<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION Washington, D.C.
20549
FORM 10-Q
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended July 31, 1999
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ________
to ________.
Commission File Number: 0-
18150
DEAN WITTER REALTY INCOME PARTNERSHIP
II, L.P.
(Exact name of registrant as specified in governing
instrument)
Delaware 13-
3244091
(State of organization)
(IRS Employer
Identification No.)
2 World Trade Center, New York, NY
10048
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code:
(212) 392-1054
Former name, former address and former fiscal year,
if changed since last report: not applicable
Indicate by check mark whether the registrant (1)
has filed all
reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such
shorter period that the registrant was required to
file such reports), and (2) has been subject to
such filing
requirements for the past 90 days. Yes X No
Page 1
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 31,
October
31,
1999
1998
ASSETS
<S>
<C> <C>
Cash and cash equivalents $
799,915 $
624,315
Investment in joint venture 2,338,299
2,373,176
Real estate:
Land -
1,900,300
Building and improvements -
13,173,398
-
15,073,698
Accumulated depreciation -
4,727,834
-
10,345,864
Deferred leasing commissions, net -
223,878
Other assets 276,121 229,999
$ 3,414,335
$13,797,232
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and other liabilities $ 170,278
$ 375,900
Partners' capital (deficiency):
General partners
(5,431,513)
(5,462,740)
Limited partners ($1,000 per Unit, 177,023 Units
issued) 8,675,570 18,884,072
Total partners' capital 3,244,057
13,421,332
$ 3,414,335
$13,797,232
See accompanying notes to consolidated financial
statements
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine months ended July 31, 1999 and 1998
<CAPTION>
Three
months ended Nine months ended
July
31,
July 31,
1999 1998
1999 1998
<S> <C> <C> <C> <C>
Revenues:
Gains on sales of real $ $ $ $19,097
estate (32,288) (30,545)
3,994,1 ,127
Rental - 34
Equity in earnings of 359,079 2,359,2
joint venture 49,825
551,241 08
Interest and other 166,508
11,160
197,394 278,070
6,007
270,713 174,073
28,697 501,049
5,013,4 21,908,
82 478
Expenses:
Property operating -
Depreciation and - 100,677
210,669 906,458
amortization
General and 32,208 122,385
130,469 520,845
administrative
110,536
170,872 352,424
32,208 333,598
512,010 1,779,7
27
Net (loss) income $ $ $ $20,128
(3,511) 167,451
4,501,4 ,751
72
Net (loss) income
allocated to: $ $ $ $20,025
Limited partners (6,389) 147,652
4,470,2 ,589
General partners 45
2,878 19,799 103,162
31,227
$ $ $ $20,128
(3,511) 167,451
4,501,4 ,751
72
Net (loss) income per
Unit of limited $ $ $ $
partnership interest (.04) 0.83
25.25 113,12
See accompanying notes to consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Nine months ended July 31, 1999
<CAPTION>
Limited
General
Partners
Partners
Total
<S>
<C> <C>
<C>
Partners' capital (deficiency)
at November 1, 1998 $ 18,884,072
$(5,462,740) $ 13,421,332
Distributions (14,678,747)
- -
(14,678,747)
Net income 4,470,245 31,227
4,501,472
Partners' capital (deficiency)
at July 31, 1999 $ 8,675,570
$(5,431,513) $ 3,244,057
See accompanying notes to consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended July 31, 1999 and 1998
<CAPTION>
1999
1998
<S>
<C>
<C>
Cash flows from operating activities:
Net income $
4,501,472 $
20,128,751
Adjustments to reconcile net income to net cash
provided
by operating activities:
Gains on sales of real estate
(3,994,134)
(19,097,127)
Depreciation and amortization 130,469
520,845
Equity in earnings of Taxter joint venture
(197,394)
(278,070)
(Increase) decrease in operating assets:
Deferred leasing commissions
(60,767) (179,947)
Other assets
173,878 417,545
Decrease in accounts payable and other
liabilities (205,622)
(607,360)
Net cash provided by operating
activities 347,902
904,637
Cash flows from investing activities:
Proceeds from sale of real estate
14,463,246
44,589,521
Additions to real estate
(189,072)
(320,509)
Distributions from Taxter joint venture
270,110
404,169
Investments in Taxter joint venture
(37,839)
(83,329)
Net cash provided by investing
activities 14,506,445
44,589,852
Cash flows from financing activities:
Cash distributions to partners
(14,678,747)
(46,539,150)
Increase (decrease) in cash and cash
equivalents
175,600
(1,044,661)
Cash and cash equivalents at beginning of period
624,315
1,741,456
Cash and cash equivalents at end of period $
799,915 $ 696,795
See accompanying notes to consolidated financial
statements.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Notes to Consolidated Financial Statements
1. The
Partnership
Dean Witter Realty Income Partnership II,
L.P. (the
"Partnership") is a limited partnership organized
under the laws of the State of Delaware in
1984. The Partnership's fiscal year ends on
October 31.
