 148 Fee Interest
Shopping center
Taxter Corporate Park 1987,88/1986,88 $7,659 345 14.8% general part-
Westchester County, NY nership interest4
Office building
1. The Managing General Partner owns the remaining 5% general partnership interest.
2. Dean Witter Realty Income Partnership I, L.P., an affiliate of the partnership, owns the remaining
25% general partnership interest. The total cost of the property was $38.8 million.
3. Sold subsequent to fiscal year end. See Item 7, Management's Discussion and Analysis of Financial
Condition, and Note 5 to the consolidated financial statements in Item 8.
4. Dean Witter Realty Income Partnership III, L.P. and Dean Witter Realty Income Partnership IV, L.P,
affiliates of the Partnership, own the remaining 44.6% and 40.6% general partnership interests.
Each property has been built with on-site parking facilities.
</TABLE>
An affiliate of the Partnership is the property manager for Century
Square, Taxter Corporate Park, Framingham Corporate Center, Wallkill
Plaza and the co-property manager for the Glenhardie Corporate Center.
Further information relating to the Partnership's properties is
included in Item 7 and footnotes 4, 5 and 6 to the consolidated financial
statements included in Item 8 below.
ITEM 3. LEGAL PROCEEDINGS.
On December 27, 1995, a class action lawsuit naming various public
real estate partnerships sponsored by Realty (including the Partnership
and its Managing General Partner and Associate General Partner), Realty,
Dean Witter Reynolds Inc. and others as defendants was filed in Superior
Court in California. The complaint alleges fraud, negligent
misrepresentation, intentional and negligent breach of fiduciary duty,
unjust enrichment and related claims and seeks compensatory and punitive
damages in unspecified amounts and injunctive and other equitable relief.
The defendants have removed the case to the United States District Court
for the Southern District of California. The defendants have not yet
responded to the complaint. The defendants intend to vigorously defend
the action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the fiscal year
to a vote of Unit holders.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
An established public trading market for the Units does not exist,
and it is not anticipated that such a market will develop in the future.
Accordingly, information as to the market value of a Unit at any given
date is not available. However, the Partnership does allow its limited
partners (the "Limited Partners") to transfer their units if a suitable
buyer can be located.
As of January 25, 1996, there were 27,685 holders of limited
partnership interests.
The Partnership is a limited partnership and, accordingly, does not
pay dividends. It does, however, make quarterly distributions of cash
to its partners. Pursuant to the partnership agreement, distributable
cash, as defined, is paid 90% to the Limited Partners and 10% to the
general partners (the "General Partners").
The Partnership paid quarterly cash distributions during the year
ended October 31, 1995 aggregating $40.00 per Unit to Limited Partners.
The total distribution amounted to $7,867,688, with $7,080,920
distributed to the Limited Partners and $786,768 distributed to the
General Partners. Additionally, in fiscal 1995, the Partnership repaid
$2,784,417 of deferred distributions owed to the General Partners.
During the year ended October 31, 1994, the Partnership paid quarterly
cash distribution aggregating $30.00 per Unit to Limited Partners. The
total distribution amounted to $5,900,766, with $5,310,690 distributed
to the Limited Partners and $590,076 distributed to the General Partners.
On November 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 anticipates making regular distributions to its
partners in the future.
Sale or financing proceeds will be distributed, to the extent
available, first, to each Limited Partner, until there has been a return
of the Limited Partner's capital contribution plus cumulative
distributions of distributable cash and sale or financing proceeds in an
amount sufficient to provide a 9% cumulative annual return on the Limited
Partner's adjusted capital contribution. Thereafter, any remaining sale
or financing proceeds will be distributed 85% to the Limited Partners and
15% to the General Partners after the Managing General Partner receives
a brokerage fee of up to 3% of the selling price of any equity
investment.
Taxable income generally is allocated in the same proportions as
distributions of distributable cash or sale or financing proceeds (except
that the General partner must be allocated at least 1% of taxable income
from sales or financings). In the event there is no distributable cash
or sale or financing proceeds, taxable income is allocated 90% to the
Limited Partners and 10% to the General Partners. Any tax loss will be
allocated 90% to the Limited Partners and 10% to the General Partners.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
The following sets forth a summary of the selected financial data for the
Partnership:
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
For the years ended October 31, 1995, 1994, 1993, 1992 and 1991
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total revenues $ 18,474,708 $ 18,995,554 $ 15,392,848 $ 19,024,121 $ 16,701,176
2
Net (loss) income $ (1,079,686) $ 3,961,466 $ 747,552 $ 3,664,354 $ 2,817,986
Net (loss) income per
Unit of
limited
partnership 1 2
interest $ (8.25) $ 20.14 $ 4.25 $ 18.63 $ 14.33
Cash distributions3
paid per Unit
of limited
partnership 4
interest $ 40.00 $ 30.00 $ 29.52 $ 15.00 $ 26.25
Total assets at
October 31 $126,033,674 $137,953,991 $141,748,117 $150,891,740 $160,145,548
1. Includes a $4.9 million write-down of real estate held for sale. See Item 7 and Note
5 to the consolidated financial statements in Item 8.
2. Includes a $0.8 million gain on sale of real estate and a $4.1 million
loss in joint venture equity due to writedown recorded at Taxter
Corporate Park. See Item 7, and Item 8 Financial Statements,
Notes 5 and 6.
3. Distributions paid to limited partners include a return of capital per Unit of limited partnership
interest of $40.00, $9.86, $21.64 and $11.92 for the years ended October 31, 1995, 1994, 1993 and
1991, respectively, calculated as the excess of cash distributed per Unit over accumulated
earnings per Unit not previously distributed.
4. Includes $4.49 per Unit distribution of proceeds from sale of real estate.
See Note 5 to consolidated financial statements, Item 8.
The above financial data should be read in conjunction with the
consolidated financial statements and the related notes appearing in Item
8.
/TABLE
<PAGE>
ITEM 7. 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 sold in May 1993,
and one sold subsequent to October 31, 1995) and made three investments
in partnerships on an all-cash basis. The Partnership's acquisition
program has been completed. No additional investments are planned.
