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, 1998
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 className 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 40
<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 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 which were acquired without mortgage debt. All
properties but two were sold to unaffiliated purchasers
prior to October 31, 1998. The remaining properties are
described in Item 2 below.
The Partnership's remaining property investments are
currently being marketed for sale, with the objective of
completing sales of such properties in fiscal year 1999.
There can be no assurance that these properties will be
sold.
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.
<PAGE>
<TABLE>
The Partnership's real property investments are subject to
competition from similar types of properties in the
vicinities in which they are located. Further information
regarding competition and market conditions where the
Partnership's properties are located is set forth in Item 7,
"Management's Discussion and Analysis of Financial Condition
and Results of Operations".
The Partnership has no employees.
All of the Partnership's business is conducted in the United
States.
ITEM 2. PROPERTIES
The Partnership's principal offices are located at Two World
Trade Center, New York, New York 10048. The Partnership has
no other offices.
As of October 31, 1998, the Partnership owned directly or
through a partnership interest the following two property
interests, neither 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, both of the properties are adequately
covered by insurance.
<CAPTION>
Year Acquisition Net Rentable
Type of
Completed/ Cost Area
Ownership of Land
Property and Location Acquired ($000) (000 sq. ft.)
and Improvements
<S> <C> <C> <C> <C>
Pavilions at East Lake, 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
Westchester County, NY
partnership
Two office buildings interest1
1. 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.
An affiliate of the Partnership is the property manager for
Taxter Corporate Park.
</TABLE>
<PAGE>
In fiscal 1998, the Partnership sold the Framingham
Corporate Center, located in Framingham, Massachusetts, and
the Glenhardie Corporate Center I and II, located in Valley
Forge, Pennsylvania.
In October 1998, the general partnership which owns the
Taxter property, entered into an agreement with KLM Royal
Dutch Airlines ("KLM"), a tenant who owns a long-term
leasehold interest in approximately 20% of the space at the
property, to purchase KLM's space for $6.75 million. The
Partnership's share of this purchase price is yet to be
determined. The closing of the purchase is expected to
occur during the second fiscal quarter in 1999.
Further information relating to the Partnership's properties
is included in Item 7 and footnotes 4, 5, 6 and 7 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. (now known as Morgan Stanley Dean Witter &
Co., "MWD") 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
<PAGE>
Realty (including the Partnership and its Managing General
Partner), Realty, MWD, 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, MWD 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,
MWD, 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, MWD, 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.
On July 17, 1998, the Delaware Chancery Court granted the
defendants' motion to dismiss the complaint in the
Consolidated Action. The plaintiffs filed a notice of
appeal from the Chancery Court's order on August 14, 1998.
Oral argument on the appeal was heard by the Delaware
Supreme Court on January 5, 1999. The Delaware Supreme
Court affirmed the Chancery Court's dismissal of the
Consolidated Action on January 6, 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
<PAGE>
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 5, 1999, there were 24,807 holders of limited
partnership interests.
The Partnership is a limited partnership and, accordingly,
does not pay dividends. It does, however, make
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 cash distributions during the year
ended October 31, 1998 aggregating $261.71 per Unit
(including $251.01 per Unit from proceeds from the sales of
the Framingham and Glenhardie properties, which was paid
100% to the Limited Partners). Total distributions amounted
to $46,539,150, with $46,328,690 distributed to the Limited
Partners and $210,460 distributed to the General Partners.
The Partnership paid cash distributions during the year
ended October 31, 1997 aggregating $390.23 per Unit
(including $356.04 per Unit from the proceeds from the sales
of the United Services and Century Square properties, which
was paid 100% to the Limited Partners). Total distributions
amounted to $69,752,177, with $69,079,686 distributed to the
Limited Partners and $672,491 distributed to the General
Partners.
The Partnership did not make a distribution of distributable
cash following the fiscal 1998 second quarter distribution
(paid May 1998) and does not anticipate making regular
distributions to its partners in the future. Generally,
future cash distributions will be paid from proceeds
<PAGE>
received from the sales of the Pavilions at East Lake and
Taxter properties and cash reserves.