The financial statements include the accounts
of the Partnership and the joint venture which
owned the Framingham Corporate Center property
(sold in the first quarter of fiscal 1998) on a
consolidated basis. The equity method of
accounting has been applied to the
Partnership's 14.8% interest in the partnership
which owns the Taxter Corporate Park property
(the "Taxter Partnership") because of the
Partnership's continuing ability to exert
significant influence over the Taxter Partnership.
The Partnership's records are maintained on the
accrual basis of accounting for financial
reporting and tax reporting purposes.
Net income per Unit of limited partnership
interest amounts are calculated by dividing net
income allocated to Limited Partners, in
accordance with the Partnership Agreement, by the
weighted average number of Units outstanding.
In the opinion of management, the accompanying
financial statements, which have not been
audited, include all adjustments necessary to
present fairly the results for the interim
period. Except for the gains on sales of real
estate, such adjustments consist only of normal
recurring accruals.
These financial statements should be read in
conjunction with the annual financial statements
and notes thereto included in
the Partnership's annual report on Form 10-K
filed with the Securities and Exchange
Commission for the year ended October 31, 1998.
Operating results of interim periods may not be
indicative of the operating results for the entire
year.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Notes to Consolidated Financial Statements
2. Real Estate
On February 16, 1999, the Partnership
entered into an
agreement with New Plan Excel Realty Trust,
Inc., an unaffiliated party, to sell the
land and building which comprise the Pavilions
at East Lake property. As part of the agreement,
Dean Witter Realty Income Partnership III, L.P.,
an affiliate, also agreed to sell a retail
property to New Plan. The aggregate negotiated
sales price of the properties sold was
approximately $24.1 million, of which $14
million was allocated in the agreement to the
Pavilions at East Lake property. The purchase
price was paid in cash at closing on March 1,
1999. At closing, the Partnership received
proceeds, net of closing costs, an escrow deposit
(described below) and other deductions, of
approximately $13.3 million. Such proceeds
($75.13 per Unit) were distributed 100% to
the Limited Partners on March 16, 1999.
The Partnership recognized a gain from this
sale of approximately $2.8 million; such gain
was allocated 100% to the Limited Partners.
The Partnership expects that, in the fourth
quarter of 1999, it will receive $220,000 of the
$250,000 which was escrowed at sale, in final
settlement of its obligations under the
agreement. The Partnership will not recognize an
additional gain upon receipt of the remaining
escrow deposit balance.
All of the Partnership's 1999 rental
income, property operating expenses and
depreciation and amortization expenses were
generated by the Pavilions at East Lake property.
During the year ended October 31, 1998, the
property generated rental income of
approximately $1,412,000, property operating
expenses of $390,000 and depreciation and
amortization expenses of $478,000.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Notes to Consolidated Financial Statements
In fiscal 1996, the Partnership sold the
Wallkill Plaza shopping center. A portion of
the sale price was represented by a $1.2 million
promissory note from the purchaser, payment of
which was contingent on the outcome of the
bankruptcy
proceedings of Bradlees Department Stores, an
anchor tenant at the shopping center. In 1996,
the Partnership did not include the $1.2 million
note in the calculation of the gain on sale of
the property because of the uncertainty of its
realization.
In April 1999, the purchaser paid the
Partnership
approximately $1.4 million, representing payment
of the note in full, interest at 4.5%. The
Partnership recognized
$1.2 million as a gain on sale of real
estate and approximately $0.2 million of
interest income. The $1.4 million was
allocated 100% to the Limited Partners. The
Partnership distributed the amount received to
the Limited Partners ($7.79 per Unit) on April
28, 1999.