The condition of the real estate market varies among different
regions of the country and by property type. The relative absence of
office construction as well as growth in business services is providing
for absorption of office space in cities such as Boston and Seattle (the
locations of Framingham Corporate Center and United Services Life,
respectively). In contrast, office vacancy levels in Los Angeles,
suburban Philadelphia and Westchester County, New York (where Century
Square, Glenhardie Corporate Center and Taxter Corporate Park,
respectively, are located) remain essentially unchanged from the prior
years as certain large corporations and financial companies continue to
restructure and consolidate their operations. In most markets, office
construction is limited to build-to-suit projects. At retail properties,
the demand for space for the first half of 1995 was subdued as a result
of generally sluggish retail sales and competition from large power
centers, discounters and reorganized department stores.
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, and the credit-worthiness
of Countrywide, the Managing General Partner considers the terms of the
new agreement favorable. The restructured lease is expected to result
in stable cash flow from this property for a total of fifteen years at
a higher level than comparable current market rents.
In the fourth fiscal quarter of 1995, the Partnership determined to
sell the Wallkill Plaza Shopping Center and, in October entered into an
agreement (amended December 1, 1995) with New Plan Realty Trust, an
unaffiliated party, to do so, for a negotiated sale price of
approximately $12.2 million.
At closing, $11 million of the sale price was received in cash. The
remaining $1.2 million was represented by a promissory note, the
repayment of which is contingent on the resolution of the lease of
Bradlees, which is in bankruptcy. The cash flow from operations from the
Wallkill Plaza Shopping Center was approximately $1.2 million for the
year ended October 31, 1995. See Note 5 to the consolidated financial
statement in Item 8.
The Partnership's liquidity depends on the cash flow from operations
of its properties, less expenditures for tenant improvements and leasing
commissions in connection with the leasing of space. In 1995, all of the
Partnership's properties generated positive cash flow from operations,
and it is anticipated that they will continue to do so.
In addition, the Partnership's liquidity is affected by the sale of
Partnership's properties. The Partnership received $10.8 million in the
first fiscal quarter of 1996 from the sale of Wallkill Plaza. In
accordance with the provisions of the Partnership Agreement, the net
sales proceeds of $60.65 per Unit will be distributed to the Limited
Partners in February 1996 and represents a return of invested capital.
Because the Partnership has fewer income producing investments, the
Partnership's cash from operations available for distribution is expected
to decline in 1996 and thereafter.
In 1995, the Partnership's cash flow from operations and
distributions received from its joint venture investment exceeded
distributions to partners, capital expenditures and minority interest
share of distributions from the Century Square property by approximately
$396,000. The net decrease in cash and cash equivalents in 1995 is due
to the use of excess cash reserves to repay the deferred distributions
of $2,784,417 owed to the General Partners.
In 1995, the Partnership incurred approximately $2,492,000 of tenant
improvements and leasing commissions (net of capital contributions by
minority interest), including approximately $1,523,000 at the Century
Square building, approximately $402,000 at United Services Life Building,
and approximately $394,000 at the Framingham Corporate Center. In 1994,
tenant improvements also approximated $2.5 million.
The Partnership has committed to demolish the existing A&P space at
Pavilions at East Lake (approximately 39,000 square feet) to build a new
Kroger supermarket (approximately 63,000 square feet) at an estimated
cost of $3.7 million. In addition, the Partnership is considering
certain non-essential discretionary improvements and upgrades at the
United Services Life Building the cost of which could range between
$250,000 and $650,000. These improvements will be funded from
Partnership's cash reserves.
The decrease in other assets during the twelve months ended October
31, 1995 primarily resulted from the decrease in the accrual to recognize
rental income on a straight-line basis.
On November 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.
Except as discussed above and in the Consolidated Financial
Statements, the Managing General Partner is not aware of any trends or
events, commitments or uncertainties that will have a material impact on
liquidity.
Operations
Fluctuations in the Partnership's operating results for the year
ended October 31, 1995 compared to 1994 and for the year ended October
31, 1994 compared to 1993 are primarily attributable to the following:
The decrease in rental income in 1995 compared to 1994 is primarily
due to reduced pass-through income under the revised Countrywide lease
at the Century Square property. The decrease in rental income in 1994
as compared to 1993 is primarily due to the sale of the Sardis Crossing
property in May 1993 and lower rents recognized at Glenhardie Corporate
Center I and Wallkill Plaza in 1994, offset by higher rental income at
the United Services Life Building and the Framingham Corporate Center.
The increase in equity in earnings (loss) of joint venture in 1994
compared to 1993 is due primarily to the Partnership's share of the
writedown for the impairment in value of Taxter Corporate Park of
approximately $4.1 million in the fourth quarter of 1993.
The increase in interest and other income in 1995 compared to 1994
is primarily due to lease termination income of approximately $354,000
from Blue Cross, the largest tenant at Framingham Corporate Center, which
terminated certain of its leases covering approximately 18% of the
property's space in the first quarter of 1995. This space was re-leased
to new tenants prior to January 31, 1995.
Property operating expenses declined slightly in 1995 compared to
1994 primarily due to the absence of legal fees incurred in connection
with the lawsuit against a construction contractor at the Century Square
office building. The slight decrease in property operating expenses in
1994 compared to 1993 is primarily attributable to lower utility and
repair and maintenance expenses at the Glenhardie office buildings in
1994 and the sale of the Sardis Crossing property in 1993, partially
offset by the absence of legal fees described earlier.
Depreciation in 1995 decreased compared to 1994 primarily because
certain of the assets at Framingham Corporate Center and Glenhardie
Corporate Center are fully depreciated at October 31, 1994. The increase
in depreciation in 1994 compared to 1993 reflects increased expenditures
for tenant improvements in 1994.
The increase in amortization in 1995 compared to 1994 relates to
increased expenditures for leasing commissions in 1995 mainly at the
Century Square property and the United Services Life building.
Amortization decreased in 1994 compared to 1993 because of a substantial
portion of leasing commissions became fully amortized in 1993 at the
United Services Life and Pavilions at East Lake properties, and because
of the sale of the Sardis Crossing property. These decreases are
partially offset by amortization on leasing commissions incurred
primarily at Glenhardie Corporate Center and Pavilions at East Lake in
fiscal 1993 and 1994.
The loss on write-down of real estate held for sale is discussed in
Note 5 to the financial statements in Item 8.
The decreases in interest expense in 1994 compared to 1993 is due
to the repayment of the bank loan in June 1993.
