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, 1996
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
Page 1 of 35<PAGE>
PART I.
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 Note 8 to the Consolidated Financial Statements in
Item 8 and 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 five office properties and three retail properties (one was sold
in 1993, and one sold in December 1995) 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 consolidated
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.
<PAGE>
<TABLE>
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.
As of October 31, 1996, the Partnership owned directly or through a
partnership interest the following six 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.
<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> <C>
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
United Services Life Building 1982/1986 $27,000 212 Fee Interest3
Bellevue, Washington
Office building
Pavilions at East Lake,4 1986, 1996/1986 $19,300 164 Fee Interest
Atlanta, GA,
Shopping center
Taxter Corporate Park 1987,88/1986,88 $7,659 345 14.8% general part-
Westchester county, NY nership interest5
Two office buildings
</TABLE>
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. Under contract to be sold subsequent to fiscal year end. See Item 7,
Management's Discussion and Analysis of Financial Condition, and Note
10 to the consolidated financial statements in Item 8.
4. Includes $3.7 million expended in connection with approximately 16,000
square feet expansion in 1996. See Item 7, Management Discussion and
Analysis of Financial Condition.
5. 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, respectively.
Each property was built with on-site parking facilities.
In fiscal 1996, the Partnership sold the Wallkill Plaza shopping
center located in Orange County, New York.
An affiliate of the Partnership is the property manager for Century
Square, Taxter Corporate Park, Framingham Corporate Center 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 purported class action lawsuit (the "Grigsby
Action") 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.
("DWR") and others as defendants was filed in Superior Court in
California. The complaint alleged fraud, negligent
misrepresentation, intentional and negligent breach of fiduciary
duty, unjust enrichment and related claims and sought compensatory
and punitive damages in unspecified amounts and injunctive and other
equitable relief. The defendants removed the case to the United
States District Court for the Southern District of California.
Pursuant to an order of the U.S. District Court for the Southern
District of California entered May 24, 1996, the Grigsby Action was
transferred to the U.S. District Court for the Southern District of
New York.
On February 14, 1996, a purported class action lawsuit (the
"Schectman Action") naming various public real estate partnerships
sponsored by Realty (including the Partnership and its Managing
General Partner), Realty, Dean Witter, Discover & Co. ("DWD") and
DWR as defendants was filed in the Chancery Court of Delaware for
New Castle County (the "Delaware Chancery Court"). On February 23,
1996, a purported class action lawsuit (the "Dosky Action") naming
various public real estate partnerships sponsored by Realty
(including the Partnership and its Managing General Partner),
Realty, DWD, DWR and others as defendants was filed in the Delaware
Chancery Court. On February 29, 1996, a purported class action
lawsuit (the "Segal Action") naming various public real estate
partnerships sponsored by Realty (including the Partnership and its
Managing General Partner), Realty, DWR, DWD and others as defendants
was filed in the Delaware Chancery Court. On March 13, 1996, a
purported class action lawsuit (the "Young Action") naming the
partnership, other unidentified limited partnerships, DWD, DWR and
others as defendants was filed in the Circuit Court for Baltimore
City in Baltimore, Maryland. The defendants removed the Young
Action to the United States District Court for the District of
Maryland.
Thereafter, the Schectman Action, the Dosky Action and the Segal
Action were consolidated in a single action (the "Consolidated
Action") in the Delaware Chancery Court. The Young Action was
dismissed without prejudice. The plaintiffs in the Young Action and
the Grigsby Action joined the Consolidated Action. The Grigsby
Action remains stayed indefinitely subject to being reopened for
good cause.
On October 7, 1996, the plaintiffs in the Consolidated Action filed
a First Consolidated and Amended Class Action Complaint naming
various public real estate partnerships sponsored by Realty
(including the Partnership and its Managing General Partner),
Realty, DWD, DWR and others as defendants. This complaint alleges
breach of fiduciary duty and seeks an accounting of profits,
compensatory damages in an unspecified amount, possible liquidation
of the Partnership under a receiver's supervision and other
equitable relief. The defendants filed a motion to dismiss this
complaint on December 10, 1996.
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 22, 1997, there were 26,548 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, 1996 aggregating $99.24 per Unit (including $60.65
per Unit from proceeds from the sale of the Wallkill Plaza
property). The total distribution amounted to $18,326,385, with
$17,567,356 distributed to the Limited Partners and $759,029
distributed to the General Partners. The distribution from the
proceeds of the sale of the Wallkill Plaza shopping center was paid
100% to the Limited Parters. The Partnership paid quarterly cash
distributions during the year ended October 31, 1995 aggregating
$40.00 per Unit. 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.