Sale or financing proceeds are 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 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.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of selected financial
data for the Partnership:
<CAPTION>
For the years ended October 31,
19981 19972 1996
1995 1994
<S> <C> <C> <C> <C> <C>
Total revenues $22,214,571 $29,219,973 $
17,414,607 $ 18,474,708 $ 18,995,554
Net income (loss) $20,110,183 $19,021,129 $
(7,812,706)3 $ (1,079,686)4 $ 3,961,466
Net income (loss)
per Unit of
limited partner-
ship interest $ 113.03 $ 105.21 $
(39.72) $ (8.25) $ 20.14
Cash distributions
paid per Unit of
limited partner-
ship interest5,6 $ 261.71 $ 390.23 $
99.24 $ 40.00 $ 30.00
Total assets at
October 31 $13,797,232 $40,963,845
$100,319,056 $126,318,743 $138,218,448
1. Revenues and net income include gains of $19.1 million
on sales of the Framingham and the Glenhardie I and II
properties.
2.Revenues and net income include gains of $17.2 million on
sales of the United Services Life Building and the
Century Square office building.
3. 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.
4. Includes a $4.9 million write-down of real
estate held for sale.
5.Distributions paid to limited partners include returns of
capital per Unit of limited partnership interest of
$148.68, $332.99, $99.24, $40.00 and $9.86 for the years
ended October 31, 1998, 1997, 1996, 1995 and 1994,
respectively, calculated as the excess of cash
distributed per Unit over accumulated earnings per Unit
not previously distributed.
6. Includes distributions of proceeds from sales of real
estate as follows: 1998 - $251.01; 1997 - $356.04; 1996 -
$60.65.
The above financial data should be read in conjunction with
the financial statements and the related notes in Item 8.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership raised $177,023,000 in a public offering
which was terminated in 1985. The Partnership has no plans
to raise additional capital.
The Partnership purchased five properties and made three
investments in partnerships on an all-cash basis. The
Partnership's acquisition program has been completed. No
additional investments are planned.
The Sardis Crossing and Wallkill Plaza retail properties
were sold in fiscal years 1993 and 1996, respectively. The
United Olympic and Century Square office buildings were sold
in fiscal year 1997. The Framingham Corporate Center and
Glenhardie Corporate Center I and II office buildings were
sold in fiscal year 1998. See Note 5 to the Consolidated
Financial Statements.
As a result of the property sales, Partnership cash flow
from operations decreased during fiscal year 1998 as
compared to 1997.
The Managing General Partner is currently marketing for sale
the Pavilions at East Lake shopping center, and the joint
venture which owns the Taxter Corporate Park office property
is currently marketing its property for sale. The objective
of both property owners is to complete sales of its
properties in fiscal year 1999; however, there can be no
assurance that these properties will be sold.
During fiscal 1998, the overall vacancy level in the office
market in Westchester County, New York, the location of
Taxter Corporate Park, increased slightly from 17% to 18%.
Also during fiscal 1998, the vacancy level in the west
Westchester market in which the building is located
increased from 11% to 14%. The average occupancy at the
property during fiscal 1998 was approximately 99%, and at
October 31, 1998, the property was 98% occupied. The
property is leased to 17 tenants. KLM Royal Dutch Airlines
("KLM") owns a long-term leasehold in approximately 20% of
the space at the property. Leases aggregating approximately
13% of the property's space expire in fiscal 1999. The
lease of Fuji Photo Film
<PAGE>
(for approximately 28% of the property's space) expires in
fiscal 2001. No other tenants occupy more than 10% of the
property.
To maximize the sales value of the Taxter property, the
joint venture has entered into an agreement with KLM to
purchase KLM's leasehold interest (see Note 6 to the
Consolidated Financial Statements). The purchase is
expected to close during the second fiscal quarter of 1999;
each partner's share of the purchase price has yet to be
determined.
Upon completion of the acquisition, KLM will vacate
approximately 13% of the property's space. The joint
venture is discussing leasing the vacant space to several
existing tenants at the property. The joint venture is
likely to incur significant tenant-related capital
expenditures and leasing commissions in connection with the
leasing of the vacant space. The Partnership plans to fund
its share of the costs to acquire the KLM leasehold interest
and to lease the vacant space using existing cash reserves
and proceeds from sales of the Pavilions at East Lake
property.
The Pavilions at East Lake shopping center is located in a
suburb of Atlanta where the market vacancy rate is currently
8%. During 1998, average occupancy at the property was 79%.
At October 31, 1998, occupancy at the property was 92% as
compared to 74% at October 31, 1997. Effective October
1998, the Partnership leased approximately 10% of the
property's space to a subsidiary of the Ace Hardware
Corporation for a lease term of approximately fifteen years.
The property is currently occupied by 37 tenants. The lease
with Kroger, which occupies approximately 39% of the space,
expires in 2016. No other tenants occupy more than 10% of
the property and no leases on significant amounts of space
expire until 2002.