The decrease in minority interest in 1995 compared to 1994 is mainly
attributable to reduced pass-through income under the revised Countrywide
lease at the Century Square property as well as an increase in
amortization expense from leasing commissions associated with the
Countrywide lease.
The gain on sale of real estate in 1993 results from the sale of the
Sardis Crossing property. Absent such gain, the Partnership would have
experienced a net loss in 1993.
A summary of the markets in which the Partnership's office
properties are located and the performance of each property is as
follows:
The Boston suburban office market, the location of the Framingham
Corporate Center, is strong with a limited amount of space available.
The current market vacancy rate is approximately 8% due to the relative
absence of office construction as well as growth in business services.
As of October 31, 1995, the building was 97% leased to 15 tenants.
Tenants occupying more than 10% of rentable square feet are ASB Meditest,
Blue Cross/Blue Shield, NYNEX, and Customer Development. Blue Cross
vacated its space in December 1994 and paid the Partnership a termination
fee of approximately $350,00 on approximately 28,000 square feet. During
the first half of 1995, all of this space was re-leased to several
tenants at higher rental rates. Blue Cross continues to pay rent on its
remaining 33,000 square feet of vacant space. The lease on this space
expires October 1996. The Partnership is working with Blue Cross to re-
lease this space. The NYNEX lease for approximately 10% of the
property's space, expired in August 1995 and was extended through
December 1995. The Partnership is currently marketing this space.
The decline in the office market in Westchester County, New York,
the location of Taxter Corporate Park, has recently stabilized and the
current vacancy level in this market is approximately 22%. The Managing
General Partner believes, it is unlikely that this vacant space will be
absorbed in the market for several years. However, during 1995, and at
October 31, 1995, the property was 98% leased to 24 tenants. KLM Royal
Dutch Airlines owns a long-term leasehold interest in approximately 20%
of the space at the property. The leases of Fuji Photo Film, the other
major tenant (for approximately 24% of the property's space) have been
renewed through 2001. Other leases aggregating approximately 12% of the
space are scheduled to expire in 1997.
Glenhardie Corporate Center I and II are located in Valley Forge,
Pennsylvania, a market in which the vacancy rate is approximately 16%.
The area still experiences slow leasing activity and continues to face
corporate downsizing pressures. As of October 31, 1995, the buildings
were 98% leased to 11 tenants. Tenants occupying more than 10% of
rentable square feet are SunGuard Data Corporation and USERS Inc. Leases
covering 11% of the space are due to expire in fiscal 1996.
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 remain constant as there has been a noticeable lack
of movement in that market. However, Century Square remained 100% leased
during the year. The property's largest tenant, Countrywide Credit,
occupies 84% of the property's rentable space. No leases are due to
expire in fiscal 1996.
The market in Bellevue, Washington, the location of the United
Services Life Building, has been absorbing office space at a steady pace
and 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 as the availability of large
blocks of contiguous space is limited. The growth in the computer
industry and professional service firms has offset the employment loss
created by Boeing's downsizing over the past two years. As of October
31, 1995, the building was 98% leased to 26 tenants. Tenants occupying
more than 10% of rentable square feet are AT&T Wireless and Asymetrix.
Asymetrix Corporation, which occupies approximately 30% of the property's
space and whose leases expire in late 1996 and 1998, has announced that
they will consolidate this office space at a different location. Given
current markets conditions, the Partnership does not expect to have a
difficult time re-leasing this space.
A summary of the markets in which the Partnership's retail
properties are located and the leasing status of each property are as
follows:
Pavilions at East Lake is located in an area of suburban Atlanta
which experienced significant retail development in the 1980's. Large
retailers of consumer electronics, appliances and toys continue to
increase retail market share at the expense of department stores and
smaller local tenants. Currently, the vacancy rate in this market is
20%. As of October 31, 1995, the center was 87% leased to 34 tenants.
Tenants occupying more than 10% of rentable square feet are A&P and
Michaels. A&P, which occupied 27% of the leased space had vacated its
space in 1994 but continued to pay rent. A&P's lease was scheduled to
expire in 2006 but was cancelled in 1995 on payment of a termination fee.
Its space is being demolished and a new Krogers prototype store is being
constructed at a cost of approximately $3.7 million. Rental revenue from
Kroger is expected to be slightly higher than the previous rental
revenues. A new shopping center recently opened which directly competes
with the property.
Wallkill Plaza, located in Wallkill, New York is in an overbuilt
retail market. However, occupancy at the property remained at 86%. As
noted above, the property was sold subsequent to fiscal year-end. See
Item 8 Financial Statements, Note 5.
Inflation
Inflation has been consistently low during the periods 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>
<TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
INDEX
Page
<S> <C>
(a) Financial Statements
Independent Auditors' Report 14
Consolidated Balance Sheets at October 31, 1995 and 1994 15
Consolidated Statements of Operations for the years ended
October 31, 1995, 1994 and 1993 16
Consolidated Statements of Partners' Capital for the
years ended October 31, 1995, 1994 and 1993 17
Consolidated Statements of Cash Flows for the years
ended October 31, 1995, 1994 and 1993 18-19
Notes to Consolidated Financial Statements 20-28
(b) Financial Statement Schedule
Real Estate and Accumulated Depreciation III 34-35
All schedules other than that indicated above have been omitted because either
the required information is not applicable or the information is shown in the
consolidated financial statements or notes thereto.