On November 27, 1996, the Partnership paid a cash distribution of
$10.34 per Unit. The cash distribution aggregated $2,033,798 with
$1,830,418 distributed to the Limited Partners and $203,380
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, if earned, 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 Partners 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:
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
For the years ended October 31, 1996, 1995, 1994, 1993 and 1992
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Total revenues $ 17,414,607 $ 18,474,708 $ 18,995,554 $ 15,392,848 $ 19,024,121
Net (loss)
income $ (7,812,706)1 $ (1,079,686)2 $ 3,961,466 $ 747,5523 $ 3,664,354
Net (loss) income
per Unit of
limited partner-
ship interest $(39.72) $(8.25) $20.14 $4.25 $18.63
Cash distributions4
paid per Unit of
limited partner-
ship interest $99.245 $40.00 $30.00 $29.526 $15.00
Total assets at
October 31 $100,319,056 $126,318,743 $138,218,448 $142,002,243 $150,891,740
</TABLE>
1. Includes $11.9 million loss on impairment recorded for the Framingham
Corporate Center, Glenhardie Corporate Center I and II and Pavilions at
East Lake properties. See Item 7 and Note 4 to the Consolidated
Financial Statements in Item 8.
2. 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.
3. Includes a $0.8 million gain on sale of real estate and a $4.1 million loss
in joint venture equity due to a writedown for impairment recorded at
Taxter Corporate Park.
4. Distributions paid to limited partners include a return of capital per Unit
of limited partnership interest of $99.24, $40.00, $9.86, $21.64 and
$11.92 for the years ended October 31, 1996, 1995, 1994, 1993 and 1992,
respectively, calculated as the excess of cash distributed per Unit over
accumulated earnings per Unit not previously distributed.
5. Includes $60.65 per Unit distribution of proceeds from sale of Wallkill
Plaza shopping center. See Note 5 to the Consolidated Financial Statements
in Item 8.
6. Includes $4.49 per Unit distribution of proceeds from sale of real estate.
The above financial data should be read in conjunction with the consolidated
financial statements and the related notes appearing in Item 8.
<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 five properties (one sold in May 1993,
one sold in December 1995, and one under contract to be sold in
1997) and made three investments in partnerships on an all-cash
basis. The Partnership's acquisition program has been completed.
No additional investments are planned.
In most regions of the country, continued restraint of new office
construction and steady leasing have reduced office supply in office
markets, and, in certain areas, rental rates are rising. Some
office markets are faring better than others. For example, vacancy
is approximately 5% in the Boston suburban market, the location of
Framingham Corporate Center, and Bellevue, Washington, the location
of the United Services Life Building. Although vacancy in the
office market in suburban Philadelphia, the location of the
Glenhardie Corporate Center buildings, increased to 16% in 1996, the
Partnership expects that this market will improve. Vacancy in the
overall office market in Westchester County, New York, the location
of Taxter Corporate Park, is approximately 24%. Office properties
in the West are benefiting from expansion by the entertainment,
high-technology and telecommunications industries; however,
Pasadena, California, the location of the Century Square building,
continues to be negatively impacted by corporate mergers and
consolidations. Office construction remains primarily on a build-
to-suit basis as current rental rates do not justify speculative
investment. In the retail sector, a changing tenant base caused by
the domination of certain power center tenants coupled with
bankruptcies and major restructuring of other tenants and reduced
consumer spending have resulted in higher vacancies and stagnant
rents at many retail properties.
The closing of the sale of the Wallkill Plaza shopping center
occurred on December 11, 1995. The Partnership received $10.8
million. In accordance with the provisions of the Partnership
Agreement, the net sales proceeds (approximately $60.65 per Unit)
were distributed 100% to the Limited Partners in March 1996,
representing a return of invested capital. See Note 5 to the
consolidated financial statements. In 1996, the Partnership's cash
flow from operations decreased when compared to 1995 by
approximately $1,057,000 as a result of the sale of the shopping
center.
Barring a change in circumstances, the Managing General Partner
currently expects to market for sale the Partnership's office
properties and the Pavilions at East Lake shopping center during
fiscal 1997 and 1998, with the objective of completing sales of all
of the Partnership's properties by the end of fiscal year 1998.
However, there is no assurance that the Partnership will be able to
achieve these objectives.
In the fourth quarter of fiscal 1996, the Partnership engaged
brokers to market the Century Square and United Services Life office
buildings. In December, the Partnership agreed to sell the United
Services Life building for $33.75 million; see Note 10 to the
consolidated financial statements in Item 8.
The Partnership's liquidity depends on the cash flow from operations
of its properties, expenditures for building improvements, and
tenant improvements and leasing commissions in connection with the
leasing of space. During the year ended October 31, 1996, all of
the Partnership's properties and its joint venture investment
generated positive cash flow from operations, and the Partnership
expects that they will continue to do so.