During the year ended October 31, 1998, all of the
Partnership's remaining properties generated positive cash
flow from operations, and it is anticipated that the Taxter
and Pavilions at East Lake properties will continue to do so
during the period the Partnership continues to own its
interests in them.
During the year ended October 31, 1998, the Partnership
incurred approximately $722,000 of building improvements,
tenant improvements and leasing commissions at the Pavilions
at East Lake and Glenhardie properties.
<PAGE>
During the year ended October 31, 1998, the Partnership made
cash distributions of cash flow from operations and proceeds
from sales of properties. See Item 5.
During the year ended October 31, 1998, the Partnership's
distributions to investors (excluding distributions of sales
proceeds), capital expenditures, and contributions to its
joint venture exceeded cash flow from operations and
distributions received from its joint venture. This
shortfall was funded from Partnership cash reserves.
As of October 31, 1998, the Partnership has commitments to
fund approximately $180,000 of capital expenditures at the
Pavilions at East Lake property and $31,000, its share of
capital expenditures and leasing commissions at the Taxter
property. The Partnership may also be required to fund
certain costs at the Glenhardie properties (see Note 5 to
the consolidated financial statements), and to make
additional contributions to the Taxter joint venture (as
discussed above).
In order to increase cash reserves to fully fund its
potential liability for capital expenditures and other
Partnership cash requirements, the Partnership stopped
paying quarterly distributions of operating cash flow after
the second quarter distribution (paid in May 1998) and
withheld approximately $190,000 from the distribution from
the sale of the Glenhardie properties. Generally, future
cash distributions will be paid from proceeds received from
the sales of the Pavilions at East Lake and Taxter
properties and cash reserves.
Other assets, deferred leasing commissions, accounts payable
and accrued liabilities and security deposits decreased in
1998 as a result of sales of properties.
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.
Operations
Fluctuations in the Partnership's operating results for the
year ended October 31, 1998 compared to 1997 and for the
year ended October 31, 1997 compared to 1996 are primarily
attributable to the following:
<PAGE>
In 1998, the gains on sales of real estate resulted from the
sales of the Framingham Corporate Center and Glenhardie
Corporate Center I and II properties (the "1998 Properties
Sold"). In 1997, the gains on sales of real estate resulted
from the sales of the United Olympic and the Century Square
properties (the "1997 Properties Sold").
Rental income, property operating expenses, and depreciation
and amortization expenses decreased in 1998 as compared to
1997 as a result of the sale of the 1998 and 1997 Properties
Sold and decreased in 1997 as compared to 1996 as a result
of the sale of the 1997 Properties Sold.
The 1997 decrease in rental revenue was partially offset by
higher rental income of approximately $570,000 at the
Framingham property due to rent and occupancy increases and
approximately $620,000 at the Pavilions at East Lake
property due to the occupancy by Kroger during all of 1997.
Depreciation also decreased in 1997 compared to 1996 due to
lower depreciation on the Framingham Corporate Center,
resulting primarily from major tenant improvements becoming
fully depreciated in 1996 and the writedown of this property
in 1996.
Interest and other income decreased during 1998 compared to
1997 primarily because the Partnership's interest earned in
1997 on the proceeds from the sale of the Century Square and
United Olympic properties (until such proceeds were
distributed to Limited Partners) exceeded interest earned in
1998 on the proceeds from the sale of properties. Interest
and other income decreased by approximately $510,000 during
1997 compared to 1996 due to the absence in 1997 of
(a)interest earned on the cash proceeds from the sale of
Wallkill Plaza until such cash was distributed to Limited
Partners in March 1996, and (b) lease termination income of
approximately $390,000 received in 1996 for tenant lease
cancellations at the Pavilions at East Lake and Framingham
properties. These decreases in 1997 were partially offset by
the interest earned on the cash proceeds of the 1997
Properties Sold until such proceeds were distributed to
Limited Partners in March and May 1997.
General and administrative expenses decreased in 1998
compared to 1997 primarily due to the elimination of
expenses relating to the 1998 Properties Sold and the 1997
Properties Sold.
<PAGE>
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 totaling $11,870,000. See note 4 to
the consolidated financial statements.
There was no minority interest share of income in 1998
because the joint venture which owned the Century Square
property sold the property in 1997. Minority interest in
the gain of such sale caused the increase in the minority
interest share of income in 1997 compared to 1996.