In September 1999, the Partnership expects
to receive
approximately $340,000, the balance of the escrow
deposit to be returned by
the buyer of the Glenhardie I and II
properties, which were sold in April 1998. The
Partnership did not include the amount of the
sale proceeds deposited in escrow in the
calculation of the gain on the sale of the
property because of the uncertainty of the
recoverability of the escrow deposit. As a
result, the Partnership will recognize the
actual amount received as an additional gain on
the sale of the property.
3. Investment in Joint Venture
In 1987, the Taxter Partnership sold a leasehold
interest in approximately 20% of the property's
space to KLM. In 1998, KLM accepted a $6.75
million purchase offer for the leasehold interest,
which the Taxter Partnership had the right to
match. The partners of the Taxter Partnership
believe that inclusion of the KLM space
improves the value and salability of the
property; however, the partners did not have
sufficient cash
to fund the purchase. Therefore, an affiliate of
the Managing General(the "Affiliate"), as an
accommodation,
purchased the leasehold interest on February 8,
1999 for $6.75 million and assumed the rights
and obligations of KLM thereunder.
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Notes to Consolidated Financial Statements
On February 4, 1999, the Taxter Partnership and
KLM entered into a new lease which allows KLM to
continue to occupy 50% of the space subject to
the leasehold interest. On February 8, 1999, the
Affiliate also assumed the rights and obligations
of the joint venture under this new lease.
As part of the purchase of the leasehold
interest, the Taxter Partnership received an
option to purchase the leasehold interest and
assume the new lease from the Affiliate for a
purchase price of $6.75 million plus the costs of
any tenant improvements, leasing commissions
and capital expenditures incurred by the
Affiliate in connection with the leasehold
interest (collectively, the "Resale Price").
The Taxter Partnership also granted the
Affiliate an option to require
the Taxter Partnership to purchase the leasehold
interest and assume the new lease for the Resale
price. When the property is sold, the Taxter
Partnership will be obligated to purchase the
leasehold interest and assume the new lease
from the Affiliate for the Resale Price.
Summarized financial information of the Taxter
Partnership is as follows:
<CAPTION>
Quarter ended July 31,
Nine months ended July 31,
1999 1998
1999 1998
<S> <C> <C> <C>
<C>
Revenues $ 1,706,457 $ 1,915,422 $ 4,705,145
$ 4,738,284
Expenses 1,370,802 790,371 3,371,399
2,859,434
Net income $ 335,655 $ 1,125,051 $ 1,333,746
$ 1,878,850
4. Related Party Transactions
An affiliate of the Managing General Partner
provided property management services for
Taxter Corporate Park (through December 31,
1998), Glenhardie I and II (sold April 1998) and
Framingham Corporate Center (sold December
1997). The Partnership paid the affiliate
management fees of approximately $3,000 and
$45,000 for the nine months ended July 31, 1999
and 1998, respectively.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Notes to Consolidated Financial Statements
Another affiliate of the Managing General
Partner performs administrative functions,
processes investor transactions and prepares
tax information for the Partnership.
Effective November 1, 1998, the affiliate
reduced its fees for these services because of
the greatly decreased level of Partnership
activity. For the nine months ended July 31,
1999 and 1998, the Partnership incurred
approximately $102,000 and $225,000, respectively,
for these services. These amounts have been
recorded in general and administrative expenses.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership raised $177,023,000 in a public
offering which was terminated in 1985. The
Partnership has no plans to raise additional
capital.
As a result of property sales in fiscal 1999
and 1998, Partnership cash flow from operations
decreased during the three and nine months ended
July 31, 1999 as compared to 1998.
The Pavilions at East Lake property was sold on
March 1, 1999 (see Note 2 to the
consolidated financial statements).
Subsequently, the Partnership's interest in
the Taxter Corporate Park office property is
the Partnership's sole property interest. The
partnership which owns the Taxter Corporate
Park (the "Taxter Partnership") has accepted a
bid from an unaffiliated third party to purchase
the property, and the parties are currently
negotiating the terms of a purchase and sale
agreement. There can be no assurance that the
Taxter property will be sold.
On February 8, 1999, an affiliate of the
Managing General Partner, as an accommodation
to the Taxter Partnership, purchased the
leasehold interest of KLM in approximately 20% of
the property's space. See Note 3 to the
consolidated financial statements.
Currently, the overall vacancy levels in the
office market in Westchester County, New York
and the west Westchester submarket in which
Taxter Corporate Park is located are
approximately 18% and 14%, respectively. During
the third quarter of fiscal 1999, occupancy at
the property decreased from 76% to 74%. Leases
aggregating approximately 39% of the property's
space expire in 2001.