The Partnership's liquidity is also affected by the sale of Wallkill
Plaza, and will be affected by sales of other Partnership
properties. As the Partnership has fewer income producing
investments, the Partnership's cash from operations available for
distribution will decline during 1997 and thereafter.
During the year ended October 31, 1996, the Partnership's cash flow
from operations and distributions received from the Taxter property
exceeded distributions to partners (exclusive of the distribution of
the sales proceeds from the Wallkill Plaza shopping center),
contributions to its joint venture and minority interest share of
distributions from the Century Square property. The Partnership
used the excess cash inflows in 1996 to fund a portion of its
capital expenditures; the remaining capital expenditures were funded
from cash reserves. In 1997, the Partnership expects that cash flow
from operations (net of minority interest share) and distributions
received from its joint venture investment will exceed distributions
to partners (other than distributions of net proceeds from future
property sales); the Partnership expects to fund a portion of
capital expenditures in 1997 from cash reserves.
The Partnership demolished the former A&P store at Pavilions at East
Lake (approximately 39,000 square feet) and built a new Kroger
supermarket (approximately 63,000 square feet) at an approximate
cost of $3.7 million, funded from Partnership cash reserves.
Substantially all work on the Kroger space was completed by October
31, 1996, and Kroger moved into its space in October 1996. As of
October 31, 1996, approximately $300,000 of the total costs of this
project were unpaid.
During the year ended October 31, 1996, the Partnership incurred
approximately $3,096,000 of other building improvements, tenant
improvements and leasing commissions (net of capital contributions
by minority interest), including tenant related capital expenditures
of approximately $1,055,000 at Framingham Corporate Center and
$1,378,000 at United Services Life Building.
As of October 31, 1996, the Partnership has commitments to fund
capital expenditures of approximately $325,000, primarily for tenant
related capital expenditures. These expenditures will be funded
from cash from operations and cash reserves.
Based on an assessment of the projected cash flow from operations of
the Partnership's properties and anticipated future cash needs, the
Partnership determined that it can distribute a portion of its cash
reserves. Accordingly, the Partnership increased the cash
distribution to $10.34 per Unit, effective with the third quarter
distribution paid August 29, 1996.
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 may have a material
impact on liquidity.
On November 27, 1996, the Partnership paid the fourth quarter cash
distribution of $10.34 per Unit. The total distribution aggregated
$2,033,798 with $1,830,418 distributed to the Limited Partners and
$203,380 distributed to the General Partners.
Operations
Fluctuations in the Partnership's operating results for the year
ended October 31, 1996 compared to 1995 and for the year ended
October 31, 1995 compared to 1994 are primarily attributable to the
following:
No individual factor accounted for a siginificant change in equity
in earnings of joint venture, amortization expense and general and
administrative expenses from 1995 to 1996 and 1994 to 1995.
Rental revenue decreased in 1996 compared to 1995 by approximately
$1,673,000 because of the sale of Wallkill Plaza, and by
approximatley $518,000 because the lease of A&P, a major anchor at
Pavilions at East Lake, terminated in December 1995. These
decreases were partially offset by higher rental income at the
Partnership's other properties; no individual property accounted for
a material increase. 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 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 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. In 1996, the
Partnership received termination fee income of approximately
$240,000 from Blue Cross for canceling its leases on its remaining
space at Framingham Corporate Center, and $100,000 from A&P for
canceling its leases at Pavilions at East Lake.
Property operating expenses decreased in 1996 compared to 1995
primarily due to the absence of approximately $585,000 of Wallkill
Plaza operating expenses. No individual factor accounted for a
significant change in property operating expenses from 1994 to 1995.
Depreciation decreased in 1996 compared to 1995 by approximately
$444,000 because of the sale of Wallkill Plaza and by $508,000 due
to lower depreciation charges at Framingham Corporate Center,
Glenhardie Corporate Center I and II and Pavilions at East Lake due
to the writedown of these properties in January 1996. Depreciation
decreased in 1995 compared to 1994 primarily because certain of the
assets at Framingham Corporate Center and Glenhardie Corporate
Center were fully depreciated at October 31, 1994.
In the first quarter of fiscal 1996, the Partnership recorded losses
on impairment of the Framingham Corporate Center, Glenhardie
Corporate Center I and II and Pavilions at East Lake properties
totalling $11,870,000. See Note 4 to the consolidated financial
statements.
The 1995 loss on write-down of real estate held for sale is
discussed in Note 5 to the financial statements.
A summary of the markets in which the Partnership's properties are
located and the performance of each property is as follows:
The vacancy rate in the office market in Framingham, Massachusetts,
a suburb of Boston and the location of Framingham Corporate Center,
decreased from 8% to 5% in fiscal 1996. Expansion by engineering,
software, financial consulting and health care companies is fueling
demand for office space in this area, and rental rates are rising.