No individual factor accounted for a significant change in
equity in earnings of the Taxter joint venture in 1998 as
compared to 1997 or 1997 as compared to 1996 or in general
and administrative expenses in 1997 as compared to 1996.
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.
INDEX
Page
(a) Financial Statements
Independent Auditors' Report 15
Consolidated Balance Sheets at October 31, 1998 and 1997 16
Consolidated Statements of Operations for the years ended
October 31, 1998, 1997 and 1996 17
Consolidated Statements of Partners' Capital for the
years ended October 31, 1998, 1997 and 1996 18
Consolidated Statements of Cash Flows for the years
ended October 31, 1998, 1997 and 1996 19-20
Notes to Consolidated Financial Statements 21-31
(b) Financial Statement Schedule
Real Estate and Accumulated Depreciation III 38-39
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, 1998 and 1997 and the related
consolidated statements of operations, partners'
capital, and cash flows for each of the three years in
the period ended October 31, 1998. 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,
1998 and 1997 and the results of their operations and
their cash flows for each of the three years in the
period ended October 31, 1998 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 15, 1999
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
October 31,
1998 1997
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 624,315 $
1,741,456
Real estate:
Land 1,900,300
3,545,300
Buildings and improvements 13,173,398
30,377,786
15,073,698
33,923,086
Accumulated depreciation 4,727,834
12,757,533
10,345,864
21,165,553
Real estate held for sale - 13,506,748
Investment in joint venture 2,373,176
2,572,800
Deferred leasing commissions, net 223,878
628,834
Other assets 229,999
1,348,454
$13,797,232
$40,963,845
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 321,506 $
940,489
Security deposits 54,394
173,057
375,900
1,113,546
Partners' capital (deficiency)
General partners (5,462,740)
(5,353,586)
Limited partners ($1,000 per Unit, 177,023 units
issued) 18,884,072
45,203,885
Total partners' capital 13,421,332
39,850,299
$13,797,232
$40,963,845
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended October 31, 1998, 1997 and 1996
<CAPTION>
1998 1997
1996
<S> <C> <C> <C>
Revenues:
Rental $ 2,722,329
$11,331,966 $16,206,557
Gains on sales of real estate 19,097,127
17,232,823 -
Equity in earnings of joint venture 226,269
209,663 250,109
Interest and other 168,846
445,521 957,941
22,214,571
29,219,973 17,414,607
Expenses:
Property operating 985,746
4,483,709 6,459,867
Depreciation 548,902
2,204,761 5,011,419
Amortization 94,228
310,960 537,220
General and administrative 475,512
715,929 759,445
Loss on impairment of real estate - -
11,870,000
2,104,388
7,715,359 24,637,951
Income (loss) before minority interest 20,110,183
21,504,614 (7,223,344)
Minority interest - 2,483,485
589,362
Net income (loss) $20,110,183
$19,021,129 $(7,812,706)
Net income (loss) allocated to:
Limited partners $20,008,877
$18,624,181 $(7,031,435)
General partners 101,306
396,948 (781,271)
$20,110,183
$19,021,129 $(7,812,706)
Net income (loss) per Unit of limited
partnership interest $ 113.03 $
105.21 $ (39.72)
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, 1998, 1997 and 1996
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency) at
November 1, 1995 $120,258,181
$(3,537,743) $116,720,438
Net loss (7,031,435)
(781,271) (7,812,706)
Cash 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
Net income 18,624,181
396,948 19,021,129
Cash distributions (69,079,686)
(672,491) (69,752,177)
Partners' capital (deficiency) at
October 31, 1997 45,203,885
(5,353,586) 39,850,299
Net income 20,008,877
101,306 20,110,183
Cash distributions (46,328,690)
(210,460) (46,539,150)
Partners' capital (deficiency) at
October 31, 1998 $ 18,884,072
$(5,462,740) $ 13,421,332
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, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 20,110,183 $
19,021,129 $(7,812,706)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Gains on sales of real estate (19,097,127)
(17,232,823) -
Depreciation 548,902
2,204,761 5,011,419
Amortization 94,228
310,960 537,220
Equity in earnings of Taxter joint venture
(226,269) (209,663)
(250,109)
Minority interest in joint venture's operations -
2,483,485 589,362
Loss on impairment of real estate -
- - 11,870,000
(Increase) decrease in operating assets:
Deferred leasing commissions (231,865)
(196,316) (713,636)
Other assets 373,626
(89,219) 372,484
(Decrease) increase in operating liabilities:
Accounts payable and accrued liabilities
(593,701) 284,357
406,464
Security deposits (115,406)
21,330 (64,299)
Net cash provided by operating
activities 862,571
6,598,001 9,946,199
