<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-K
----------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE
ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER 0-14633
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 13-3294820
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
27611 La Paz Road, Laguna Niguel, California 92656
(Address of principal executive offices) (Zip Code)
(714) 643-7700
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 twelve months and (2) has been subject to such filing requirements
for the past ninety 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. [ ]
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's registration statement on Form S-11 (Commission
File No. 2-99421), dated August 5, 1985, filed under the Securities Act of 1933
are incorporated by reference into PART IV of this report.
<PAGE> 2
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
PART I
Item 1. Business.................................................................. 3
Item 2. Properties................................................................ 6
Item 3. Legal Proceedings......................................................... 7
Item 4. Submission of Matters to a Vote of Security Holders....................... 8
PART II
Item 5. Market for the Registrant's Limited Partnership
Interests and Related Security Holder Matters........................... 8
Item 6. Selected Financial Data................................................... 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 9
Item 8. Financial Statements and Supplementary Data............................... F-1
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................... 18
PART III
Item 10. Directors and Executive Officers of the Registrant........................ 18
Item 11. Executive Compensation.................................................... 18
Item 12. Security Ownership of Certain Beneficial Owners
and Management.......................................................... 19
Item 13. Certain Relationships and Related Transactions............................ 19
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K..................................................... 19
--- Signatures................................................................ 21
</TABLE>
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<PAGE> 3
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
PART I Item 1. Business
Damson/Birtcher Realty Income Fund-II, Limited Partnership (the "Partnership")
was formed on September 13, 1985, under the laws of the State of Delaware. The
General Partner of the Partnership is Birtcher/Liquidity Properties, a general
partnership, consisting of LF Special Fund I, L.P., a California limited
partnership, and Birtcher Investors, a California limited partnership. The
Partnership is engaged in the business of acquiring and operating existing
income-producing office buildings, research and development facilities, shopping
centers and other commercial or industrial properties as specified in its
prospectus (Commission File No. 2-99421) dated September 27, 1985, as amended.
See Item 2 for a description of the properties acquired by the Partnership.
The Partnership commenced operations on November 14, 1985. The closing for the
final admission of Limited Partners to the Partnership occurred on June 19,
1986. Total limited partners' capital contributions through that date aggregated
$52,588,000.
The Partnership acquired its properties entirely for cash, free and clear of
mortgage indebtedness. However, the Partnership may incur mortgage indebtedness
on its properties, primarily for the purpose of funding capital improvements to
properties or obtaining financing proceeds for distribution to partners.
The Partnership's objectives in operating the properties are: (i) to make
regular quarterly cash distributions to the Partners, of which a portion will be
tax sheltered; (ii) to achieve capital appreciation over a holding period of at
least five years; and (iii) to preserve and protect the Partnership's capital.
An Information Statement, dated May 5, 1993, mandated that the General Partner
shall seek a vote of the Limited Partners no later than December 31, 1996,
regarding prompt liquidation of the Partnership in the event that properties
with appraised values as of January 1993, which constituted at least one-half of
the aggregate appraised values of all Partnership properties as of that date,
are not sold or under contract for sale by the end of 1996.
Given the mandate of the May 5, 1993 Information Statement, the General Partner
decided to account for the Partnership's properties as assets held for sale,
instead of for investment as of December 31, 1995. 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" (see Note 2 to
the Financial Statements in Item 8), the carrying value of the properties was
evaluated to insure that each property is carried on the Partnership's balance
sheets at the lower of cost or fair value, less estimated selling costs.
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 estimated
selling costs, the General Partner reduced the carrying value of the property by
the difference. Using this methodology, Atrium Place, Kennedy Corporate Center,
Lakeland Industrial Park and Cooper Village (58% interest), had carrying values
greater than they had appraised values, and therefore reduced their carrying
values to $829,000, $2,625,000, $4,929,000, and $3,704,000, respectively at
December 31, 1995. Since the adoption of the 1993 Solicitation, the General
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<PAGE> 4
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 1. Business (Cont'd.)
Partner has considered several preliminary indications of interest from third
parties to acquire some or all of the Partnership's properties. Apart from the
recent sale of Atrium Place, however, these transactions never materialized,
primarily because the General Partner rejected as too low the valuations of the
Partnership's properties proposed by the potential purchasers.