During 1996, average occupancy at the property was 96%, and at
October 31, 1996, occupancy was 97%, the same as the prior fiscal
year-end. Also, in 1996, rental rates on renewals and new leases
increased at the property. The property is occupied by 13 tenants.
The leases of TJX Corporation (for approximately 27% of the
property's space), International Communications Inc. (for
approximately 17% of the space), CIO Publishing (for approximately
13% of the space) and IDG Corporation (for approximately 11% of the
space) expire in fiscal years 2002, 2002, 2001 and 2001,
respectively. There are no other significant leases.
The overall vacancy level in the office market in Westchester
County, New York, the location of Taxter Corporate Park increased
from 22% to 24% in 1996; the vacancy level in the west Westchester
market in which the building is located is currently 15%. It is
unlikely that the vacant space will be absorbed in the market for
several years. However, during 1996, average occupancy at the
property was approximately 98%, and at October 31, 1996, occupancy
at the property was 99%, essentially unchanged from the prior year.
The property is leased to 22 tenants. KLM Royal Dutch Airlines owns
a long-term leasehold interest in approximately 20% of the space at
the property. Leases aggregating approximately 12% and 10% of the
property's space expire in 1997 and 1998, respectively. The lease
of Fuji Photo Film (for approximately 24% of the property's space)
expires in 2001; no other tenants occupy more than 10% of the
property.
Although the current vacancy rate in Valley Forge, Pennsylvania
increased from 12% to 16% in 1996, the Partnership believes that
this is an improving market with increasing demand. During 1996,
average occupancy at the property was 98%, and at October 31, 1996,
occupancy at the property was 100% compared to 98% at October 31,
1995. The property is occupied by 11 tenants. The leases of
Sungard Data Systems (for approximately 37% of the property's space)
and USERS, Inc. (for approximately 27% of the space) expire in 1998
and 1999, respectively. No other tenants occupy more than 10% of
the property. Leases on approximately 10% and 44% of the space
expire in 1997 and 1998, respectively.
In Pasadena, California, the location of the Century Square office
building, the overall office market vacancy rate was approximately
15% during 1996, and the Partnership does not expect the market to
improve in the near term. However, Century Square remained 100%
leased during the year. The property is currently occupied by three
tenants, and the leases of the property's largest tenant,
Countrywide Credit (which occupies 84% of the property's space),
expire in 2010. No other tenants occupy more than 10% of the
property.
Vacancy rates in the office market of Bellevue, Washington, a suburb
of Seattle and the location of United Services Life Building,
decreased from 7% to 5% in 1996. This area is experiencing heavy
demand from the telecommunications, bio-technology and software
industries. However, rental rates in the property's sub-market have
not increased significantly. During 1996, and at October 31, 1996,
occupancy at the property was approximately 99%. The building is
occupied by 30 tenants. The leases of Asymetrix Corporation on 30%
of the property's space expire in 1998 (14%) and 1999 (16%). The
lease of McCaw RCC Communications, on 19% of the space expires in
2002. No other tenants occupy more than 10% of the property. Other
leases on approximately 19% of the property's space expire in fiscal
1998. The Partnership has agreed to sell this property.
The Pavilions at East Lake shopping center is located in a suburb of
Atlanta which currently has a vacancy rate of 5%. During 1996,
average occupancy at the property was 64%. At October 31, 1996,
occupancy at the property was 73% vs. 87% at October 31, 1995. The
property is occupied by 32 tenants. In October 1996, Kroger moved
into its newly constructed space (for approximately 39% of the
property's space). The initial lease term is twenty years with an
option to renew for an additional twenty years. Rental revenue from
the Kroger store is higher than that of the previous tenant.
Shopper traffic has increased at the property as a result of the new
lease with Kroger, and Kroger's presence at the property enabled the
Partenrship to increase rental rates on leases completed during the
second half of 1996. No other tenants occupy more than 10% of the
property. No significant amount of leases expire in the near
future. A new shopping center recently opened which directly
competes with the property, but the Partnership does not expect that
it will have a significant impact.
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>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
<TABLE>
INDEX
<CAPTION>
Page
(a) Financial Statements
<S> <C>
Independent Auditors' Report 15
Consolidated Balance Sheets at October 31, 1996 and 1995 16
Consolidated Statements of Operations for the years ended
October 31, 1996, 1995 and 1994 17
Consolidated Statements of Partners' Capital for the
years ended October 31, 1996, 1995 and 1994 18
Consolidated Statements of Cash Flows for the years
ended October 31, 1996, 1995 and 1994 19
Notes to Consolidated Financial Statements 20-27
(b) Financial Statement Schedule
Real Estate and Accumulated Depreciation III 33-34
</TABLE>
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.
