FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission File Number: 0-15448
CENTENNIAL MORTGAGE INCOME FUND II
(Exact name of registrant as specified in its charter)
California 33-0112106
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1540 South Lewis Street, Anaheim, California 92805
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714)502-8484
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
PART I
ITEM 1. FINANCIAL STATEMENTS
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
Assets (Unaudited)
---------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 3,316,000 $ 2,039,000
Real estate loans receivable, earning 490,000 543,000
Real estate loans receivable from
unconsolidated investee, nonearning 5,000 5,000
---------------------------------------------------------------------------
Net real estate loans receivable 495,000 548,000
---------------------------------------------------------------------------
Real estate owned, held for sale (note 3) 1,511,000 2,843,000
Less allowance for possible
losses on real estate owned 1,112,000 1,112,000
---------------------------------------------------------------------------
Net real estate owned 399,000 1,731,000
---------------------------------------------------------------------------
Due from unconsolidated investee 2,000 2,000
Other assets, net 6,000 5,000
---------------------------------------------------------------------------
$ 4,218,000 $ 4,325,000
===========================================================================
Liabilities and Partners' Equity
---------------------------------------------------------------------------
Accounts payable and accrued liabilities $ 17,000 $ 65,000
Due to affiliates 1,000 ---
Accrued distribution to limited partners 2,127,000 ---
---------------------------------------------------------------------------
Total liabilities 2,145,000 65,000
---------------------------------------------------------------------------
Partners' equity (deficit)
-- 29,141 limited partnership units
outstanding at September 30, 2000
and December 31, 1999
General partners (56,000) (56,000)
Limited partners 2,129,000 4,316,000
---------------------------------------------------------------------------
Total partners' equity 2,073,000 4,260,000
Contingencies (note 5)
Subsequent event (note 6)
---------------------------------------------------------------------------
$ 4,218,000 $ 4,325,000
===========================================================================
</TABLE>
See accompanying notes to consolidated financial statements
1
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Interest income on loans
to nonaffiliates,
including fees $ 32,000 $ 34,000 $ 11,000 $ 10,000
Interest on interest-
bearing deposits 106,000 36,000 44,000 19,000
Income from operations of
real estate owned --- 135,000 --- 43,000
Other income 7,000 8,000 4,000 2,000
------------------------------------------------------------------------
Total revenue 145,000 213,000 59,000 74,000
------------------------------------------------------------------------
Expenses:
Provision for possible
losses 30,000 --- 30,000 ---
Operating expenses from
operations of real
estate owned --- 69,000 --- 26,000
Operating expenses from
operations of real estate
owned paid to affiliates --- 9,000 --- 3,000
Expenses associated with non-
operating real estate
owned 40,000 52,000 8,000 27,000
Depreciation and
amortization --- 3,000 --- 1,000
Interest expense --- 16,000 --- 6,000
General and administrative,
affiliates 82,000 162,000 24,000 25,000
General and administrative,
nonaffiliates 53,000 66,000 17,000 23,000
-------------------------------------------------------------------------
Total expenses 205,000 377,000 79,000 111,000
-------------------------------------------------------------------------
Net loss $ (60,000) $ (164,000) $ (20,000) $ (37,000)
=========================================================================
Net loss per limited
partnership unit
- basic and diluted $ (2.06) $ (5.63) $ (0.69) $ (1.27)
=========================================================================
</TABLE>
See accompanying notes to consolidated financial statements
2
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Statement of Partners' Equity
(Unauidited)
<TABLE>
<CAPTION>
For the nine months ended September 30, 2000
<S> <C> <C> <C>
Total
General Limited Partners'
Partners Partners Equity
(Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------
<S> <C> <C> <C>
Balance (deficit) at
December 31, 1999 $ (56,000) $ 4,316,000 $ 4,260,000
Net loss --- (60,000) (60,000)
Accrued distribution to
limited partners (2,127,000) (2,127,000)
--------------------------------------------------------------------------
Balance (deficit) at
September 30, 2000 $ (56,000) $ 2,129,000 $ 2,073,000
===========================================================================
</TABLE>
See accompanying notes to consolidated financial statements
3
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine months ended September 30, 2000 and 1999
2000 1999
(Unaudited) (Unaudited)
--------------------------------------------------------------------------
<S> <C> <C>
Cash flows from
operating activities:
Net loss $ (60,000) $ (164,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Provision for possible losses 30,000 ---
Depreciation and amortization --- 3,000
Changes in assets and liabilities:
Increase in other assets (1,000) 1,000
Decrease in accounts payable
