UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549
FORM 10-Q
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended April 30,
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>
April 30, October 31,
1999
1998 ASSETS
<S>
<C> <C>
Cash and cash equivalents $
736,523
$
624,315
Investment in joint venture
2,425,957
2,373,176
Real estate:
Land
-
1,900,300
Building and improvements -
13,173,398
Accumulated depreciation -
4,727,834
Deferred leasing commissions, net
-
223,878
Other assets 290,474
229,999
$ 3,452,954
$13,797,232
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and other liabilities $ 205,386
$ 375,900
Partners' capital (deficiency):
General partners
(5,434,391)
(5,462,740)
Limited partners ($1,000 per Unit, 177,023 Units
issued) 8,681,959
18,884,072
Total partners' capital 3,247,568
13,421,332
$ 3,452,954
$13,797,232
See accompanying notes to consolidated financial
statements
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME
PARTNERSHIP II, L.P.
CONSOLIDATED INCOME
STATEMENTS
Three and six months ended April 30, 1999 and 1998
<CAPTION>
Three months ended Six months ended
April
30,
April 30,
1999 1998
1999 1998
<S> <C> <C> <C> <C>
Revenues:
Gains on sales of real $ $ $ $19,127
estate 4,026,422 8,079,387
4,026,4 ,672
Rental 22
Equity in earnings of 146,469 841,208 2,000,1
joint venture
551,241 29
Interest and other 78,800 52,041
147,569 111,562 225,566
54,687
259,553 168,066
4,477,257 9,027,323 4,98
4,7
21,4
07,
85 429
Expenses:
Property operating
Depreciation and 131,827 284,856
210,669 805,781
amortization
General and 4,590 133,429
130,469 398,460
administrative
61,560 73,001
138,664 241,888
197,977 491,286
479,802 1,446,1
29
Net income $ $ $ $19,961
4,279,280 8,536,037
4,504,9 ,300
83
Net income allocated to:
Limited partners $ $ $ $19,877
General partners 4,273,501 8,490,372
4,476,6 ,937
34
5,779 45,665 83,363
28,349
$ $ $ $19,961
4,279,280 8,536,037
4,504,9 ,300
83
Net income per Unit of
limited $ $ $ $
partnership interest 24.14 47.96
25.29 112.29
See accompanying notes to
consolidated
financial
statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP
II, L.P.
CONSOLIDATED STATEMENT OF PARTNERS'
CAPITAL
Six months ended April 30, 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 4,476,634
28,349
4,504,983
Partners' capital (deficiency)
at April 30, 1999 $ 8,681,959
$(5,434,391) $ 3,247,568
See accompanying notes to consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended April 30, 1999 and 1998
<CAPTION>
1999
1998
<S>
<C>
<C>
Cash flows from operating activities:
Net income
$
4,504,983 $
19,961,300
Adjustments to reconcile net income to net
cash provided
by operating activities:
Gains on sales of real estate
(4,026,422)
(19,127,672)
Depreciation and amortization
130,469
398,460
Equity in earnings of Taxter joint
venture
(147,569)
(111,562)
(Increase) decrease in operating assets:
Deferred leasing commissions
(60,767) (179,947)
Other assets
189,525 360,059
Decrease in accounts payable and other
liabilities (170,514)
(598,495)
Net cash provided by operating
activities 419,705
702,143
Cash flows from investing activities:
Proceeds from sale of real estate
14,465,534
44,620,066
Additions to real
estate
(189,072)
(278,631)
Distributions from Taxter
joint venture
108,780
175,065
Investments in Taxter
joint
venture
(13,992)
(36,157)
Net cash provided by
investing activities
14,371,250
44,480,343
Cash flows from financing
activities: Cash
distributions to
partners
(14,678,747)
(46,342,458)
Increase (decrease) in cash
and cash equivalents
112,208
(1,159,972)
Cash and cash equivalents at beginning
of period 624,315
1,741,456
Cash and cash equivalents at end of
period $ 736,523 $ 581,484
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.
Partnership sale proceeds of $250,000
are being held inan
escrow account to secure the
Partnership's obligations, if any,
pursuant to its
representations and warranties in
the agreement. If the buyer has not
made any claims against the
Partnership by September 1, 1999, the
escrow deposit will be released to
the Partnership.
All of the Partnership's rental
income, property operating expenses
and depreciation and amortization
expenses were generated by the
Pavilions at East Lake property during
fiscal 1999. In fiscal 1998, the
property generated rental income of
approximately $1,412,000, property
operating expenses of
$390,000 and depreciation and
amortization expensesof
$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 gain on sale
of the property
because of the uncertainty of its
realization.
In April 1999, the purchaser paid
the Partnership $1.4
million, representing payment of
the note in full, plus 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.
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
Partner (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.
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.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP
II, L.P.
Notes to Consolidated Financial
Statements
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.
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 $39,000 for
the six months ended April 30, 1999
and 1998, respectively.
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 six months ended
April 30, 1999 and 1998, the
Partnership incurred approximately
$95,000 and $159,000, 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 six months ended
April 30, 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. However, 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 second
quarter of fiscal 1999, occupancy at
the property decreased from 99% to
76% primarily because KLM vacated
approximately 10%
of the property's space, another
tenant vacated approximately 7% of the
space and Cityscape, which filed for
bankruptcy protection in 1998, vacated
approximately 9% of the space. Leases
aggregating approximately 39% of the
property's space expire in 2001.
During the six months ended April
30, 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.
During the six months ended April 30,
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 six months ended April
30, 1999, the Partnership made cash
distributions of proceeds from sales
of properties. See Note 2 to the
consolidated financial statements.
The Taxter Partnership expects to
pay for its share of the purchase
price of the former KLM leasehold
interest from its share of the
proceeds from the sale of the Taxter
property. As of April 30, 1999, the
Partnership had commitments to fund
approximately $66,000 for its share of
tenant improvements and leasing
commissions at the Taxter property.
The Partnership may also be required
to fund costs of capital expenditures
at the Glenhardie property
pursuant to commitments made prior
to the sale of the property if the
aggregate of such costs, when
all projects have been completed,
exceeds the escrow deposit made in
April 1998 at closing of the sale of
the property.
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 deposit relating to the sale of
the
Pavilions at East Lake property and
cash reserves.
The Partnership believes that its
cash reserves are adequate for its
needs during the remainder of fiscal
1999.
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
six-month periods ended April 30, 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 in
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
Partne
rship
II,
L.P.
By:
Dean Witter Realty Income
Properti
es II
Inc.
Managing
General
Partner
Date: June 10, 1999 By:
/s/E.
Davisson Hardman,
Jr.
E. Davisson
Hardman,
Jr.
President
Date: June 10, 1999 By:
/s/Charles
M. Charrow
Charles M.
Charro
w
Contro
ller
(Princ
ipal
Financ
ial
and
Accoun
ting
Office
r)
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP
II, L.P.
Quarter Ended
April
30, 1999
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
unaudited financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> APR-30-1999
<CASH> 736,523
<SECURITIES> 0
<RECEIVABLES> 250,937
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,452,954<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,247,568<F2>
<TOTAL-LIABILITY-AND-EQUITY> 3,452,954<F3>
<SALES> 0
<TOTAL-REVENUES> 4,984,785<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 479,802
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,504,983
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,504,983
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,504,983
<EPS-BASIC> 25.29<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include investment
in joint ventures of $2,425,957 and other assets of $39,537.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and other liabilites of $205,386.
<F4>Total revenue includes rent of $551,241, gains on sales of real estate of
$4,026,422, equity in earnings of joint venture of $147,569 and interest
and other revenues of $259,553.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