<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, 1996 and 1995 and
the related consolidated statements of operations, partners'
capital, and cash flows for each of the three years in the period
ended October 31, 1996. 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 consolidated 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, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in
the period ended October 31, 1996 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, 1997<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED BALANCE SHEETS
October 31, 1996 and 1995
<CAPTION>
ASSETS
<S> <C> <C>
1996 1995
Cash and cash equivalents $ 3,193,852 $ 7,424,199
Real estate:
Land 11,803,399 15,821,935
Buildings and improvements 94,143,130 130,152,151
105,946,529 145,974,086
Accumulated depreciation 38,964,769 45,806,137
66,981,760 100,167,949
Real estate held for sale 22,417,670 10,769,096
Investment in joint venture 2,694,918 2,730,575
Deferred leasing commissions, net 2,185,691 2,009,275
Other assets 2,845,165 3,217,649
$100,319,056 $126,318,743
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 1,121,405 $ 714,941
Security deposits 192,459 256,758
Minority interests in joint ventures 8,423,845 8,626,606
9,737,709 9,598,305
Partners' capital (deficiency)
General partners (5,078,043) (3,537,743)
Limited partners ($1,000 per Unit, 177,023 units issued) 95,659,390 120,258,181
Total partners' capital 90,581,347 116,720,438
$100,319,056 $126,318,743
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, 1996, 1995 and 1994
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
Revenues:
Rental $16,206,557 $17,249,584 $18,076,876
Equity in earnings of joint venture 250,109 306,711 346,296
Interest and other 957,941 918,413 572,382
17,414,607 18,474,708 18,995,554
Expenses:
Property operating 6,459,867 6,803,324 6,866,522
Depreciation 5,011,419 6,053,280 6,309,155
Amortization 537,220 611,819 561,595
General and administrative 759,445 725,508 710,712
Loss on impairment of real estate 11,870,000 - -
Loss on write-down of real estate held
for sale - 4,886,200 -
24,637,951 19,080,131 14,447,984
(Loss) income before minority interest (7,223,344) (605,423) 4,547,570
Minority interest 589,362 474,263 586,104
Net (loss) income $(7,812,706) $(1,079,686) $ 3,961,466
Net (loss) income allocated to:
Limited Partners $(7,031,435) $(1,460,337) $ 3,565,319
General Partners (781,271) 380,651 396,147
$(7,812,706) $(1,079,686) $ 3,961,466
Net (loss) income per Unit of limited
partnership interest $(39.72) $(8.25) $20.14
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, 1996, 1995 and 1994
<CAPTION>
<S> <C> <C> <C>
Limited General
Partners Partners Total
Partners' capital (deficiency)
at November 1, 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
Net loss (7,031,435) (781,271) (7,812,706)
Distributions (17,567,356) (759,029) (18,326,385)
Partners' capital (deficiency)
at October 31, 1996 $ 95,659,390 $(5,078,043) $ 90,581,347
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, 1996, 1995 and 1994
<CAPTION>
<S> <C> <C> <C>
1996 1995 1994
Cash flows from operating activities:
Net (loss) income $ (7,812,706) $ (1,079,686) $ 3,961,466
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation 5,011,419 6,053,280 6,309,155
Amortization 537,220 611,819 561,595
Loss on impairment of real estate 11,870,000 - -
Loss on write-down of real estate held for sale - 4,886,200 -
Minority interest in joint venture's operations 589,362 474,263 586,104
Equity in earnings of Taxter joint venture (250,109) (306,711) (346,296)
(Increase) decrease in operating assets:
Deferred leasing commissions (713,636) (1,299,609) (113,416)
Other assets 372,484 519,000 1,018,336
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities 406,464 (25,742) (282,810)
Security deposits (64,299) (14,573) (69,077)
Net cash provided by operating activities 9,946,199 9,818,241 11,625,057
Cash flows from investing activities:
Additions to real estate (6,112,900) (1,314,951) (2,367,774)
Cost recoveries on real estate - 27,114 835,000
Distributions from Taxter joint venture 349,775 502,174 461,460
Investment in Taxter joint venture (64,009) (166,691) (227,576)
Proceeds from disposition of real estate
held for sale 10,769,096 - -
Net cash provided by (used in) investing activities 4,941,962 (952,354) (1,298,890)
Cash flows from financing activities:
Cash distributions to partners (18,326,385) (7,867,688) (5,900,766)
Repayment of deferred distribution - (2,784,417) (928,139)
Additional investment by minority interest 130,576 387,503 11,557
Minority interests in joint venture's distributions (922,699) (989,365) (1,162,129)
Net cash used in financing activities (19,118,508) (11,253,967) (7,979,477)
(Decrease) increase in cash and cash equivalents (4,230,347) (2,388,080) 2,346,690
Cash and cash equivalents at beginning
of year 7,424,199 9,812,279 7,465,589
Cash and cash equivalents at end of year $ 3,193,852 $ 7,424,199 $ 9,812,279
Supplemental disclosure of non-cash investing activities:
Reclassification of real estate held for sale:
Real estate, at cost
Land $ 2,831,536 $ 2,300,000 $ -
Buildings and improvements 31,438,921 17,397,188 -
Accumulated depreciation (11,852,787) (4,041,892) -
Loss on write-down of real estate held
for sale - (4,886,200) -
Real estate held for sale $ 22,417,670 $ 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, 1996, 1995 and 1994
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 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 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, in the Taxter Corporate Park property.