</TABLE>
<PAGE>
Independent Auditors' Report
To The Partners of
Dean Witter Realty Income Partnership II, L.P.:
We have audited the accompanying consolidated balance sheets of Dean
Witter Realty Income Partnership II, L.P. and consolidated partnerships
(the "Partnership") as of October 31, 1995 and 1994 and the related
consolidated statements of operations, partners' capital, and cash flows
for each of the three years in the period ended October 31, 1995. Our
audits also included the financial statement schedule listed in the Index
at Item 8. These financial statements and financial statement schedule
are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on the financial statements and
the financial statement schedule 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 management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Dean Witter Realty Income Partnership
II, L.P. and consolidated partnerships as of October 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the
three years in the period ended October 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
January 24, 1996
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED BALANCE SHEETS
October 31, 1995 and 1994
<CAPTION>
ASSETS
1995 1994
<S> <C> <C>
Cash and cash equivalents, at cost
which approximates market $ 7,424,199 $ 9,812,279
Real estate, at cost:
Land 15,821,935 18,121,935
Buildings and improvements 130,152,151 146,235,433
145,974,086 164,357,368
Accumulated depreciation 45,806,137 43,775,258
100,167,949 120,582,110
Real estate held for sale 10,769,096 -
Investment in joint venture 2,730,575 2,759,347
Deferred leasing commissions, net 2,009,275 1,328,063
Other assets 2,932,580 3,472,192
$126,033,674 $137,953,991
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 714,941 $ 740,683
Security deposits 256,758 271,331
Minority interests in joint ventures 8,341,537 8,489,748
Deferred distributions - 2,784,417
9,313,236 12,286,179
Partners' capital (deficiency)
General partners (3,537,743) (3,131,626)
Limited partners ($1,000 per Unit, 177,023 units issued) 120,258,181 128,799,438
Total partners' capital 116,720,438 125,667,812
$126,033,674 $137,953,991
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended October 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Rental $17,249,584 $18,076,876 $18,652,759
Equity in earnings (loss) of joint venture 306,711 346,296 (3,810,029)
Interest and other 918,413 572,382 550,118
18,474,708 18,995,554 15,392,848
Expenses:
Property operating expenses 6,803,324 6,866,522 6,993,622
Depreciation 6,053,280 6,309,155 6,250,212
Amortization 611,819 561,595 677,917
Interest - - 183,130
General and administrative 725,508 710,712 771,971
Loss on write-down of real estate held for sale 4,886,200 - -
19,080,131 14,447,984 14,876,852
(Loss) income before minority interests (605,423) 4,547,570 515,996
Minority interests 474,263 586,104 562,451
(Loss) income before gain on sale of
real estate (1,079,686) 3,961,466 (46,455)
Gain on sale of real estate - - 794,007
Net (loss) income $(1,079,686) $ 3,961,466 $ 747,552
Net (loss) income allocated to:
Limited Partners $ (1,460,337) $3,565,319 $ 752,198
General Partners 380,651 396,147 (4,646)
$(1,079,686) $ 3,961,466 $ 747,552
Net (loss) income per Unit of limited
partnership interest $(8.25) $20.14 $4.25
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the years ended October 31, 1995, 1994 and 1993
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at October 31, 1992 $135,018,329 $(2,588,839) $132,429,490
Net income (loss) 752,198 (4,646) 747,552
Distributions (5,225,718) (344,212) (5,569,930)
Partners' capital (deficiency)
at October 31, 1993 130,544,809 (2,937,697) 127,607,112
Net income 3,565,319 396,147 3,961,466
Distributions (5,310,690) (590,076) (5,900,766)
Partners' capital (deficiency)
at October 31, 1994 128,799,438 (3,131,626) 125,667,812
Net loss (1,460,337) 380,651 (1,079,686)
Distributions (7,080,920) (786,768) (7,867,688)
Partners' capital (deficiency)
at October 31, 1995 $120,258,181 $(3,537,743) $116,720,438
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (1,079,686) $ 3,961,466 $ 747,552
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 6,053,280 6,309,155 6,250,212
Loss on write-down of real estate held for sale 4,886,200 - -
Amortization 611,819 561,595 677,917
Minority interests in joint venture's operations 474,263 586,104 562,451
Equity in (earnings) loss of joint venture (306,711) (346,296) 3,810,029
Gain on sale of real estate - - (794,007)
Decrease (increase) in operating assets:
Deferred leasing commissions (1,299,609) (113,416) (805,396)
Other assets 539,612 1,028,668 (123,719)
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities (25,742) (282,810) 171,185
Security deposits (14,573) (69,077) 30,186
Net cash provided by operating activities 9,838,853 11,635,389 10,526,410
Cash flows from investing activities:
Additions to real estate (1,314,951) (2,367,774) (693,215)
Cost recoveries on real estate 27,114 835,000 -
Distributions from Taxter joint venture 502,174 461,460 508,352
Investment in Taxter joint venture (166,691) (227,576) (127,434)
Proceeds from sale of real estate - - 6,379,216
Net cash provided by (used in) investing activities (952,354) (1,298,890) 6,066,919
Cash flows from financing activities:
Cash distributions to partners (7,867,688) (5,900,766) (5,422,410)
Repayment of deferred distribution (2,784,417) (928,139) -
Repayment of loan payable to bank - - (4,250,035)
Additional investment by minority interest 387,503 10,358 8,987
Minority interests in joint venture's distributions (1,009,977) (1,171,262) (991,540)
Net cash used in financing activities (11,274,579) (7,989,809) (10,654,998)
(Decrease) increase in cash and short-term
investments (2,388,080) 2,346,690 5,938,331
Cash and cash equivalents at beginning
of fiscal year 9,812,279 7,465,589 1,527,258
Cash and cash equivalents at end of fiscal year $ 7,424,199 $ 9,812,279 $ 7,465,589
Supplemental disclosure of cash flow information:
Cash paid for interest $ - $ - $ 183,130
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER INCOME PARTNERSHIP II, L.P.
Consolidated Statements of Cash Flows
For the years ended October 31, 1995, 1994 and 1993
(Cont'd)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Supplemental disclosure of non-cash investing activities:
Reclassification of real estate held for sale:
Real estate, at cost
Land $ 2,300,000 $ - $ -
Buildings and improvements 17,397,188 - -
Accumulated depreciation (4,041,892) - -
Loss on write-down of real estate held
for sale (4,886,200) - -
Real estate held for sale $ 10,769,096 $ - $ -
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
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 is managed by Dean Witter Realty Income
Properties II Inc. (the "Managing General Partner"). The Partnership's
fiscal year ends on October 31.
In 1985, the Partnership issued 177,023 units of limited partnership
interest (the "Units") for $177,023,000. No additional Units will be
sold. The proceeds of the offering were used to make equity
investments in income-producing office and retail properties which were
not encumbered by debt when acquired.
2. Summary of Significant Accounting Policies
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 14.8% interest in the Taxter Corporate Park
property because of the Partnership's continuing ability to exert
significant influence. Affiliates of the Partnership, Dean Witter
Realty Income Partnership III, L.P. and Dean Witter Realty Income
Partnership IV, L.P. own the remaining 44.6% and 40.6% general
partnership interests, respectively.
The Partnership owns a 75% general partnership interest in Century
Square, an affiliate of the partnership, Dean Witter Realty Income
Partnership I, L.P., owns the remaining 25% general partnership
interest. The Partnership owns a 95% general partnership interest in
Framingham Corporate Center; the Managing General Partner owns the
remaining 5% interest.