Cash flows from investing activities:
Proceeds from sales of real estate 44,623,521
73,238,230 10,769,096
Distributions from Taxter joint venture 521,385
408,903 349,775 Investments in
Taxter joint venture (95,492)
(77,122) (64,009)
Additions to real estate (489,976)
(934,688) (6,112,900)
Minority interest in proceeds from sale
of real estate - (10,446,817)
- -
Net cash provided by investing
activities 44,559,438
62,188,506 4,941,962
(continued)
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 31, 1998, 1997 and 1996
(continued)
<CAPTION>
1998 1997 1996
<S> <C> <C>
<C>
Cash flows from financing activities:
Cash distributions to partners (46,539,150)
(69,752,177) (18,326,385)
Minority interest in joint venture's
distributions - (492,285)
(922,699)
Additional investments by minority interest -
5,559 130,576
Net cash used in financing activities (46,539,150)
(70,238,903) (19,118,508)
Decrease in cash and cash equivalents (1,117,141)
(1,452,396) (4,230,347)
Cash and cash equivalents at beginning of year
1,741,456 3,193,852
7,424,199
Cash and cash equivalents at end of year $ 624,315 $
1,741,456 $ 3,193,852
Supplemental disclosure of non-cash
investing activities:
Reclassification of real estate held
for sale:
Land $ - $
1,829,099 $ 2,831,536
Buildings and improvements - 26,370,585
31,438,921
Accumulated depreciation - (14,692,936)
(11,852,787)
Real estate held for sale $ - $ 13,506,748 $
22,417,670
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1998, 1997 and 1996
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.
The Partnership expects to sell its remaining real estate
investments in 1999. Pursuant to the Partnership Agreement,
the sale of the Partnership's last such investments will
cause the dissolution of the Partnership. Thereafter, the
Partnership will wind up its affairs, make a final cash
distribution and terminate.
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 owned a 75% interest in the Century Square
property until its sale in April 1997 and a 95% interest in
the Framingham Corporate Center property until its sale in
December 1997.
The equity method of accounting has been applied to the
Partnership's 14.8% interest in the general partnership
which owns 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%
interests, respectively, in the Taxter general partnership.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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. The Partnership stops
recording depreciation on a property when it is reclassified
as held for sale.
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.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 values as of October 31,
1998. 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.
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
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
addition, offering costs are treated differently for tax and
financial reporting purposes. The tax basis of the
Partnership's assets and
liabilities is approximately $23.6 million higher than the
amounts reported for financial statement purposes.
The implementation in 1998 of Statement of Financial
Accounting Standards ("Statement") No. 128, "Earnings per
Share" and Statement No. 129, "Disclosure of Information
about Capital Structure" effective for the Partnership's
1998 year-end financial statements did not have any impact
on the Partnership's financial statements.
Two additional accounting pronouncements will be effective
for the Partnership's 1999 financial statements. Statement
No. 130, "Reporting Comprehensive Income" establishes
standards for reporting and display of comprehensive income
and its components. Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information"
establishes standards for reporting information about
operating segments and related disclosures about products
and services, geographic areas, and major customers. The
Partnership does not believe that these statements will have
any effect on its computation or presentation of net income
or other disclosures.
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 are 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.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Distributions paid to limited partners include returns of
capital per Unit of limited partnership interest of $148,68,
$332.99, and $99.24 for the years ended October 31, 1998,
1997 and 1996, 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:
Carrying
Value at
Year of
October 31
Property Acquisiti 1998 1997
on
Pavilions at
East Lake
Atlanta, GA 1986 $10,345 $10,521
,864 ,158
Glenhardie I and
II,
Valley Forge, 1985 - $10,644
PA ,395
$10,345 $21,165
,864 ,553
The net carrying value of the Framingham Corporate Center
was reclassified to Real Estate Held for Sale in the fourth
quarter of 1997.