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.
Cash and cash equivalents consist of cash and highly liquid
investments with maturities, when purchased, of three months or
less.
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 and any related assets. As part of this
evaluation, the Partnership assesses, among other things, whether
there has been a significant decrease in the market value of any of
its properties. If events or circumstances indicate that the net
carrying value of a property may not be recoverable, the expected
future net cash flows from the property are estimated for a period
of approximately five years (or a shorter period if the Partnership
expects that the property may be disposed of sooner), 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 as determined (in some cases with the assistance of
outside real estate consultants) based on discounted cash flows, 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, 1996. The cash flows used to evaluate the
recoverability of the properties and to determine fair 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.
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 receivables and included in other assets.
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $28 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, if earned, 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
will be 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.
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Distributions paid to limited partners include returns of capital
per Unit of limited partnership interest of $99.24, $40.00 and $9.86
for the years ended October 31, 1996, 1995 and 1994, respectively,
calculated as the excess of cash distributed per Unit over
accumulated earnings per Unit not previously distributed.
4. Real Estate Investments
The locations, years of acquisition and net carrying values of the
properties are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year of Carrying Value at October 31,
Acquisition 1996 1995
Framingham Corporate Center,
Framingham, MA 1985 $14,184,216 $ 17,006,057
Glenhardie I and II,
Valley Forge, PA 1985 10,559,394 14,734,654
Century Square,
Pasadena, CA 1985 31,312,446 32,185,831
United Services Life Building,
Bellevue, Washington
(see Note 10) 1986 - 22,732,540
Pavilions at East Lake,
Atlanta, GA 1986 10,925,704 13,508,867
$66,981,760 $100,167,949
</TABLE>
In the first quarter of fiscal 1996, in accordance with the
impairment evaluation policy described in Note 2, the Partnership
evaluated the recoverability of its investments in real estate and
concluded that, based on revised expectations as to the holding
periods of the properties, the Partnership will be unable to recover
its investments in the Framingham Corporate Center, Glenhardie
Corporate Center I and II and Pavilions at East Lake properties.
Accordingly, the Partnership wrote these properties down to their
estimated fair values (based on independent appraisals) and recorded
losses on impairment of $2,323,000, $3,550,000 and $5,997,000,
respectively.
5. Sale of Real Estate
In the fourth quarter of fiscal 1995, the Partnership determined to
sell the Wallkill Plaza shopping center, and in October entered into
an agreement 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 INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 was
reclassified to real estate held for sale at October 31, 1995, and
its carrying value was 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 was allocated to
the Limited Partners in 1995. The reduced carrying value
represented 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 Wallkill Plaza Shopping Center included in
the Partnership's statement of operations in fiscal 1995 was
approximately $752,000.
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
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Summarized balance sheet information of the joint venture are as
follows:
<TABLE>
<CAPTION>
October 31,
1996 1995
<S> <C> <C>
Land and buildings, net $17,781,234 $18,575,100
Other 1,990,515 1,427,047
Total assets $19,771,749 $20,002,147
Liabilities $ 176,478 $ 165,593
Partners' capital 19,595,271 19,836,554
Total liabilities and capital $19,770,749 $20,002,147
Summarized results of the operations of the joint venture are as
follows:
Year ended October 31,
1996 1995 1994
Rental income $5,954,030 $6,267,312 $6,269,934
Other income 43,394 92,483 81,301
5,997,424 6,359,795 6,351,235
Property operating
expenses 3,111,267 3,168,141 3,020,235
Depreciation and
amortization 1,196,229 1,119,284 991,163
4,307,496 4,287,425 4,011,398
Net income $1,689,928 $2,072,370 $2,339,837
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Activity in the investment in joint venture is as follows:
<CAPTION>
Year ended October 31,
1996 1995 1994
<S> <C> <C> <C>
Investment at beginning
of year $2,730,575 $2,759,347 $2,646,935
Equity in earnings 250,109 306,711 346,296
Distributions (349,775) (502,174) (461,460)
Additional investments 64,009 166,691 227,576
Investment at end of year $2,694,918 $2,730,575 $2,759,347
</TABLE>
The accounting policies of the joint venture are the same as those
of the Partnership.
