<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended September 30, 1996
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Commission file number 0-14633
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 13-3294820
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27611 La Paz Road, P.O. Box A-1, Laguna Niguel, California 92677-0100
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(Address of principal executive offices) (Zip Code)
(714) 643-7700
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 12(g), 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve 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
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<PAGE> 2
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------
INDEX
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<TABLE>
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -
September 30, 1996 (Unaudited) and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations (Unaudited) -
Three and Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
BALANCE SHEETS
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<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
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(Unaudited) (Note)
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ASSETS
- ------
Properties held for sale (net of valuation
allowance of $932,000 in 1996 and $707,000
in 1995) $23,351,000 $23,387,000
Investment in Cooper Village Partners 3,874,000 3,892,000
Cash and cash equivalents 1,563,000 1,055,000
Accounts receivable 117,000 29,000
Accrued rent receivable 473,000 527,000
Prepaid expenses and other assets 200,000 244,000
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$29,578,000 $29,134,000
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable and accrued liabilities $ 751,000 $ 712,000
----------- -----------
Partners' capital(deficit):
Limited Partners 28,991,000 28,590,000
General Partner (164,000) (168,000)
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28,827,000 28,422,000
Commitments and contingencies - -
----------- -----------
$29,578,000 $29,134,000
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</TABLE>
Note: The balance sheet at December 31, 1995 has been prepared from the
audited financial statements as of that date.
The accompanying notes are an integral part of these financial statements.
3
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(UNAUDITED)
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -----------------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
REVENUES
- --------
Rental income $1,198,000 $1,149,000 $3,601,000 $3,313,000
Interest income 17,000 17,000 44,000 46,000
---------- ---------- ---------- ----------
Total revenues 1,215,000 1,166,000 3,645,000 3,359,000
---------- ---------- ---------- ----------
EXPENSES
- --------
Operating expenses 259,000 288,000 774,000 821,000
Real estate taxes 175,000 154,000 555,000 520,000
Depreciation and amortization 18,000 309,000 51,000 949,000
General and administrative 165,000 180,000 481,000 516,000
Adjustment to carrying value
of real estate 157,000 - 225,000 -
---------- ---------- ---------- ----------
Total Expenses 774,000 931,000 2,086,000 2,806,000
---------- ---------- ---------- ----------
Income before equity
in earnings 441,000 235,000 1,559,000 553,000
Equity in earnings of Cooper
Village Partners 65,000 36,000 283,000 119,000
---------- ---------- ---------- ----------
NET INCOME $ 506,000 $ 271,000 $1,842,000 $ 672,000
========== ========== ========== ==========
NET INCOME ALLOCABLE TO:
General Partner $ 5,000 $ 3,000 $ 18,000 $ 7,000
========== ========== ========== ==========
Limited Partners $ 501,000 $ 268,000 $1,824,000 $ 665,000
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<TABLE>
<CAPTION>
Nine Months Ended September 30,
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1996 1995
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Cash flows from operating activities:
Net income $ 1,842,000 $ 672,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 51,000 949,000
Equity in earnings of Cooper Village Partners (283,000) (119,000)
Adjustment to carrying value of real estate 225,000 -
Changes in:
Additions to properties held for sale (189,000) -
Accounts receivable (88,000) (84,000)
Accrued rent receivable 54,000 (67,000)
Prepaid expenses and other assets (7,000) -
Accounts payable and accrued liabilities 39,000 154,000
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Net cash provided by operating activities 1,644,000 1,505,000
Cash flows from investing activities:
Investments in real estate - (338,000)
Distributions received from
Cooper Village Partners 302,000 238,000
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Net cash provided by (used in) investing
activities 302,000 (100,000)
Cash flows from financing activities:
Distributions (1,438,000) (1,379,000)
----------- -----------
Net cash used in financing activities (1,438,000) (1,379,000)
Net increase in cash and cash
equivalents 508,000 26,000
Cash and cash equivalents, beginning of
period 1,055,000 1,058,000
----------- -----------
Cash and cash equivalents, end of period $ 1,563,000 $ 1,084,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
- -----------------------------------------
(1) Accounting Policies
-------------------
The financial statements of Damson/Birtcher Realty Income Fund-II,
Limited Partnership (the "Partnership") included herein have been
prepared by the General Partner, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. These
financial statements include all adjustments which are of a normal
recurring nature and, in the opinion of the General Partner, are
necessary for a fair presentation. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted, pursuant to the rules and regulations of the
Securities and Exchange Commission. These financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1995.