and accrued liabilities (48,000) (35,000)
Increase in due to affiliates 1,000 ---
-------------------------------------------------------------------------
Net cash used in operating activities (78,000) (195,000)
-------------------------------------------------------------------------
Cash flows from investing activities:
Principal collected on loans 23,000 62,000
Advances on loans --- (8,000)
Cash proceeds from sale of real
estate owned, held for sale 1,332,000 842,000
Capital expenditures for real
estate owned, held for sale --- (25,000)
-------------------------------------------------------------------------
Net cash provided by investing activities 1,355,000 871,000
-------------------------------------------------------------------------
Cash flows used in financing activities:
Principal payments on notes payable --- (1,000)
-------------------------------------------------------------------------
Net increase in cash
and cash equivalents 1,277,000 675,000
Beginning cash and cash equivalents 2,039,000 1,010,000
-------------------------------------------------------------------------
Ending cash and cash equivalents $ 3,316,000 $1,685,000
=========================================================================
Supplemental schedule of cash flow
information:
Cash paid during the period
for interest $ --- $ 14,000
Supplemental schedule of noncash investing
and financing activities:
Decrease in notes receivable as
a result of partial chargeoff $ 30,000 $ ---
See accompanying notes to consolidated financial statements
4
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2000 and 1999
(1) BUSINESS
Centennial Mortgage Income Fund II (the "Partnership") was formed in 1985 and
initially invested in commercial, industrial and residential income-producing
real property through mortgage investments consisting of participating first
mortgage loans, other equity participation loans, construction loans, and
wrap-around and other junior loans. The Partnership's underwriting policy for
granting credit was to fund loans secured by first and second deeds of trust
on real property. The Partnership's area of concentration is in California.
In the normal course of business, the Partnership participated with other
lenders in extending credit to single borrowers. The Partnership did this in
an effort to decrease credit concentrations and provide a greater
diversification of credit risk.
As of September 30, 2000, most of the Partnership's loans have been repaid or
charged off. However, during the early 1990's, real estate market values for
undeveloped land in California declined severely. As the loans secured by
undeveloped land became delinquent, the Partnership elected to foreclose on
certain of these loans, thereby increasing real estate owned balances. As a
result, the Partnership became a direct investor in this real estate and
intends to manage operating properties and develop raw land until such time as
the Partnership is able to sell this real estate owned.
As required by the Partnership Agreement, the Partnership is currently in the
repayment stage, and as a result, cash proceeds from mortgage investments are
no longer available for reinvestment.
(2) BASIS OF PRESENTATION
The consolidated financial statements are unaudited and reflect all
adjustments, consisting only of normal recurring accruals, which are, in the
opinion of management, necessary for a fair statement of the results of
operations for the interim periods. Results for the nine and three months
ended September 30, 2000 and 1999 are not necessarily indicative of results
which may be expected for any other interim period, or for the year as a
whole.
Information pertaining to the nine months ended September 30, 2000 and 1999 is
unaudited and condensed inasmuch as it does not include all related footnote
disclosures.
The condensed consolidated financial statements do not include all information
and footnotes necessary for fair presentation of financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles. Notes to consolidated financial statements included in Form 10-K
for the year ended December 31, 1999 on file with the Securities and Exchange
Commission, provide additional disclosures and a further description of
accounting policies.
5
Financial Information about Industry Segments
Given that the Partnership is in the process of liquidation, the Partnership
has identified only one operating business segment which is the business of
asset liquidation.
Net Loss per Limited Partnership Unit
Net loss per limited partnership unit was based on the weighted average number
of limited partnership units outstanding of 29,141 for all periods presented.
(3) REAL ESTATE OWNED
</TABLE>
<TABLE>
<CAPTION>
Real estate owned consists of the following:
(dollars in thousands)
<S> <C> <C>
September 30, December 31,
2000 1999
----------------------------------------------------------------------------
1. Land in Sacramento, CA 1,511 2,843
----------------------------------------------------------------------------
Total real estate owned $ 1,511 $ 2,843
============================================================================
</TABLE>
In February 2000, the Partnership sold approximately 7.13 acres of the
remaining 27.83 acres of land in Sacramento for a gross sales price of
$900,000. The sale generated approximately $846,000 in net cash proceeds
after deducting $54,000 in selling costs. No gain or loss was recorded in
connection with this transaction.