In 1996, the Partnership made certain capital improvements that resulted in a
corresponding increase in the properties' valuation allowance. At December 31,
1996, the General Partner compared the carrying value of each property to its
appraised value as of January 1, 1997 and determined that Ladera-II Shopping
Center and Kennedy Corporate Center had carrying values greater than their
respective appraised values. As a result, during the year ended December 31,
1996, the carrying values were adjusted by $185,000 and $343,000 to $2,200,000
and $2,460,000, respectively. In addition, the carrying value of Atrium Place
was reduced in September 1996 by $75,000 in order to reflect its approximate
selling price and the carrying value of Lakeland Industrial Park was increased
by $40,000 to $5,300,000, its estimated fair value less estimated selling costs.
On February 18, 1997, the General Partner mailed a Consent Solicitation to the
Limited Partners which sought their consent to dissolve the Partnership and sell
and liquidate all of its remaining properties as soon as practicable, consistent
with obtaining reasonable value for the Partnership's properties. A majority in
interest of the Limited Partners consented by March 13, 1997. As a result, the
Partnership adopted the liquidation basis of accounting as of March 31, 1997.
The difference between the adoption of the liquidation basis of accounting as of
March 13, 1997 and March 31, 1997 was not material.
Under the liquidation basis of accounting, assets are stated at their estimated
net realizable values and liabilities are stated at their anticipated settlement
amounts. The valuation of assets and liabilities necessarily requires many
estimates and assumptions, and there are substantial uncertainties in carrying
out the dissolution of the Partnership. The actual values upon dissolution and
costs associated therewith could be higher or lower than the amounts recorded.
Since the approval of the February 18, 1997 Consent Solicitation, the General
Partner has been evaluating possible sales of Partnership properties,
individually and as a portfolio, to liquidate and wind up the Partnership.
Recently, the General Partner has solicited several offers from prospective
purchasers to acquire all of the Partnership's remaining properties in a single
transaction. The General Partner is evaluating these offers, and expects to
either accept an offer or counter one or more of the offers soon. The offers are
substantially similar in price, and value the Partnership's remaining properties
on a collective basis at the high end of the range that the General Partner
previously discussed in the February 18, 1997 Consent Solicitation. To help
evaluate these offers, the General Partner is also evaluating local market
conditions and potential sales of the properties on an individual basis. There
can be no assurance as to when or at what price properties will be sold. If an
agreement can be reached to sell the properties in a single transaction, the
General Partner expects to complete such a transaction in 1998.
The Partnership derives most of its revenue from rental income. Both Iomega
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<PAGE> 5
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 1. Business (Cont'd.)
Corporation and Delta Dental Corporation represent significant portions of such
income. Rental income from Iomega Corporation totaled $1,216,000 in 1997,
$1,210,000 in 1996 and $1,120,000 in 1995, or approximately 25%, 25% and 24%,
respectively, of the Partnership's total rental income. Rental income from Delta
Dental Corporation totaled $860,000 in 1997, $755,000 in 1996 and $701,000 in
1995, or approximately 18%, 16% and 16%, respectively, of the Partnership's
total rental income.
The Partnership's investments in real estate are subject to competition for
tenants from similar types of properties in the vicinities in which they are
located. The Partnership has no investments in real estate located outside the
United States.
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 and operating the Partnership's
properties. The General Partner and its affiliates receive compensation in
connection with such activities. See Item 11 and Note 4 to the Financial
Statements in Item 8 for a description of such charges.
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<PAGE> 6
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 2. PROPERTIES
<TABLE>
<CAPTION>
NUMBER OF
NET TENANT PERCENTAGE
APPROXIMATE RENTABLE LEASES OCCUPIED
PURCHASE AREA IN AS OF AS OF
NAME/LOCATION/DATE ACQUIRED PRICE(1) DESCRIPTION SQ. FT. 12/31/97 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lakeland Industrial Park, 5,875,000 Nine one-story office/warehouse 209,840 17 98%
Phases I-IV buildings located on 11.27 acres
Milwaukee, Wisconsin of land.
December 19, 1985 and
November 25, 1986
Kennedy Corporate Center, 4,599,000 Three-story office building 39,933 10 100%
Phase I located on 2.8 acres of land.
Palatine, Illinois
January 8, 1986
Iomega/Northpointe Center 7,980,000 Seven industrial/office buildings 210,165 7 100%
Roy, Utah located on 16.6 acres of land.
January 31, 1986
Ladera Shopping Center, 2,889,000 A neighborhood retail shopping 35,094 6 100%
Phase II center located on 3.8 acres of land.