Earnings Per Unit
The Partnership Agreement does not designate investment interests in
units. All investment interests are calculated on a "percent of
Partnership" basis, in part to accommodate reduced rates on sales
commissions for subscriptions in excess of certain specified amounts.
A Limited Partner who was charged a reduced sales commission or no
sales commission was credited with proportionately larger Invested
Capital and therefore had a disproportionately greater interest in the
capital and revenues of the Partnership than a Limited Partner who
paid commissions at a higher rate. As a result, the Partnership has
no set unit value as all accounting, investor reporting and tax
information is based upon each investor's relative percentage of
Invested Capital. Accordingly, earnings or loss per unit is not
presented in the accompanying financial statements.
Carrying Value of Real Estate
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," ("FAS 121"). This Statement requires that if the
General Partner believes factors are present that may indicate
long-lived assets are impaired, the undiscounted cash flows, before
debt service, related to the assets should be estimated. If these
estimated cash flows are less than the carrying value of the asset,
then impairment is deemed to exist. If impairment exists, the asset
should be written down to the estimated fair value.
6
<PAGE> 7
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
- -----------------------------------------
(1) Accounting Policies (Cont'd.)
-------------------
Further, assets held for sale, including any unrecoverable accrued
rent receivable or capitalized leasing commissions, should be carried
at the lower of carrying value or fair value less estimated selling
costs. Any adjustment to carrying value is recorded as a valuation
allowance against property held for sale. Each reporting period, the
General Partner will review its estimates of fair value, which may be
decreased or increased up to the original carrying value. Finally,
assets held for sale are no longer depreciated. The General Partner
adopted FAS 121 at December 31, 1995 and the adoption did not have a
material impact on the Partnership's operations or financial position,
as prior to December 31, 1995, the Partnership had not had any
properties held for sale.
As noted above, as of December 31, 1995 the General Partner decided to
account for the Partnership's properties as assets held for sale,
assuming an average 12 month holding period, instead of for
investment. Accordingly, the General Partner compared the carrying
value of each property to its appraised value as of January 1, 1996.
If the carrying value of a property and certain related assets was
greater than its appraised value, less selling costs, the General
Partner reduced the carrying value of the property by the difference.
Using this methodology, as of December 31, 1995, the General Partner
determined that Atrium Place, Kennedy Corporate Center, Lakeland
Industrial Park and Cooper Village (58% interest) had carrying values
greater than their appraised values, and accordingly reduced those
carrying values by $167,000, $500,000, $40,000 and $789,000 to
$829,000, $2,625,000, $4,929,000 and $3,704,000, respectively.
For the three and nine months ended September 30, 1996, the
Partnership spent approximately $82,000 and $150,000, respectively,
related to tenant/building improvements and leasing commissions at
Kennedy Corporate Center I and Lakeland Industrial Park. Atrium Place
is under contract for sale (see Note 4, "Subsequent Events"). Based
on its anticipated gross sales price of $816,250, the General Partner
reduced its estimated carrying value by $75,000 to $754,000. Because
these expenditures, and the carrying value of Atrium Place, exceeded
the estimates of fair value, the General Partner adjusted the carrying
value of the Partnership's portfolio by an aggregate of $225,000 for
the nine months ending September 30, 1996.
(2) Transactions with Affiliates
----------------------------
The Partnership has no employees and, accordingly, the General Partner
and its affiliates perform services on behalf of the Partnership in
connection with administering the affairs of the Partnership. The
General Partner and affiliates are reimbursed for their general and
administrative costs actually incurred and associated with services
performed on behalf of the Partnership. For the three months ended
September 30, 1996 and 1995 the Partnership incurred approximately
$42,000 and $31,000, respectively, of such expenses. For the nine
months ended September 30, 1996 and 1995, such payments were $105,000
and $109,000, respectively.
7
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
- -----------------------------------------
(2) Transactions with Affiliates (Cont'd.)
----------------------------
An affiliate of the General Partner provides property management
services with respect to the Partnership's properties and receives a
fee for such services not to exceed 6% of the gross receipts from the
properties under management provided that leasing services are
performed, otherwise not to exceed 3%. Such fees amounted to
approximately $43,000 and $40,000, respectively, for the three months
ended September 30, 1996 and 1995, and $126,000 and $114,000 for the
nine months ended September 30, 1996 and 1995 respectively. In
addition, an affiliate of the General Partner received $27,000 and
$32,000 for the three months ended September 30, 1996 and 1995,
respectively, as reimbursement of costs of on-site property management
personnel and other reimbursable expenses. For the nine months ended
September 30, 1996 and 1995, such expenses were $83,000 and $96,000,
respectively.