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
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
properties, the Partnership would 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. Sales of Real Estate
<CAPTION>
000's
Date Negotia Net Gain on
of ted Proceeds
Property Sale Sale From Sale
Price Sale
<S> <C> <C> <C> <C>
Fiscal 1998
Sales:
Framingham
Corporate 12/3/9 $26,050 $25,342 $11,018
Center 7
Glenhardie
Corporate
Center
I and II 4/1/98 $19,700 $19,282 $ 8,079
$45,750 $44,624 $19,097
Fiscal 1997
Sales:
United
Services
Life Building 2/27/9 $33,750 $32,395 $ 9,554
7
Century Square 4/10/9 $41,500 $40,843 $ 7,679
7
$75,250 $73,238 $17,233
Fiscal 1996
Sales:
Wallkill Plaza 12/11/ $12,200 $10,769 $ -
95
All of the properties were sold to unaffiliated buyers.
The net proceeds from the sales are net of closing costs.
As of October 31, 1998, all of the net sales proceeds were
distributed except for approximately $190,000, from the sale
of the Glenhardie properties, which was added to the
Partnership's cash reserves.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the Partnership Agreement, all of the
distributed net sale proceeds were paid 100% to the Limited
Partners, and all gains from properties sales were allocated
100% to the Limited Partners.
As part of the Purchase and Sale Agreement for the
Glenhardie properties (the "Agreement"), Dean Witter Realty
Income Partnership III, L.P. and Dean Witter Realty Income
Partnership IV, L.P., affiliated public partnerships, also
sold certain other properties. The aggregate negotiated
sale price of the properties sold was approximately $168
million, of which approximately $19.7 million was allocated
in the Agreement to Glenhardie I and II.
Pursuant to the Agreement, escrows were established for the
costs of certain building improvements and tenant
improvements (the "Improvements"). In addition to payment
of the purchase price, at closing, the Purchaser deposited
into these escrows approximately $3.9 million, of which
approximately $1.6 million relates to Glenhardie II. Any
balance remaining in the portion of the escrows relating to
Glenhardie II after the Improvements are completed will be
delivered to the Partnership. If the costs of Improvements
at Glenhardie II exceed the escrow established therefor, the
Partnership will be required to fund the excess costs.
With regards to the sale of the Century Square property, the
Partnership paid, from the net proceeds from the sale,
approximately $10.2 million to the minority interest, Dean
Witter Realty Income Partnership I, L.P. (an affiliate of
the Partnership). The minority interest's share of the gain
on sale was approximately $2.2 million.
There was no gain or loss on the sale of the Wallkill Plaza
property in fiscal year 1996 because, in fiscal year 1995,
the Partnership reduced the net carrying value of the
property to the amount of the net proceeds to be received at
closing. 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 at the property 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
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. 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.
6. Investment in Joint Venture
Taxter Corporate Park, Westchester County, New York
In October 1998, the general partnership which owns the
Taxter property entered into an agreement with KLM Royal
Dutch Airlines ("KLM"), a tenant who owns a long-term
leasehold interest in approximately 20% of the space at the
property, to purchase KLM's interest for $6.75 million. The
Partnership's share of this purchase price has yet to be
determined. The closing of the purchase is expected to
occur during the second fiscal quarter of 1999.
The partners receive cash flow and profits and losses
according to their interests.
Summarized balance sheet information of the joint venture is
as follows:
<CAPTION>
October 31,
1998 1997
<S> <C>
<C>
Land and buildings, net $16,630,575 $17,203,009
Other 913,738 1,718,650
Total assets $17,544,313 $18,921,659
Liabilities $ 124,622 $ 153,159
Partners' capital 17,419,691 18,768,500
Total liabilities and capital $17,544,313 $18,921,659
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summarized results of the operations of the joint venture
are as follows:
<caption
Years ended October 31,
1998 1997 1996
<S> <C> <C> <C>
Rental income $5,158,170 $5,511,684
$5,954,030
Other income 67,779 181,367
43,394
5,225,949 5,693,051
5,997,424
Property operating expenses 2,455,628 3,111,753
3,111,267
Depreciation and amortization 1,241,470 1,164,659
1,196,229
3,697,098 4,276,412
4,307,496
Net income $1,528,851 $1,416,639
$1,689,928
Activity in the Partnership's investment in joint venture is
as follows:
Years ended October 31,
1998 1997 1996
Investment at beginning of year $2,572,800
$2,694,918 $2,730,575
Equity in earnings 226,269 209,663
250,109
Distributions (521,385)
(408,903) (349,775)
Additional investments 95,492 77,122
64,009
Investment at end of year $2,373,176 $2,572,800
$2,694,918
The accounting policies of the joint venture are the same as
those of the Partnership.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Leases
Minimum future rental income under noncancellable operating
leases of the Pavilions at East Lake property as of October
31, 1998 is as follows:
Year ending October 31:
1999 $ 1,321,558
2000 1,246,166
2001 1,189,328
2002 1,001,156
2003 828,776
Thereafter 8,576,114
Total $14,163,098
The Partnership has determined that all of the property's
leases are operating leases. The lease terms range from
three years 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 one property in 1998
(subsequent to the sales of the Framingham and Glenhardie
properties), three properties in 1997 (subsequent to the
sale of the Century Square property) and four properties in
1996. The Partnership paid the affiliate management fees
(included in property operating expenses) of approximately
$52,000, $193,000 and $243,000 for the years ended October
31, 1998, 1997 and 1996, 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, 1998, 1997 and 1996, the affiliate was
reimbursed approximately $290,000, $396,000 and $489,000,
respectively, for these services. These amounts have been
recorded in general and administrative expenses.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of October 31, 1998, the affiliates were owed
approximately $20,000 for these services.