The Partnership's records are maintained on the accrual basis of
accounting for financial reporting and tax purposes. The preparation
of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The carrying value of real estate includes the purchase price paid by
the Partnership and acquisition fees and expenses. Costs of
improvements to the properties are capitalized, and repairs are
expensed. Depreciation is recorded on the straight-line method.
At least annually, and more often if circumstances dictate, the
Partnership evaluates the recoverability of the net carrying value of
its real estate. As part of this evaluation, the fair values of each
of the properties are estimated (in some cases with the assistance of
outside real estate consultants) based on discounted cash flows. The
fair values are compared to the properties' carrying amounts in the
financial statements. A deficiency in fair value relative to carrying
amount is an indication of the need for a writedown due to impairment.
In such case, the expected future net cash flows from the property are
estimated for a period of approximately five years, along with
estimated sales proceeds at the end of the period. If the total of
these future undiscounted cash flows were less than the carrying amount
of the property, the property would be written down to its fair value,
and a loss on impairment recognized by a charge to earnings. The
Partnership's accounting policy complies with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of".
Because the determination of fair value is based upon projections of
future economic events such as property occupancy rates, rental rates,
operating cost inflation and market capitalization rates which are
inherently subjective, the amounts ultimately realized at disposition
may differ materially from the net carrying value as of October 31,
1995. The cash flows used to determine fair value and net realizable
value are based on good faith estimates and assumptions developed by
the Managing General Partner. Unanticipated events and circumstances
may occur and some assumptions may not materialize; therefore actual
results may vary from the estimates and the variances may be material.
The Partnership may provide additional write-downs which could be
material in subsequent years if real estate markets or local economic
conditions change.
Cash and cash equivalents consist of cash and highly liquid investments
with maturities, when purchased, of three months of less.
Deferred leasing commissions are amortized over the applicable lease
terms.
Rental income is accrued on a straight-line basis over the terms of the
leases. Accruals in excess of amounts payable by tenants pursuant to
their leases (resulting from rent concessions or rents which
periodically increase over the term of a lease) are recorded as
receivable and included in other assets.
Net income (loss) per Unit amounts are calculated by dividing net
income (loss) allocated to Limited Partners, in accordance with the
Partnership Agreement, by the weighted average number of Units
outstanding.
No provision for income taxes has been made in the financial
statements, since the liability for such taxes is that of the partners
rather than the Partnership.
For income tax purposes, Partnership results are reported for the
calendar year. The accounting policies used for tax reporting purposes
differ from those used for financial reporting as follows: (a)
depreciation is calculated using accelerated methods, (b) rental income
is recognized based on the payment terms in the applicable leases, and
(c) writedowns for impairment of real estate are not deductible. In
addition, offering costs are treated differently for tax and financial
reporting purposes. The tax basis of the Partnership's assets and
liabilities is approximately $11.0 million higher than the amounts
reported for financial statement purposes.
3. Partnership Agreement
The Partnership Agreement provides that distributable cash, as defined,
is paid 90% to the Limited Partners and 10% to the General Partners.
Sale or financing proceeds will be distributed, to the extent
available, first, to each Limited Partner, until there has been a
return of the Limited Partner's capital contribution, plus cumulative
distributions of distributable cash and sale or financing proceeds in
an amount sufficient to provide a 9% cumulative annual return on the
Limited Partner's adjusted capital contribution. Thereafter, any
remaining sale or financing proceeds will be distributed 85% to the
Limited Partners and 15% to the General Partners after the Managing
General Partner receives a brokerage fee of up to 3% of the selling
price of any equity investment.
Taxable income generally is allocated in the same proportions as
distributions of distributable cash or sale or financing proceeds
(except that the General partner must be allocated at least 1% of
taxable income from sales or financings). In the event there is no
distributable cash or sale or financing proceeds, taxable income is
allocated 90% to the Limited Partners and 10% to the General Partners.
Any tax loss will be allocated 90% to the Limited Partners and 10% to
the General Partners.
Distributions paid to limited partners include returns of capital per
Unit of limited partnership interest of $40.00, $9.86 and $21.64 for
the years ended October 31, 1995, 1994 and 1993, respectively,
calculated as the excess of cash distributed per Unit over accumulated
earnings per Unit not previously distributed.<PAGE>
<TABLE>
4. Real Estate Investments
The locations, years of acquisition and net carrying values of the
properties are as follows:
<CAPTION>
Carrying Value
Year of at October 31,
Property Acquisition 1995 1994
<S> <C> <C> <C>
Framingham Corporate Center,
Framingham, MA 1985 $ 17,006,057 $ 18,096,036
Glenhardie I and II,
Valley Forge, PA 1985 14,734,654 15,420,078
Century Square,
Pasadena, CA 1985 32,185,831 33,129,398
Wallkill Plaza,
Orange County, NY1 1986 - 16,084,429
United Services Life Building,
Bellevue, Washington 1986 22,732,540 24,036,993
Pavilions at East Lake,
Atlanta, GA 1986 13,508,867 13,815,176
$100,167,949 $120,582,110
1. Reclassified to real estate held for sale. See Note 5.
</TABLE>
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
$100,000 and $835,000 in 1995 and 1994, respectively, and will receive
an additional $100,000 in fiscal year 1996. The Partnership recorded
proceeds of $27,000 and $835,000 in 1995 and 1994, respectively, which
represent the recovery of costs incurred and capitalized to correct the
defects, as a reduction of building and improvement costs. The
remaining $73,000 of proceeds in 1995 represents a recovery of legal
costs.
5. Sales of Real Estate
In the fourth fiscal quarter of 1995, the Partnership determined to
sell the Wallkill Plaza Shopping Center, and in October entered into
an agreement (amended December 1, 1995) with New Plan Realty Trust, an
unaffiliated party, to do so.
As part of the agreement, two affiliated public partnerships, Dean
Witter Realty Income Partnership III, L.P. and Dean Witter Realty Yield
Plus L.P., also agreed to sell certain shopping centers owned by them.
The closing of the sale of the Wallkill Plaza Shopping Center, for a
negotiated sale price of approximately $12.2 million, took place on
December 11, 1995.