Leasing fees for the three months ended September 30, 1996 and 1995,
included charges of $6,000 and $38,000, respectively, from the General
Partner and its affiliates for leasing services rendered in connection
with leasing space in a Partnership property after expiration or
termination of leases. For the nine months ended September 30, 1996
and 1995, such fees amounted to $16,000 and $52,000, respectively.
As previously reported on June 24, 1993, the Partnership completed its
solicitation of written consent from its Limited Partners. A majority
in interest of the Partnership's Limited Partners approved each of the
proposals contained in the Information Statement dated May 5, 1993.
Those proposals have been implemented by the Partnership as
contemplated by the Information Statement as amendments to the
Partnership Agreement, and are reflected in these financial statements
as such.
The Amended Partnership Agreement provides for the Partnership's
payment to the General Partner of an annual asset management fee equal
to .75% of the aggregate appraised value of the Partnership's
properties as determined by independent appraisal undertaken in
January of each year. Such fees for the three months ended September
30, 1996 and 1995, amounted to $50,000 and $50,000, respectively. For
the nine months ended September 30 1996 and 1995, such fees were
$150,000 and $149,000, respectively.
In addition to the aforementioned, the General Partner was also paid
$18,000 and $20,000, related to the Partnership's portion (58%) of
asset management fees, property management fees, leasing fees,
reimbursement of on-site property management personnel and other
reimbursable expenses for Cooper Village Partners for the three months
ended September 30, 1996 and 1995, respectively. For the nine months
ended September 30, 1996 and 1995, such costs were $60,000 and
$63,000, respectively.
8
<PAGE> 9
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
- -----------------------------------------
(3) Commitments and Contingencies
-----------------------------
Litigation
The Partnership is not a party to any pending legal proceedings other
than ordinary routine litigation incidental to its business. It is
the General Partner's belief that the outcome of these proceedings
will not be material to the business or financial condition of the
Partnership.
4) Subsequent Events
-----------------
In August 1996, the General Partner entered into a contract to sell
Atrium Place for $816,250. The property is currently in escrow and is
scheduled to close on or before November 30, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
-------------------------------
Since completion of its acquisition program in December 1988, the
Partnership has been engaged primarily in the operation of its
properties. The Partnership's objective has been to hold its
properties as long-term investments, although properties may be sold
at any time depending upon the General Partner's judgment of the
anticipated remaining economic benefits of continued ownership.
Working capital is and will be provided principally from the operation
of the Partnership's properties and the working capital reserve
established for the properties. The Partnership may incur mortgage
indebtedness relating to such properties by borrowing funds primarily
to fund capital improvements or to obtain sale or financing proceeds
for distribution to the Partners.
Certain of the Partnership's properties are not fully leased. The
Partnership is actively marketing the vacant space in these
properties, subject to the competitive environment in each of the
market areas. To the extent the Partnership is not successful in
maintaining or increasing occupancy levels at these properties, the
Partnership's future cash flow and distributions may be reduced.
Distributions through September 30, 1996 represent cash flow generated
from operations of the Partnership's properties and interest earned on
the temporary investment of working capital net of capital improvement
reserve requirements. Future cash distributions will be made
principally to the extent of cash flow attributable to operations and
sales of the Partnership's properties and interest earned on the
investment of capital reserves, after providing for future capital
requirements for the Partnership's properties.
9
<PAGE> 10
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Liquidity and Capital Resources (Cont'd.)
-------------------------------
In accordance with the terms of the Partnership Agreement, each year
the Partnership secures an independent appraisal of each of the
Partnership's properties as of January 1. Prior to the January 1,
1995 appraisals, the independent appraiser had estimated each
property's "Investment Value," utilizing a seven to ten-year cash flow
model to estimate value based upon an income approach.
The Amendment to the Partnership Agreement consented to by the Limited
Partners in June 1993 mandated, among other things, that the General
Partner seek a vote of (and provide an analysis and recommendation to)
the Limited Partners no later than December 31, 1996 regarding the
prompt liquidation of the Partnership in the event that properties
with (then) current appraised values constituting at least one-half of
the total (then) current appraised values of all of the Partnership's
properties are not sold or under contract for sale by the end of 1996.
Given that mandate, the General Partner requested that the appraiser
provide an assessment of value that reflects a shorter investment
holding term. Although the General Partner does not currently have a
specific liquidation plan for the Partnership's properties, it
requested that the appraiser assume that the entire portfolio would be
sold over four years, in connection with the January 1995 appraisals
and over three years in connection with the January 1996 appraisals.