In August 2000, the Partnership sold approximately 2.65 acres of the remaining
27.83 acres of land in Sacramento for a gross sales price of $519,000. The
sale generated approximately $486,000 in net cash proceeds after deducting
$33,000 in selling costs. No gain or loss was recorded in connection with
this transaction.
The Partnership held approximately 18.05 acres of this property as of
September 30, 2000 with a remaining net carrying value of $399,000, after
deducting an allowance for possible losses on real estate owned of $1,112,000.
(4) TRANSACTIONS WITH AFFILIATES
Under the provisions of the Partnership Agreement, the general partners are to
receive compensation for their services in supervising the affairs of the
Partnership. This partnership management compensation shall be equal to 10
percent of the cash available for distribution, as defined in the Partnership
Agreement. The general partners will not receive this compensation until the
limited partners have received a 12 percent per annum cumulative return on
their adjusted invested capital, but are entitled to receive a 5 percent
interest in cash available for distribution in any year until this provision
has been met. Adjusted invested capital is defined as the original capital
invested less distributions from mortgage reductions. Payments to the general
6
partners have been limited to 5 percent of cash available for distribution as
the limited partners have not received their 12 percent per annum cumulative
return. Under this provision of the Partnership Agreement, no distributions
were paid to the general partners during the nine months ended September 30,
2000 or 1999.
(5) CONTINGENCIES
There are no material pending legal proceedings.
(6) SUBSEQUENT EVENT
The Partnership made a cash distribution to limited partners of approximately
$2,127,000 in October 2000. The distribution, which equaled $73.00 per
limited partnership unit, was made to all holders of record as of September
15, 2000.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
References to the "Partnership" in the following discussion refers to
Centennial Mortgage Income Fund II and its wholly-owned subsidiaries.
The Partnership had net losses and losses per limited partnership unit of
$(60,000) and $(2.06) and $(20,000) and $(0.69) for the nine and three months
ended September 30, 2000, respectively. The Partnership had net losses and
losses per limited partnership unit of $(164,000) and $(5.63) and $(37,000)
and $(1.27) for the nine and three months ended September 30, 1999,
respectively. The decrease in losses is principally the result of a reduction
in general and administrative costs.
Cautionary Statements Regarding Forward-Looking Information
The Partnership wishes to caution readers that the forward-looking statements
contained in this Form 10-Q under "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in
this Form 10-Q involve known and unknown risks and uncertainties which may
cause the actual results, performance or achievements of the Partnership to be
materially different from any future results, performance or achievements
expressed or implied by any forward-looking statements made by or on behalf of
the Partnership. In connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Partnership is filing
the following cautionary statements identifying important factors that in some
cases have affected, and in the future could cause the Partnership's actual
results to differ materially from those expressed in any such forward-looking
statements.
The factors that could cause the Partnership's results to differ materially
include, but are not limited to, general economic and business conditions,
including interest rate fluctuations; the impact of competitive products and
pricing; success of operating initiatives; adverse publicity; changes in
business strategy or development plans; quality of management; availability,
terms and deployment of capital; the results of financing efforts; business
abilities and judgment of personnel; availability of qualified personnel;
employee benefit costs and changes in, or the failure to comply with
government regulations.
Risks of the year 2000 Issue
The Partnership is in the process of liquidating its remaining assets. As of
September 30, 2000, the Partnership held only cash and cash equivalents, a
single note secured by real estate, an investment in a single undeveloped
parcel of real estate and $8,000 in other non-cash assets. In light of these
circumstances, the Partnership has made only the absolutely necessary
modifications to existing software which were necessitated by the year 2000
issues. The cost of these modifications was less than $10,000.
To date, the Partnership has experienced only minor computer related problems
that are the result of the year 2000. None of these problems have caused any
significant disruption to the Partnership's operations. The Partnership
8
anticipates that it will encounter additional minor problems in the coming
months. It does not anticipate that it will be required to spend any
significant amounts to correct these problems or that these problems will
cause any disruptions of any consequence to the Partnership's operations.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Partnership had $3,316,000 in unrestricted cash and
interest-bearing deposits. The Partnership had no unfunded loan commitments
at September 30, 2000. Sources of funds are expected to be from the sale of
real estate owned and the payoff or paydown of notes receivable.