7. Leases
Minimum future rental income under noncancellable operating leases
(excluding the leases of real estate held for sale) as of October
31, 1996 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending October 31:
1997 $10,119,623
1998 9,505,910
1999 8,795,025
2000 8,561,372
2001 7,672,096
Thereafter 47,388,014
Total $92,042,040
</TABLE>
The Partnership has determined that all leases relating to its
properties are operating leases. The lease terms range from two to
twenty years, and generally provide for fixed minimum rents with
rental escalation and/or expense reimbursement clauses.
8. Related Party Transactions
An affiliate of the Managing General Partner provided property
management services for four properties in 1996, 1995 and 1994. The
Partnership paid the affiliate management fees (included in property
operating expenses) of approximately $243,000, $296,000 and $295,000
for the years ended October 31, 1996, 1995 and 1994, 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, 1996, 1995 and 1994, the affiliate was reimbursed
approximately $489,000, $522,000 and $523,000, respectively, for
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
these services. These amounts have been recorded in general and
administrative expenses.
As of October 31, 1996, the affiliates were owed approximately
$132,000 for these services.
Through October 31, 1993, the General Partners had deferred receipt
of distributions to which they were entitled totaling $3,712,556.
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
these deferred distributions.
9. Litigation
Various public partnerships sponsored by Dean Witter Realty Inc.
(including the Partnership and its Managing General Partner) are
defendants in purported class action lawsuits pending in state and
federal courts. The complaints allege a number of claims, including
breach of fiduciary duty, fraud and misrepresentation, and seek an
accounting of profits, compensatory and other damages in an
unspecified amount, possible liquidation of the Partnership under a
receiver's supervision and other equitable relief. The defendants
are vigorously defending these actions. It is impossible to predict
the effect, if any, the outcome of these actions might have on the
Partnership's financial statements.
10. Subsequent Events
On November 27, 1996, the Partnership paid a cash distribution of
$10.34 per Unit. The cash distribution aggregated $2,033,798 with
$1,830,418 distributed to the Limited Partners and $203,380
distributed to the General Partners.
In December 1996, the Partnership agreed to sell the United Services
Life Building for $33.75 million. Closing of the sale is expected
to occur in the second quarter of fiscal 1997. The carrying value
of the property has been reclassified to real estate held for sale
at October 31, 1996.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
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:
Position with the
Name Managing General Partner
William B. Smith Chairman of the Board of Directors
E. Davisson Hardman, Jr. President and Director
Lawrence Volpe Controller and Director
Ronald T. Carman Secretary and Director
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 53, 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 47, is a Managing Director of Dean
Witter Realty Inc. and has been with Dean Witter Realty Inc. since
1982.
Lawrence Volpe, age 49, 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 45, 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.
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
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 received cash distributions of $759,029, $786,768 and
$590,076 for the years ended October 31, 1996, 1995 and 1994,
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 Note 8 to the consolidated
financial statements in Item 8 above.
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 of the Managing General
Partner own the following Units as of January 1, 1997:
(1) (2) (3)
Amount and
Title of Name of Nature of
Class Beneficial Owner Beneficial Ownership
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.
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
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 general 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 officers and
directors of Realty are partners of LSA 84 II L.P. Additional
information with respect to the directors and 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 and their affiliates are on terms as favorable as would be
obtained from unrelated third parties.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
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.
(b) Certificate of Limited Partnership included in
Registration Statement Number 2-93207 is incorporated
herein by reference.
(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.
(b) Certificate of Limited Partnership included in
Registration Statement Number 2-93207 is incorporated
herein by reference.
(10)(a) 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.
(b) Purchase and Sale Agreement, dated as of October 19,
1995, between Dean Witter Income Partnership II,
L.P., Midway Crossing Limited Partnership, Dean
Witter Income Partnership III, L.P., Genesee Crossing
Limited Partnership, Farmington/9 Mile Associates, a
Michigan Limited Partnership, Hampton Crossing
Associates, Rochester Hills Limited Partnership, Dean
Witter Realty Yield Plus, L.P. and New Plan Realty
Trust (including Exhibit J thereto) was filed as an
exhibit to Form 8-K on December 11, 1995 and is
incorporated herein by reference.
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
(c) First Amendment to Purchase and Sale Agreement, dated
as of October 19, 1995, between Dean Witter Income
Partnership II, L.P., Midway Crossing Limited
Partnership, Dean Witter Income Partnership III,
L.P., Genesee Crossing Limited Partnership,
Farmington/9 Mile Associates, a Michigan Limited
Partnership, Hampton Crossing Associates, Rochester
Hills Limited Partnership, Dean Witter Realty Yield
Plus, L.P. and New Plan Realty Trust was filed as an
exhibit to Form 8-K on December 11, 1995 and is
incorporated herein by reference.
(21) Subsidiaries: Century Square Venture, a California
general partnership; Framingham Corporate Center LP,
a Massachusetts limited partnership.