Using the shorter-term investment methodology that is consistent with
the mandate of the 1993 Amendment to the Partnership Agreement, the
appraiser estimated the value of the Partnership's properties at
January 1, 1996 to be $30,355,000, or $5,772 per $10,000 original
investor subscription.
Over the past year, the General Partner has examined several
alternative methods to achieve the Partnership's goal of selling
properties and liquidating the Partnership at the earliest practicable
time consistent with achieving reasonable value for the Limited
Partners' investment. As explained in the Partnership's May 5, 1993
Information Statement, "achieving reasonable value" has meant for the
Partnership to balance receiving higher sales prices per property than
their 1993 values while at the same time not waiting forever to sell
at a theoretical "top of the market." Alternatives under
consideration by the General Partner may include a
property-by-property liquidation or selling all the properties as a
single portfolio. The General Partner has had preliminary discussions
regarding disposition, in whole or in part, of the Partnership's
properties with various potential purchasers of some or all of the
Partnership's portfolio.
10
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Liquidity and Capital Resources (Cont'd.)
-------------------------------
In connection with its consideration of these alternatives, the
General Partner has decided to treat its properties as held for sale,
instead of for investment, for financial statement purposes. In
accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," the carrying value of these properties was
evaluated to ensure that each property was carried on the
Partnership's Balance Sheet at the lower of cost or fair value less
estimated selling costs. The General Partner estimated fair value for
this purpose based on appraisals performed as of January 1, 1996.
However, fair value can only be determined based upon sales to third
parties and sales proceeds could differ substantially.
Based upon the General Partner's survey of the current marketplace,
the General Partner believes, in fact, that in the relatively short
term the Partnership's properties could generate sales prices that, in
the aggregate, could be materially less than their aggregate appraised
values based upon an "Investment Value" appraisal model. The amount
of the possible variance between the aggregate appraised values and
potential sales prices cannot be reliably estimated at this time,
because of the numerous variables that could affect the sales prices,
including but not limited to the time frame in which the properties
must be sold, method of sale (property-by-property or single
transaction), prevailing capitalization rates at which comparable
properties are being sold at the time of the Partnership's sales,
constantly changing local market conditions and the state of leasing
negotiations and capital expenditures for the properties at the time
of sale.
Results of Operations for the Three Months Ended September 30, 1996
-------------------------------------------------------------------
Compared With the Three Months Ended September 30, 1995 and for the
-------------------------------------------------------------------
Nine Months Ended September 30, 1996 Compared With the Nine Month
-----------------------------------------------------------------
Ended September 30, 1995.
-------------------------
The increases in revenue for the three and nine months ended September
30, 1996, as compared to the corresponding periods in 1995, were
attributable to several factors. At Iomega, Iomega Corporation
increased its occupancy to 100% of the site's buildings effective
August 1, 1995, resulting in an increase in revenue of approximately
$22,000 and $80,000, respectively, for the three and nine month
periods ended September 30, 1996. At Creekridge, occupancy increased
to 98% as a result of the successful negotiation of new leases with
California Growers Corp. in August 1995, Premier Resorts, Inc. in
December 1995, Rada Advertising in April 1996 and Hilleman House and
CFC Funding in September 1996. Creekridge's revenue increased
approximately $49,000 and $141,000, for the three and nine months
ended September 30, 1996, respectively, as compared to the same
periods in 1995.
11
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Cont'd.)
Results of Operations for the Three Months Ended September 30, 1996
-------------------------------------------------------------------
Compared With the Three Months Ended September 30, 1995 and for the
-------------------------------------------------------------------
Nine Months Ended September 30, 1996 Compared With the Nine Month
-----------------------------------------------------------------
Ended September 30, 1995. (Cont'd.)
-------------------------
Interest income resulted from the temporary investment of Partnership
working capital. For the three and nine months ended September 30,
1996 interest income was generally comparable to the same periods in
1995.
The increase in real estate taxes for the three months ended September
30, 1996, as compared to the corresponding period in 1995, was
primarily attributable to a tax refund received in 1995 for Atrium
Place. The tax refund was accounted for as reduction of real estate
tax expense in 1995.
The increase in real estate taxes for the nine months ended September
30, 1996, as compared to the corresponding period in 1995, was
primarily attributable to an increased tax assessment at Creekridge.