9. Litigation
Various public partnerships sponsored by Dean Witter Realty
Inc. (including the Partnership and its Managing General
Partner) were defendants in a class action lawsuit. On July
17, 1998, the Delaware Chancery Court granted the
defendants' motion to dismiss the complaint in the lawsuit.
On August 14, 1998, the Plaintiffs filed a notice of appeal
from the Court's order. On January 6, 1999, the Delaware
Supreme Court affirmed the Chancery Court's dismissal of the
compliant.
<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 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 55, has been a Managing Director of
Morgan Stanley and co-head of Morgan Stanley Realty
Incorporated since July 1997, and a Managing Director of
Dean Witter Realty Inc., which he joined in 1982. He is an
Executive Vice President of Dean Witter Reynolds Inc.
E. Davisson Hardman, Jr., age 49, has been a Managing
Director of Morgan Stanley Asia, Ltd. since July 1997, and a
Managing Director of Dean Witter Realty Inc., which he
joined in 1982.
Lawrence Volpe, age 51, is a Senior Vice President of Dean
Witter Reynolds Inc., which he joined in 1983. Since June
1998, he has served in an advisory capacity in connection
with Dean Witter Realty Inc. and related entities. Prior to
June 1998, he was the Controller of Dean Witter Reynolds
Inc. and the Managing General Partner, and the Controller
and a Director of Dean Witter Realty Inc.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Ronald T. Carman, age 47, is a Director and the Secretary of
Dean Witter Realty Inc. He has been an Assistant Secretary
of MWD and a Managing Director of Morgan Stanley & Co. Inc.,
since July 1998. Previously, he was a Senior Vice President
and Associate General Counsel of Dean Witter Reynolds Inc.,
which he joined in 1984.
There is no family relationship among any of the foregoing
persons.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive cash
distributions, when and as cash distributions are made to
the Limited Partners, and a share of taxable income or tax
loss. Descriptions of such distributions and allocations
are in Item 5 above. The General Partners received cash
distributions of $210,460, $672,491 and $759,029 for the
years ended October 31, 1998, 1997 and 1996, respectively.
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,
1999:
(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
Interests General Partner, as a group
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
* Own, by virtue of ownership of Limited Partnership
interests in the Associate General Partner, less than 1% of
the Units of the Partnership.
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 Morgan
Stanley Dean Witter & 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 executive officers and compensation of the Managing
General Partner and affiliates is contained in Items 10 and
11 above.
The General Partners and their affiliates were paid certain
fees and reimbursed for certain expenses. Information
concerning such fees and reimbursements is contained in Note
8 to the Consolidated Financial Statements in Item 8 above.
The Partnership believes that the payment of fees and the
reimbursement of expenses to the General Partners 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 Schedule (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.
<PAGE>
(b) Purchase and Sale Agreement, dated as of October 19,
1995, between Dean Witter Income Partnership II, L.P.,
Midway
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
PART IV
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.
(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.
(d) Purchase and Sale Agreement dated
as of December 19, 1996, between Dean Witter
Realty Income Partnership II, L.P., a Delaware
limited partnership, as Seller and Office
Opportunity Fund III, a California limited
partnership, as Purchaser was filed as an
Exhibit to Form 8-K on February 27, 1997 and is
incorporated herein by reference.
(e) Purchase and Sale Agreement, dated as of February 28,
1997, between Century Square Venture, a California general
partnership, as Seller and Speiker Properties, L.P., a
California limited partnership, as Purchaser was filed as an
Exhibit to Form 8-K on April 10, 1997 and is incorporated
herein by reference.