At closing, a contingent promissory note for $1.2 million of the
purchase price was issued by the Purchaser to the Partnership. A
portion of the space in the Wallkill Plaza Shopping Center is leased
to The Stop & Shop Companies, Inc. ("S&S") and assigned to Bradlees,
which is in bankruptcy. If, in the bankruptcy proceedings, the lease
is assumed by Bradlees, the note will be payable in full, plus interest
at 4.5%. If, at December 11, 2000, the lease has neither been assumed
nor rejected nor deemed rejected by Bradlees, an amount equal to one
half of the promissory note, plus interest on such half will be
payable, and the remaining amount of the promissory note will be
forgiven. If the lease is rejected or deemed rejected by Bradlees but,
until December 11, 2000, S&S makes all payments due under the lease,
the note will be payable in full, plus interest. If, however, the
lease is rejected or deemed rejected by Bradlees and S&S does not make
all payments due under the lease during the five-year period ending
December 11, 2005, the promissory note will be forgiven and the
Purchaser shall have no obligation to pay the Partnership any portion
of the $1.2 million.
Because of the sale , the net carrying value of the property has been
reclassified to real estate held for sale at October 31, 1995, and its
carrying value has been reduced to approximately $10.8 million,
resulting in a loss of approximately $4.9 million. In accordance with
the Partnership Agreement, 100% of the loss has been allocated to the
Limited Partners. The reduced carrying value represents the cash
portion of the sale price, net of closing costs. The portion of the
sale price represented by the $1.2 million promissory note has not been
recognized in revenue because of the uncertainty of its realization.
The net income from the property included in the Partnership's
statement of operations was approximately $752,000 for the year ended
October 31, 1995.
In May 1993, the Partnership sold the Sardis Crossing property for
$6,450,000, less closing costs. The net carrying value of the
property, including deferred costs, was approximately $5,585,000 at the
time of sale. $4,250,035 of the proceeds were used to repay the
Partnership's bank loan (which bore interest at prime plus three
quarter percent), and the remainder was distributed to the Limited
Partners. The gain on the sale ($4.49 per Unit) was allocated 100%
to the Limited Partners, in accordance with the Partnership Agreement.
6. Investment in Joint Venture
Taxter Corporate Park, Westchester County, New York
In 1986, the Partnership purchased a 14.8% general partnership interest
in the partnership which owns the property. Affiliates of the
Partnership, Dean Witter Realty Income Partnership III, L.P. and Dean
Witter Realty Income Partnership IV, L.P. purchased the remaining 44.6%
and 40.6% general partnership interests, respectively.
The partners receive cash flow and profits and losses according to
their interests.
In fiscal 1993, in accordance with its policy for evaluating the
recoverability of its real estate (which are the same as the
Partnership's), the partnership which owns the property concluded that
the value of the property was impaired. Accordingly, the partnership
which owns the property recorded a loss on impairment of approximately
$27.8 million at October 31, 1993. The Partnership's share of this
loss, approximately $4.1 million, was included in equity in earnings
(loss) of joint venture in 1993.
<PAGE>
<TABLE>
Summarized balance sheet information of the joint venture are as
follows:
<CAPTION>
October 31,
1995 1994
<S> <C> <C>
Land and buildings, net $18,575,100 $18,525,138
Other 1,427,047 1,720,405
Total assets $20,002,147 $20,245,543
Liabilities $ 165,593 $ 214,584
Partners' capital 19,836,554 20,030,959
Total liabilities and capital $20,002,147 $20,245,543
</TABLE>
<TABLE>
Summarized results of the operations of the joint venture are as follows:
<CAPTION>
Years ended October 31,
1995 1994 1993
<S> <C> <C> <C>
Rental income $ 6,267,312 $ 6,269,934 $ 6,516,950
Other income 92,483 81,301 100,967
6,359,795 6,351,235 6,617,917
Property operating expenses 3,168,141 3,020,235 2,956,814
Depreciation and amortization 1,119,284 991,163 1,576,393
Loss on impairment of real
estate - - 27,828,152
4,287,425 4,011,398 32,361,359
Net income (loss) $ 2,072,370 $ 2,339,837 $(25,743,442)
Activity in the investment in joint venture is as follows:
Years ended October 31,
1995 1994 1993
Investment at beginning
of year $ 2,759,347 $ 2,646,935 $ 6,837,882
Equity in earnings (loss) 306,711 346,296 (3,810,029)
Distributions (502,174) (461,460) (508,352)
Additional investments 166,691 227,576 127,434
Investment at end of year $ 2,730,575 $ 2,759,347 $ 2,646,935
</TABLE>
The accounting policies of the joint venture are the same as those of the
Partnership.
<TABLE>
7. Leases
Minimum future rental income under noncancellable operating leases as of
October 31, 1995 is as follows:
<S> <C>
Year ending October 31:
1996 $ 13,836,255
1997 11,317,316
1998 10,184,229
1999 8,229,728
2000 7,131,803
Thereafter 47,937,897
Total $ 98,637,228
</TABLE>
The Partnership has determined that all leases relating to its properties
are operating leases. The lease terms range from two to fifteen years,
and generally provide for fixed minimum rents with rental escalation
and/or expense reimbursement clauses.
Subsequent to year-end, the lease term of Countrywide Credit, the largest
tenant at the Century Square office building, was extended from March 2000
to March 2010. The rental rate will remain constant over the next five
years rather than increasing, as provided for under the original leases.
8. Related Party Transactions
An affiliate of the Managing General Partner provided property
management services for four properties in 1995 and 1994, and six
properties in 1993. The Partnership paid the affiliate management fees
(included in property operating expenses) of approximately $296,000,
$295,000 and $321,000 for the years ended October 31, 1995, 1994 and
1993, respectively.
Another affiliate of the Managing General Partner performs
administrative functions and processes certain investor and tax
information on behalf of the Partnership. For the years ended October
31, 1995, 1994 and 1993, the affiliate was reimbursed approximately
$522,000, $523,000 and $527,000, respectively, for these services.
These amounts have been recorded in general and administrative
expenses.
As of October 31, 1995, the affiliate was owed approximately $163,000
for these services.
Through October 31, 1994 and 1993, the General Partners had deferred
receipt of an aggregate amount of $2,784,417 and $3,712,556,
respectively, of distributions to which they were entitled, including
distributions of approximately $148,000 in 1993. Amounts deferred were
charged against partners' capital and recorded as liabilities to the
General Partners. In fiscal 1995 and 1994, the Partnership repaid
$2,784,417 and 928,139, respectively, of deferred distributions owed
to the General Partners.