The decreases in operating expenses for the three and nine months
ended September 30, 1996, as compared to the corresponding periods in
1995, were attributable to several factors. At Creekridge, legal
fees were lower ($10,000) and at Kennedy Corporate Center, cleaning
costs, HVAC repairs, painting costs and utilities were lower ($12,000)
as compared to 1995. In addition, on-site expenses decreased at
Lakeland Business Park ($6,000).
For the nine months ended September 30, 1996, the carrying value of
the Partnership's portfolio was reduced by $150,000, which is
representative of the amount spent on building improvements, tenant
improvements, leasing commissions and other related assets at Lakeland
Industrial Park and Kennedy Corporate Center.
The decreases in depreciation and amortization expenses for the three
and nine months ended September 30, 1996 as compared to the
corresponding periods in 1995, were attributable to the adoption of
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," pursuant to which "assets held for sale" are no longer
depreciated.
The increases in equity in earnings of Cooper Village Partners for the
three and nine months ended September 30, 1996, as compared to the
corresponding periods in 1995, were primarily attributable to the
Partnership's portion (58%) of depreciation expenses incurred during
1995, amounting to $35,000 and $106,000, respectively. As previously
discussed, the Partnership no longer depreciates its assets due to the
adoption of Financial Accounting Standard No. 121. In addition,
during the nine months ended September 30, 1996, a lease termination
settlement in the amount of $127,000 was collected from The Boston
Stores which was taken into income at the end of the first quarter.
12
<PAGE> 13
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Cont'd.)
Results of Operations for the Three Months Ended September 30, 1996
-------------------------------------------------------------------
Compared With the Three Months Ended September 30, 1995 and for the
-------------------------------------------------------------------
Nine Months Ended September 30, 1996 Compared With the Nine Month
-----------------------------------------------------------------
Ended September 30, 1995. (Cont'd.)
-------------------------
General and administrative expenses for the nine months ended
September 30, 1996 and 1995 include charges of $270,000 and $310,000,
respectively, from the General Partner and its affiliates for services
rendered in connection with administering the affairs of the
Partnership and operating the Partnership's properties. Also included
in general and administrative expenses for the nine months ended
September 30, 1996 and 1995 are direct charges of $211,000 and
$206,000, respectively, relating to audit fees, tax preparation fees,
legal and professional fees, insurance expenses, costs incurred in
providing information to the Limited Partners and other miscellaneous
costs.
The decrease in general and administrative expenses for the three
months ended September 30, 1996, as compared to the corresponding
period in 1995, was primarily attributable to a decrease in aggregate
leasing fees and other professional fees, which was partially offset
by an increase in legal fees during the period.
The decrease in general and administrative expenses for the nine
months ended September 30, 1996, as compared to the corresponding
period in 1995, was primarily attributable to a decrease in aggregate
leasing fees.
13
<PAGE> 14
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
So far as is known to the General Partner, neither the Partnership nor
its properties are subject to any material pending legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) Exhibits:
27 - Financial Data Schedule
b) Reports on Form 8-K:
None filed in quarter ended September 30, 1996.
14
<PAGE> 15
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAMSON / BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
By: BIRTCHER/LIQUIDITY By: BIRTCHER INVESTORS,
PROPERTIES a California limited partnership
(General Partner)
By: BIRTCHER INVESTMENTS,
a California general partnership,
General Partner of Birtcher Investors
By: BIRTCHER LIMITED,
a California limited partnership,
General Partner of Birtcher
Investments
By: BREICORP,
a California corporation,
formerly known as Birtcher
Real Estate Inc., General
Partner of Birtcher Limited
Date: November 12, 1996 By: /s/ Robert M. Anderson
-----------------------------
Robert M. Anderson
Executive Director
BREICORP
By: LF Special Fund I, L.P.,
a California limited partnership
By: Liquidity Fund Asset Management,
Inc.,
a California corporation, General
Partner of LF Special Fund I, L.P.
Date: November 12, 1996 By: /s/ Brent R. Donaldson
-----------------------------
Brent R. Donaldson
President
Liquidity Fund Asset Management,
Inc.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AND STATEMENTS OF OPERATIONS OF DAMSON BIRTCHER REALTY INCOME FUND II AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,563,000
<SECURITIES> 0
<RECEIVABLES> 117,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,353,000
<PP&E> 27,225,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,578,000
<CURRENT-LIABILITIES> 751,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,827,000
<TOTAL-LIABILITY-AND-EQUITY> 29,578,000
<SALES> 0
<TOTAL-REVENUES> 3,928,000
<CGS> 0
<TOTAL-COSTS> 1,861,000
<OTHER-EXPENSES> 225,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,842,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,842,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