<PAGE>
(f) Purchase and Sale Agreement, dated as of October 22,
1997, between Framingham Corporate Center Limited
Partnership as Seller and Massachusetts Mutual Life
Insurance Company as
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
PART IV
Purchaser was filed as an Exhibit to
Form 8-K on December 3, 1997 and is incorporated
herein by reference.
(g) Purchase and Sale Agreement, dated as of February 10,
1998, between DWR Chesterbrook Associates, Glenhardie
Corporation, the Partnership, Dean Witter Realty Income
Partnership III, L.P., and Part Six Associates, as Sellers,
and FV Office Partners, L.P., as Purchaser was filed as an
Exhibit to Form 8-K on April 1, 1998 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.
SCHEDULE III
Real Estate and Accumulated Depreciation
October 31, 1998
Initial cost to Partnership
<CAPTION> Costs
Capital-
ized
Subsequent
Description Land Improvements Total
To Acquisition
<S> <C> <C> <C> <C>
Office Buildings
Valley Forge, PA $2,000,000 $16,534,152
$18,534,152 $4,348,437
Shopping Center
Atlanta, GA 2,500,000 13,858,607
16,358,607 4,712,091
$4,500,000 $30,392,759
$34,892,759 $9,060,528
Gross Amount at which
Carried at End of Period
(A)
Building and
Description Reductions Land
Improvements Total
Office Buildings
Valley Forge, PA $ (3,550,000)1 $ -
$ - $ -
$(19,332,589)2
Shopping Center
Atlanta, GA (5,997,000)1 1,900,300 13,173,398
15,073,698
$(28,879,589) $1,900,300 $13,173,398
$15,073,698
2. Loss on impairment of real estate.
3. Real estate sold during year.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
SCHEDULE III (continued)
<CAPTION>
Life on
which
Depreciation in
Latest
Income
Accumulated Date of Statement
is
Description Depreciation (B) Construction Date
Acquired Computed
<S> <C> <C> <C> <C>
Shopping Center
Atlanta, GA 4,727,834 1986 December
1986 5-40 years
Notes:
(A)Reconciliation of real estate owned at October 31:
1998 1997 1996
Balance at beginning of period $ 33,923,086
$105,946,529$145,974,086
Additions (deletions) during period:
Improvements 489,976
934,688 6,112,900
Loss on impairment of real
estate - -
(11,870,000) Reclassified to real estate
held for sale -
(28,199,684) (34,270,457) Real estate
sold (19,339,364)
(44,758,447) -
Balance at end of period $ 15,073,698 $
33,923,086 105,946,529
(B) Reconciliation of accumulated depreciation:
1998 1997 1996
Balance at beginning of period $ 12,757,533 $
38,964,769 $ 45,806,137
Additions (deletions) during
period:
Depreciation expense 548,902
2,204,761 5,011,419
Reclassified to real estate
held for sale - (14,692,936)
(11,852,787)
Real estate sold (8,578,601)
(13,719,061) -
Balance end of period $ 4,727,834 $
12,757,533 $ 38,964,769
There is no difference between cost for financial reporting
purposes and cost for federal income tax purpose.
</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
28,1999
E. Davisson Hardman, Jr.
President
By: /s/Charles M. Charrow Date: January
28,1999 Charles M. Charrow
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
28,1999
William B. Smith
Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: January
28,1999
E. Davisson Hardman, Jr.
Director
/s/Lawrence Volpe Date: January
28,1999
Lawrence Volpe
Director
/s/Ronald T. Carman Date: January
28,1999
Ronald T. Carman
Director
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP II, L.P.
Year Ended October 31, 1998
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-31-1998
<PERIOD-END> OCT-31-1998
<CASH> 624,315
<SECURITIES> 0
<RECEIVABLES> 166,323
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,797,232<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,421,332<F2>
<TOTAL-LIABILITY-AND-EQUITY> 13,797,232<F3>
<SALES> 0
<TOTAL-REVENUES> 22,214,571<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,104,388
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20,110,183
<INCOME-TAX> 0
<INCOME-CONTINUING> 20,110,183
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,110,183
<EPS-PRIMARY> 113.03<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $10,345,864, investment in joint venture of $2,373,176,
net deferred expenses of $223,878 and other assets of $63,676.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $321,506
and other liabilities of $54,394.
<F4>Total revenue includes rent of $2,722,329, gains on sales of real
estate of $19,097,127, equity in earnings of joint venture of $226,269,
and interest and other revenues of $168,846.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