During the nine months ended September 30, 2000 the Partnership's cash and
cash equivalents increased by approximately $1,277,000. This increase was
principally due to $1,332,000 in net cash proceeds from the sale of a portion
of the land in Sacramento. The Partnership used approximately $78,000 in cash
in operating activities during the nine months ended September 30, 2000.
The Partnership's principal capital requirements for the next year consist of:
(i) a $2,127,000 cash distribution to limited partners that was paid in
October 2000 (ii) real property taxes on real estate owned of approximately
$23,000 payable during the next twelve months, and (iii) general and
administrative costs. These commitments are expected to be paid from existing
cash balances.
Effective with the third quarter of 1991, the Partnership had suspended making
any cash distributions to partners, due to a decline in liquidity and the
uncertainty of the cash requirements for existing and potential real estate
owned. Pursuant to the Partnership Agreement, 60 months after the closing of
the offering, cash proceeds from mortgage investments are no longer available
for reinvestment by the Partnership.
Through the latter part of 1997, the general partners believed that the cash
proceeds from mortgage reductions and the sale of real estate owned should be
retained by the Partnership until such time as it was assured that it had
sufficient cash to fulfill any potential operating requirements. Due to the
substantial amount of real estate owned, these potential operating costs were
considered to be very significant. As a result of the substantial decrease in
real estate owned which occurred during 1998, the general partners determined
that the Partnership could make a $3,496,000 distribution to its limited
partners in October 1998.
Additional property sales in 1999 and 2000 caused the Partnership's cash
balances to increase from approximately $1.0 million at December 31, 1998 to
over $3.3 million as of September 30, 2000. As a result, the general partners
declared a distribution payable to all limited partners of record as of
September 15, 2000 in the amount of $2,127,000, or $73.00 per limited
partnership unit. This distribution was paid in October 2000.
The general partners have had discussions with legal counsel regarding the
amounts of cash balances that would be prudent to be retained by the
Partnership at this time. In light of the substantial amount of real estate
that the Partnership has held an interest in over the years, there is always
the potential for future litigation to arise, particularly in the area of
toxic contamination. Although the general partners are not aware of any
9
threatened litigation, or litigation that is likely to arise, they have
determined that the Partnership should retain at least $1,000,000 in cash
balances to be available to defend the Partnership in any future litigation
which may arise. It is expected that these cash balances will be retained
until such time as legal counsel advises the general partners that the
potential for any future litigation is remote.
RESULTS OF OPERATIONS
INTEREST ON LOANS
Interest income on loans to nonaffiliates, including fees was $11,000 and
$10,000 for the three months ended September 30, 2000 and 1999, respectively.
Interest income on loans to nonaffiliates, including fees was $32,000 and
$34,000 for the nine months ended September 30, 2000 and 1999, respectively.
The year to date decrease is attributable to a small loan which was repaid in
early 1999 and did not generate any interest income in 2000.
Interest income on loans to nonaffiliates for the nine months ended September
30, 2000 was earned from a single note secured by real estate. The
Partnership owns a 50% interest in the note with the remaining interest in the
note being owned by Centennial Mortgage Income Fund, an affiliate. The
principal balance of this note of $1,070,000 was due in April 2000, however, ,
the borrower failed to repay the note when it matured. The Partnership
commenced foreclosure proceedings under the trust deed securing the note in
July 2000. In August 2000, the Partnership entered into a modification
agreement with the borrower which required the borrower to make an immediate
$50,000 principal payment, bring interest current and pay for all foreclosure
proceeding costs. In addition, the modification agreement required the
borrower to make monthly interest payments, make $50,000 principal payments in
September 2000 and November 2000, and to repay the remaining balance of the
note by December 28, 2000.