9. Litigation
On December 27, 1995, a class action lawsuit naming various public real
estate partnerships sponsored by Dean Witter Realty Inc. ("Realty")
(including the Partnership and its Managing General Partner and
Associate General Partner), Realty, Dean Witter Reynolds Inc. and
others as defendants was filed in Superior Court in California. The
complaint alleges fraud, negligent, misrepresentation, intentional and
negligent breach of fiduciary duty, unjust enrichment and related
claims and seeks compensatory and punitive damages in unspecified
amounts and injunctive and other equitable relief. The defendants have
removed the case to the United States District Court for the Southern
District of California. The defendants have not yet responded to the
complaint. The defendants intend to vigorously defend the action.
It is impossible to predict what financial exposure the Partnership may
have as a result of this litigation.
10. Subsequent Event
On November 28, 1995, the Partnership paid a cash distribution of
$10.00 per Unit to the 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. <PAGE>
<TABLE>
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.
The Partnership is a limited partnership which has no directors or
officers.
The directors and executive officers of the Managing General Partner
are as follows:
<CAPTION>
Position with the
Name Managing General Partner
<S> <S>
William B. Smith Chairman of the Board of Directors
E. Davisson Hardman, Jr. President and Director
Lawrence Volpe Controller, Assistant Secretary and
Director
Ronald T. Carman Secretary and Director
</TABLE>
All of the directors have been elected to serve until the next
annual meeting of the shareholder of the Managing General Partner or
until their successors are elected and qualify. Each of the executive
officers has been elected to serve until his successor is elected and
qualifies.
William B. Smith, age 52, is a Managing Director of Dean Witter
Realty Inc. and has been with Dean Witter Realty Inc. since 1982. He is
an executive Vice President of Dean Witter Reynolds Inc.
E. Davisson Hardman, Jr., age 46, is a Managing Director of Dean
Witter Realty Inc. and has been with Dean Witter Realty Inc. since 1982.
Lawrence Volpe, age 48, is a Director and the Controller of Dean
Witter Realty Inc. He is a Senior Vice President and Controller of Dean
Witter Reynolds Inc., which he joined in 1983.
Ronald T. Carman, age 44, is a Director and the Secretary of Dean
Witter Realty Inc. He is a Senior Vice President and Associate General
Counsel of Dean Witter Discover & Co. and Dean Witter Reynolds Inc.,
which he joined in 1984.
There is no family relationship among any of the foregoing persons.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive cash distributions,
when and as cash distributions are made to the Limited Partners, and a
share of taxable income or tax loss. Descriptions of such distributions
and allocations are in Item 5 above. The General Partners were entitled
to receive cash distributions of $147,520 for the year ended October 31,
1993, which they agreed to defer. The General Partners no longer defer
their share of cash distributions. The General Partners received cash
distributions of $786,768, $590,076 and $344,212 for the years ended
October 1995, 1994 and 1993, respectively. In fiscal 1995 and 1994, the
Partnership repaid $2,784,417 and $928,139, respectively, of previously
deferred distributions owed to the General Partners.
The General Partners and their affiliates were paid certain fees and
reimbursed for certain expenses. Information concerning such fees and
reimbursements is contained in Item 8 Financial Statements, Note 8.
The directors and officers of the Partnership's Managing General
Partner received no remuneration from the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) No person is known to the Partnership to be the beneficial
owner of more than five percent of the Units.
(b) The directors and executive officers and directors of the
Managing General Partner own the following Units as of January 1, 1996:
<TABLE>
<CAPTION>
(1) (2) (3)
Amount and
Title of Name of Nature of
Class Beneficial Owner Beneficial Ownership
<S> <S> <S>
Limited All directors and executive *
Partnership officers of the Managing General
Interests Partner, as a group
* Own, by virtue of ownership of Limited Partnership interests in the
Associate General Partner, less than 1% of the Units of the
Partnership.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
As a result of their being partners of a limited partnership which
is the limited partner of the Associate General Partner, certain current
and former officers and directors of the Managing General Partner also
own indirect partnership interests in the Partnership. The Partnership
Agreement of the Partnership provides that cash distributions and
allocations of income and loss to the general partners be distributed or
allocated 50% to the Managing General Partner and 50% to the Associate
General Partner. The General Partners' share of cash distributions and
income or loss is described in Item 5 above.
All of the outstanding shares of common stock of the Managing
General Partner are owned by Realty, a Delaware corporation which is a
wholly-owned subsidiary of Dean Witter, Discover & Co. The general
partner of the Associate General Partner is Dean Witter Realty Income
Associates II Inc., which is a wholly-owned subsidiary of the Managing
General Partner. The limited partner of the Associate General Partner
is LSA 84 II L.P., a Delaware limited partnership. Realty and certain
current and former executive officers and directors of the Managing
General Partner are partners of LSA 84 II L.P. Additional information
with respect to the directors and executive officers and compensation of
the Managing General Partner and affiliates is contained in Items 10 and
11 above.
The General Partners and their affiliates were paid certain fees and
reimbursed for certain expenses. Information concerning such fees and
reimbursements is contained in Note 8 to the Consolidated Financial
Statements in Item 8 above. The Partnership believes that the payment
of fees and the reimbursement of expenses to the General Partners are on
terms as favorable as would be obtained from unrelated third parties.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements (see Index to Financial Statements filed as
part of Item 8 of this Annual Report).
2. Financial Statement Schedules (see Index to Financial Statements
filed as part of Item 8 of this Annual Report).
3. Exhibits
(3)(a) Amended and Restated Agreement of Limited Partnership
dated as of September 6, 1984 set forth in Exhibit A to
the Prospectus included in Registration Statement Number
2-93207 is incorporated herein by reference.
(3)(b) Certificate of Limited Partnership
(4)(a) Amended and Restated Agreement of Limited Partnership
dated as of September 6, 1984 set forth in Exhibit A to
the Prospectus included in Registration Statement Number
2-93207 is incorporated herein by reference.
(4)(b) Certificate of Limited Partnership
(9) Not applicable.