During the nine months ended July 31, 1999,
the Taxter property generated positive cash flow
from operations, and it is anticipated that it
will continue to do so during the period the
Partnership continues to own its interest in the
property.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
The Taxter Partnership expects to buy the former
KLM leasehold interest at the time the property is
sold, using a portion of the proceeds from the
sale of the Taxter property. As of July
31, 1999, the Partnership had commitments
to fund approximately $45,000 for its share of
tenant improvements and leasing commissions at the
Taxter property.
During the nine months ended July 31, 1999, the
Partnership's cash flow from operations and
distributions received from the Taxter
Partnership exceeded its capital expenditures
for tenant improvements and leasing commissions
at the Pavilions at East Lake property and
contributions to the Taxter Partnership.
During the nine months ended July 31, 1999, the
Partnership made cash distributions of proceeds
from sales of properties. See Note 2 to the
consolidated financial statements.
Generally, future cash distributions will be
paid from the remaining proceeds from the sale
of the Taxter property, the receipt, if any, of
the escrow deposits relating to the sales of the
Pavilions at East Lake and Glenhardie properties
(see Notes 2 and 5 to the consolidated financial
statements) and cash reserves.
The Partnership believes that its cash reserves
are adequate for its needs during the
remainder of fiscal 1999 and in fiscal 2000.
Deferred leasing commissions and accounts payable
and other liabilities decreased in 1999 as a
result of the sale of the Pavilions at East Lake
property.
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.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Operations
Fluctuations in the Partnership's operating
results for the three- and nine-month periods
ended July 31, 1999 compared to 1998 are
primarily attributable to the following:
The 1999 gains on sales of real estate resulted
from the March 1999 sale of the Pavillions at
East Lake property and the April 1999 receipt
of $1.2 million in payment of the Wallkill Plaza
contingent promissory note (see Note 2 to the
consolidated financial statements). The 1998
gains on sales of real estate resulted from
the sale of the Framingham Corporate Center
(December 1997) and the Glenhardie Corporate
Center I and II (April 1998) properties.
In 1999, rental income, property operating
expenses, depreciation and amortization
expenses, and general and
administrative expenses decreased as a result of
the 1999 and 1998 property sales.
Interest and other income increased during the
nine-month period ended July 31, 1999 primarily
because the Partnership received approximately
$200,000 of interest in April 1999 under the
terms of the Wallkill Plaza contingent promissory
note. This increase was partially offset by a
decrease in 1999 in interest earned on the
proceeds from the sales of properties until
such proceeds were distributed to the Limited
Partners.
There were no other individually significant
factors which caused changes in revenues or
expenses.
Inflation
Inflation has been consistently low during
the periods presented in the consolidated
financial statements and, as a result, has not
had a significant effect on the operations of the
Partnership or its properties.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
An exhibit index has been
filed as part of this Report
on Page E1.
b) Reports on Form 8-K
None.
<page
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by
the undersigned there unto duly authorized.
DEAN WITTER REALTY
INCOME Partnership
II, L.P.
By:
Dean
Witter Realty Income
Properties II Inc.
Managing General
Partner
Date: September 10, 1999 By: /s/E.
Davisson Hardman,
Jr.
E. Davisson Hardman,
Jr. President
Date: September 10, 1999 By: /s/Charles
M. Charrow
Charles M. Charrow
Controller
(Principal
Financial and
Accounting
Officer)
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Quarter Ended July 31, 1999
Exhibit Index
<CAPTION>
Exhibit No.
Description
<S> <C>
27 Financial
Data Schedule
E1
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate, and
real estate joint ventures. In accordance with industry practice, its
balance sheet is unclassified. For full information, refer to the
accompanying unaudited financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 799,915
<SECURITIES> 0
<RECEIVABLES> 220,343
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,414,335<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,244,057<F2>
<TOTAL-LIABILITY-AND-EQUITY> 3,414,335<F3>
<SALES> 0
<TOTAL-REVENUES> 5,013,482<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 512,010
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,501,472
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,501,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,501,472
<EPS-BASIC> 25.25<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total asset include investment
in joint venture of $2,338,299 and other assets of $55,778.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and other liabilities of $170,278.
<F4>Total revenue includes rent of $551,241 gains on sales of real estate
of $3,994,134, equity in earnings of joint venture of $197,394 and
interest and other revenues of $270,713.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