The borrower failed to make the required payment in September 2000. During
discussions with the borrower in early October, they indicated that they had
an external source of funds available to repay the entire note, but only if
the Partnership was willing to take a payoff amount that was $60,000 less than
the face value of the note plus accrued interest. Additionally, the borrower
indicated that if the Partnership did not accept this discounted payoff and
instead pursued its right to foreclose under the deed of trust securing the
note, the borrower would be likely to seek protection under the federal
bankruptcy laws. Before deciding whether or not to accept the discounted
payoff, the General Partners considered the following items: i) the length of
time that it might take to pursue its rights through a bankruptcy proceeding;
ii) the risk that the Partnership might not ultimately recover the full face
value of the note plus accrued interest and collection costs; and iii) the
potential administrative costs of having to continue to operate the
Partnership for additional time due to the extended holding period of the
note. After evaluating these factors, the General Partners determined that it
would be in the best interest of the limited partners to accept the discounted
payoff. The Partnership received approximately $490,000 in cash from the
payoff of the note in October 2000. The Partnership reduced its carrying
value of the note by $30,000 (1/2 of the total discount) as of September 30,
2000 to reflect this agreement and charged the write down to provision for
possible losses.
10
REAL ESTATE OWNED
The real estate owned balances at September 30, 2000 and December 31, 1999
were $1,511,000 and $2,843,000, respectively. A description of the principal
real estate assets owned by the Partnership during the periods covered in the
accompanying financial statements follows:
Office Building in San Bernardino, California
The Partnership funded a loan during January 1988 with an original committed
amount of $921,000 which was secured by a second trust deed on an office
building comprised of 15,984 square feet of rentable space located in San
Bernardino, California. The loan was provided as gap financing behind a first
deed of trust in the amount of $350,000 to another financial institution. The
borrower was unable to payoff the loan at maturity and the Partnership
foreclosed on April 20, 1993. The project was 92 percent leased as of March
31, 1999, however, a number of leases expired in 1999 and occupancy levels
declined as a result. The property generated net operating income of $57,000
during the nine months ended September 30, 1999. As of September 30, 1999, the
property was encumbered by a note secured by a first trust deed of $234,000
which was repaid when the property was sold. The property was sold in December
1999 and the secured note was repaid from the sales proceeds.
28 Acres in Sacramento, California
The Partnership funded a loan in 1987 with a committed amount of $4,000,000
secured by a first trust deed on 44.52 acres in Sacramento, California. The
loan was provided for the development of offsite improvements. The maturity
date was February 1, 1991. The borrower was unable to obtain construction
financing and bring interest current. The Partnership accepted a grant deed
on the property on March 10, 1992. The property is zoned for multi-family and
light industrial use. A portion of the property is adjacent to Highway 99 and
has good freeway visibility. The Partnership rezoned and subdivided a portion
of the property to facilitate one escrow on a 6.5 acre portion of the property
without freeway visibility. This transaction closed escrow during the fourth
quarter of 1997. During the first quarter of 1999, the Partnership opened
escrow on a 9.45 acre portion of the property which also did not have freeway
visibility for a purchase price of $900,000. The escrow closed at the end of
the second quarter of 1999, generated $842,000 in net cash proceeds and was
recorded at no gain or loss. Both parcels sold are zoned for residential use.
The balance of the property is zoned for industrial/commercial use.
During the first quarter of 2000, the Partnership opened escrow on a 7.13 acre
portion of the property which did have freeway visibility for a purchase price
of $900,000. The escrow closed in February 2000, generated $846,000 in net
cash proceeds and was recorded at no gain or loss.
In August 2000, the Partnership sold approximately 2.65 acres of the remaining
27.83 acres of land in Sacramento for a gross sales price of $519,000. The
sale generated approximately $486,000 in net cash proceeds after deducting
$33,000 in selling costs. No gain or loss was recorded in connection with
this transaction.
11
At September 30, 2000, the Partnership still held approximately 18.05 acres of
this property that had a carrying value before allowance for possible losses
was $1,551,000. The Partnership has recorded a $1,112,000 allowance for
losses related to this property as of September 30, 2000.
INTEREST ON INTEREST-BEARING DEPOSITS
Interest on interest-bearing deposits totaled $44,000 and $19,000 for the
three months ended September 30, 2000 and 1999, respectively. Interest on
interest-bearing deposits totaled $106,000 and $36,000 for the nine months
ended September 30, 2000 and 1999, respectively. Interest on interest-bearing
deposits represents interest earned on Partnership funds invested, for
liquidity, in time certificate and money market deposits. The increase in
2000 is primarily attributable to an increase in the average balance of cash
and cash equivalents and to a lesser extent, an increase in the average yield
earned on bank deposits in 2000.
INCOME FROM OPERATIONS OF REAL ESTATE OWNED
Income from operations of real estate owned consists of operating revenues of
$135,000 for the nine months ended September 30, 1999. The 1999 revenues are
from the office building in San Bernardino. There was no rental income from
this property during the nine months ended September 30, 2000 due to the sale
of the building in December 1999.