(10) Purchase and Sale Agreements for properties purchased
were filed as Exhibits to Form 8-K on May 24, 1985, July
15, 1985, October 29, 1985, November 15, 1985, February
27, 1986, August 29, 1986, September 4, 1986, December
18, 1986 and December 30, 1986 and are incorporated
herein by reference.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(18) Not applicable.
(19) Not applicable.
(21) Subsidiaries: Century Square Ventures, a California
limited partnership; Framingham Corporate Center LP, a
Massachusetts limited partnership.
(23) Not applicable.
(24) Not applicable.
(25) Not applicable.
(27) Financial Data Schedule.
(28) Not applicable.
(99) Not applicable.
(b) Reports on Form 8-K -
Report dated October 19, 1995, of the agreement to sell the land
and buildings which comprise the Wallkill Plaza shopping center.
Report dated December 11, 1995 of the closing of the sale of the
Wallkill Plaza Shopping Center.
(c) See Paragraph (a)(3) above.
(d) See Paragraph (a)(2) above.<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III
Initial cost to Partnership (A)
Cost
Capitalized
Building and Subsequent to
Description Land Improvements Total Acquisition
<S> <C> <C> <C> <C>
Office Building
Framingham, MA $2,061,399 $21,369,446 $23,430,845 $6,244,107
Office Buildings
Valley Forge, PA 2,000,000 16,534,152 18,534,152 3,349,774
Office Building
Pasadena, CA 6,429,000 33,907,000 40,336,000 3,877,915
Shopping Center
Wallkill, NY 2,300,000 17,300,870 19,600,870 70,249
Office Building
Bellevue, WA 2,831,536 25,483,828 28,315,364 4,813,365
Shopping Center
Atlanta, GA 2,500,000 13,858,607 16,358,607 713,957
$18,121,935 $128,453,903 $146,575,838 19,069,367
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at which
Carried at End of Period (B)
Amounts
Reclassified to
Real Estate Building and
Description Held for Sale Land Improvements Total
<S> <C> <C> <C> <C>
Office Building
Framingham, MA $ 2,061,399 $27,613,553 $29,674,952
Office Buildings
Valley Forge, PA 2,000,000 19,883,926 21,883,926
Office Building
Pasadena, CA 6,429,000 37,784,915 44,213,915
Shopping CenterD
Wallkill, NY (19,671,119) - - -
Office Building
Bellevue, WA 2,831,536 30,297,193 33,128,729
Shopping Center
Atlanta, GA 2,500,000 14,572,564 17,072,564
$(19,671,119) $15,821,935 $130,152,151 $145,974,086
/TABLE
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III (CONTINUED)
Life on which
Depreciation
in Latest Income
Accumulated Date of Date Statement is
Description Depreciation(C) Construction Acquired Computed
<S> <C> <C> <S> <S>
Office Building
Framingham, MA $12,668,895 1984 May 1985 5-40 years
Office Buildings
Valley Forge, PA 7,149,272 1979 July 1985 5-40 years
1982 November 1985
Office Building
Pasadena, CA 12,028,084 1984 October 1985 5-40 years
Shopping Center
Wallkill, NY - 1986 August 1986 5-40 years
Office Building
Bellevue, MA 10,396,189 1982 September 1986 5-40 years
Shopping Center
Atlanta, GA 3,563,697 1986 December 1986 5-40 years
$45,806,137
</TABLE>
<TABLE>
Notes:
(A) The initial cost includes the purchase price paid by the Partnership and acquisition fees and
expenses. There is no difference between cost for financial reporting purposes and cost for
federal income tax purpose.
<CAPTION>
(B) Reconciliation of real estate owned
at October 31: 1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of period $164,357,368 $162,989,118 $169,734,278
Additions (deletions) during period:
Acquisition of Minority interest - - -
Improvements 1,314,951 2,367,774 693,215
Cost recovery on capital improvements (27,114) (835,000) -
Cost of real estate sold - (6,229,880)
Write-offs due to lease expirations - (164,524) (1,208,495)
Reclassified to Real estate held
for sale (19,671,119) - -
Balance at end of period $145,974,086 $164,357,368 $162,989,118
(C) Reconciliation of accumulated depreciation:
Balance at beginning of period $ 43,775,258 $ 37,630,627 $ 33,818,402
Additions (deletions) during Period:
Depreciation expense 6,053,280 6,309,155 6,250,212
Accumulated Depreciation on real
estate sold - (1,229,492)
Write-offs due to lease expirations - (164,524) (1,208,495)
Reclassified to real estate held
for sale (4,022,401) - -
Balance end of period $ 45,806,137 $43,775,258 $37,630,627
(D) Property sold in December 1995. Carrying value reduced to reflect sales price and reclassified
as real estate held for sale.
/TABLE
<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.
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
By: Dean Witter Realty Income Properties II Inc.
Managing General Partner
By: Date: January 29, 1996
E. Davisson Hardman, Jr.
President
By: Date: January 29, 1996
Lawrence Volpe
Controller
(Principal Financial and 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 and on the dates indicated.
DEAN WITTER REALTY INCOME PROPERTIES II INC.
Managing General Partner
/s/William B. Smith Date: January 29, 1996
William B. Smith
Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: January 29, 1996
E. Davisson Hardman, Jr.
Director
/s/Lawrence Volpe Date: January 29, 1996
Lawrence Volpe
Director
/s/Ronald T. Carman Date: January 29, 1996
Ronald T. Carman
Director
<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
audited financial statements.
</LEGEND>
<CIK> 0000752744
<NAME> DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 7,424,199
<SECURITIES> 0
<RECEIVABLES> 2,387,459
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 126,033,674<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 116,720,438<F2>
<TOTAL-LIABILITY-AND-EQUITY> 126,033,674<F3>
<SALES> 0
<TOTAL-REVENUES> 18,474,708<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,554,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,079,686)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,079,686)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,079,686)<F5>
<EPS-PRIMARY> (8.25)<F6>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $100,167,949, real estate held for sale of $10,769,096,
investment in joint venture of $2,730,575, net deferred expenses of
$2,009,275 and other assets of $545,121.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of
$714,941, minority interest in joint venture of $8,341,537, and other
liabilities of $256,758.
<F4>Total revenue includes rent of $17,249,584, equity in earnings of joint
venture of $306,711, and interest and other revenues of $918,413.
<F5>Net loss includes loss on write-down of real estate held for sale of
$4,886,200.
<F6>Represents net loss per Unit of limited partnership interest.
</FN>
</TABLE>