(27) Financial Data Schedule.
(b) Reports on Form 8-K -
No Forms 8-K were filed by the Partnership during the last
quarter of the period covered by this report.
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
October 31, 1996
<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 $ 6,947,319
Office Buildings
Valley Forge, PA 2,000,000 16,534,152 18,534,152 3,384,147
Office Building
Pasadena, CA 6,429,000 33,907,000 40,336,000 4,400,211
Office Building
Bellevue, WA (D) 2,831,536 25,483,828 28,315,364 5,955,093
Shopping Center
Atlanta, GA 2,500,000 13,858,607 16,358,607 4,425,248
$15,821,935 $111,153,033 $126,974,968 $25,112,018
Gross Amount at which
Carried at End of Period (B)
Reduction Building and
Description in Value Land Improvements Total
Office Building
Framingham, MA $ (2,323,000)1 $ 1,829,099 $26,226,065 $28,055,164
Office Buildings
Valley Forge, PA (3,550,000)1 1,645,000 16,723,299 18,368,299
Office Building
Pasadena, CA 6,429,000 38,307,211 44,736,211
Office Building
Bellevue, WA (D) (34,270,457)2 - - -
Shopping Center
Atlanta, GA (5,997,000)1 1,900,300 12,886,555 14,786,855
$(46,140,457) $11,803,399 $94,143,130 $105,946,529
1. Loss on impairment of real estate.
2. Reclassified to real estate held for sale.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE III (continued)
<CAPTION> Life on which
Depreciation
in Latest Income
Accumulated Date of Date Statement is
Description Depreciation(C) Construction Acquired Computed
<S> <C> <C> <C> <C>
Office Building
Framingham, MA $13,870,948 1984 May 1985 5-40 years
Office Buildings
Valley Forge, PA 7,808,905 1979 July 1985 5-40 years
1982 November 1985
Office Building
Pasadena, CA 13,423,765 1984 October 1985 5-40 years
Office Building
Bellevue, MA (D) - 1982 September 1986 5-40 years
Shopping Center
Atlanta, GA 3,861,151 1986 December 1986 5-40 years
$38,964,769
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.
</TABLE>
<TABLE>
<CAPTION>
(B) Reconciliation of real estate owned
at October 31: 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of period $ 145,974,086 $164,357,368 $162,989,118
Additions (deletions) during period:
Improvements 6,112,900 1,314,951 2,367,774
Cost recovery on capital improvements - (27,114) (835,000)
Loss on impairment of real estate (11,870,000) - -
Write-offs due to lease expirations - - (164,524)
Reclassified to real estate held
for sale (34,270,457) (19,671,119) -
Balance at end of period $ 105,946,529 $145,974,086 $164,357,368
(C) Reconciliation of accumulated depreciation:
Balance at beginning of period $ 45,806,137 $ 43,775,258 $ 37,630,627
Additions (deletions) during period:
Depreciation expense 5,011,419 6,053,280 6,309,155
Write-offs due to lease expirations - - (164,524)
Reclassified to real estate held
for sale (11,852,787) (4,022,401) -
Balance end of period $ 38,964,769 $ 45,806,137 $ 43,775,258
(D) In December 1996, the Partnership agreed to sell this building. Carrying value 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: /s/E. Davisson Hardman, Jr. Date: January 29, 1997
E. Davisson Hardman, Jr.
President
By: /s/Lawrence Volpe Date: January 29, 1997
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, 1997
William B. Smith
Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: January 29, 1997
E. Davisson Hardman, Jr.
Director
/s/Lawrence Volpe Date: January 29, 1997
Lawrence Volpe
Director
/s/Ronald T. Carman Date: January 29, 1997
Ronald T. Carman
Director <PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Year Ended October 31, 1996
Exhibit Index
Exhibit
No. Description
27 Financial Data Schedule
E1
<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>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 3,193,852
<SECURITIES> 0
<RECEIVABLES> 2,274,885
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 100,319,056<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 90,581,347<F2>
<TOTAL-LIABILITY-AND-EQUITY> 100,319,056<F3>
<SALES> 0
<TOTAL-REVENUES> 17,414,607<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 25,227,313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,812,706)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,812,706)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,812,706)<F5>
<EPS-PRIMARY> (39.72)<F6>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $66,981,760, real estate held for sale of $22,417,670,
investment in joint venture of $2,694,918, net deferred expenses of
$2,185,691 and other assets of $570,280.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of
$1,121,405, minority interest in joint venture of $8,423,845, and other
liabilities of $192,459.
<F4>Total revenue includes rent of $16,206,557, equity in earnings of joint
venture of $250,109, and interest and other revenues of $957,941.
<F5>Net loss includes loss on impairment of real estate of $11,870,000.
<F6>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