PROVISION FOR POSSIBLE LOSSES
There was a $30,000 provision for possible losses for the nine months ended
September 30, 2000. There was no provision for possible losses for the nine
months ended September 30, 1999. The provision in 2000 was related to the
note receivable discussed above under "Interest on Loans". The provision for
possible losses results from the change in the allowance for possible losses
on real estate owned net of chargeoffs, if any. Management believes that the
allowance for possible losses at September 30, 2000 is adequate to absorb the
known and inherent risk in the Partnership's loan and real estate owned
portfolio.
OTHER EXPENSES
Operating expenses from operations of real estate owned were $69,000 for the
nine months ended September 30, 1999. These expenses were associated with the
office building in San Bernardino which was sold in December 1999.
Operating expenses from operations of real estate owned paid to affiliates
were $9,000 for nine months ended September 30, 1999. The operating expenses
consist of property management fees paid to an affiliate for the management of
the office building in San Bernardino.
Expenses associated with non-operating real estate owned were $8,000 and
$27,000 for the three months ended September 30, 2000 and 1999, respectively.
Expenses associated with non-operating real estate owned were $40,000 and
$52,000 for the nine months ended September 30, 2000 and 1999, respectively.
The expenses for the nine months ended September 30, 2000 relate primarily to
12
the 45 acres in Sacramento. The expenses for the nine months ended September
30, 1999 also relate primarily to the 45 acres in Sacramento but also include
approximately $17,000 in expenses associated with a property which was sold by
the Partnership in 1998.
Interest expense was $16,000 for the nine months ended September 30, 1999.
The interest expense relates to the note secured by the office building in San
Bernardino which was repaid in December 1999.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, affiliates totaled $24,000 and $25,000,
respectively, for the three months ended September 30, 2000 and 1999. General
and administrative expenses, affiliates totaled $82,000 and $162,000,
respectively, for the nine months ended September 30, 2000 and 1999. These
expenses are primarily salary allocation reimbursements paid to affiliates.
The decrease from 1999 to 2000 is due to the termination of five employment
contracts effective March 31, 1999.
General and administrative expenses, nonaffiliates totaled $17,000 and $23,000
for the three months ended September 30, 2000 and 1999, respectively. General
and administrative expenses, nonaffiliates totaled $53,000 and $66,000 for the
six months ended June 30, 2000 and 1999, respectively. These expenses consist
of other costs associated with the administration of the Partnership and real
estate owned. The decrease in 2000 is principally due to a decrease in
accountant's fees.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since the Partnership does not invest in any derivative financial instruments
or enter into any activities involving foreign currencies, its market risk
associated with financial instruments is limited to the effect that changing
domestic interest rates might have on the fair value of its bank deposits and
notes receivable.
As of September 30, 2000, the Partnership held bank deposits with carrying
values totaling $3,316,000 and fixed rate notes receivable with carrying
values totaling $495,000. The bank deposits and fixed rate notes all had
maturities of ninety days or less. The estimated fair value of all of these
assets was estimated to be equal to their carrying values as of September 30,
2000.
Management currently intends to hold the remaining fixed rate assets until
their respective maturities. Accordingly, the Partnership is not exposed to
any material cash flow or earnings risk associated with these assets. Given
the relatively short-term maturities of these assets, management does not
believe the Partnership is exposed to any significant market risk related to
the fair value of these assets.
The Partnership had no interest bearing indebtedness outstanding as of
September 30, 2000. Accordingly, the Partnership is not exposed to any market
risk associated with its liabilities.
13
PART II -OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (3) & (4) Articles of Incorporation and Bylaws
The Amended and Restated Limited Partnership Agreement
Incorporated by reference to Exhibit A to the Partnership's
Prospectus contained in the Partnership's registration
Statement on Form Form S-11 (Commission File No. 0-15448)
Dated January 17, 1986, as supplemented filed under the Securities
Act of 1933
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None
14
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.
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A California Limited Partnership
/s/ John B. Joseph
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John B. Joseph
General Partner November 13, 2000
/s/ Ronald R. White
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Ronald R. White
General Partner November 13, 2000
By: CENTENNIAL CORPORATION
General Partner
/s/ Joel H. Miner
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Joel H. Miner
Chief Financial Officer November 13, 2000