Albuquerque, New Mexico
February 7, 1986
Creekridge Center 11,865,000 Two three-story office buildings 81,835 18 99%
Bloomington, Minnesota located on 5 acres of land.
September 23, 1986
Cooper Village 4,789,000(2) A single-story shopping center 59,978(2) 18 80%
Mesa, Arizona located on 10.88 acres of land.
December 30, 1987 and
December 30, 1988
----------- -------
TOTAL $37,997,000 636,845
=========== =======
</TABLE>
SEE NOTES TO TABLE ON THE FOLLOWING PAGE.
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<PAGE> 7
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 2. PROPERTIES (Cont'd.)
NOTES TO TABLE ON THE PRECEDING PAGE
(1) The purchase price does not include an allocable share of acquisition
fees of $2,484,000 paid to the General Partner. Also, for certain
properties, the purchase price has been reduced by cash received after
acquisition under rental agreements for non-occupied space.
(2) An interest in Cooper Village was acquired by the Partnership through
a general partnership, Cooper Village Partners ("CV Partners")
consisting of the Partnership and Real Estate Income Partners III,
Limited Partnership, an affiliated limited partnership. At December
31, 1997, the Partnership had a 58% interest in CV Partners. (See Note
3 to Financial Statements in Item 8 for a further discussion of the
Partnership's interest in CV Partners.) The amounts shown herein for
approximate purchase price and net rentable square feet represent 58%
of the respective amounts for CV Partners.
Item 3. 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, however:
On March 25, 1997, a limited partner named Bigelow/Diversified Secondary
Partnership Fund 1990 filed a purported class action lawsuit in the Court
of Common Pleas of Philadelphia County against Damson/Birtcher Partners,
Birtcher Investors, Birtcher/Liquidity Properties, Birtcher Investments,
L.F. Special Fund II, L.P., L.F. Special Fund I, L.P., Arthur Birtcher,
Ronald Birtcher, Robert Anderson, Richard G. Wollack and Brent R. Donaldson
alleging breach of fiduciary duty and breach of contract and seeking to
enjoin the Consent Solicitation dated February 18, 1997. On April 18, 1997,
the court denied the plaintiff's motion for a preliminary injunction. On
June 10, 1997, the court dismissed the plaintiff's complaint on the basis
of lack of personal jurisdiction and forum non conveniens.
On June 13, 1997, the Partnership, its affiliated partnership, Real Estate
Income Partners III, and their general partner, Birtcher/Liquidity
Properties, filed a complaint for declaratory relief in the Court of
Chancery in Delaware against Bigelow/Diversified Secondary Partnership Fund
1990 L.P. The complaint seeks a declaration that the vote that the limited
partners of the Partnership and Real Estate Income Partners III took
pursuant to the respective consent solicitations dated February 18, 1997
was effective to dissolve the respective partnerships and complied with
applicable law, that the actions of the General Partner in utilizing the
consent solicitations to solicit the vote of the limited partners did not
breach any fiduciary or contractual duty to such limited partners, and an
award of costs and fees to the plaintiffs. The defendant has answered the
complaint. The parties have initiated discovery. No motions are pending at
this time.
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<PAGE> 8
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP INTERESTS AND RELATED
SECURITY HOLDER MATTERS
There is no public market for the limited partnership interests and a market is
not expected to develop as such limited partnership interests are not publicly
traded or freely transferable.
As of February 28, 1998, the number of holders of the Partnership's interests is
as follows:
<TABLE>
<S> <C>
General Partner 1
Limited Partners 6,092
-----
6,093
=====
</TABLE>
The Partnership makes quarterly cash distributions to its partners out of
distributable cash pursuant to the Partnership's Agreement of Limited
Partnership. Distributable cash is generally paid 99% to the Limited Partners
and 1% to the General Partner.
The Partnership has paid the following quarterly cash distributions to its
Limited Partners:
<TABLE>
<CAPTION>
CALENDAR
QUARTERS 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $705,000 $600,000 $ 463,000 $441,000 $358,000 $420,000
Second 610,000 456,000 462,000 421,000 262,000
Third 562,000 504,000 462,000 405,000 200,000
Fourth 610,000 1,318,000 463,000 465,000 289,000
</TABLE>
The Limited Partners and the General Partner are entitled to receive quarterly
cash distributions, as available, in the future.
In December 1996, the Partnership made a $720,000 special distribution to its
limited partners from a portion of the proceeds from the sale of Atrium Place.
See Item 7, Liquidity and Capital Resources for further discussion.
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<PAGE> 9
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED ----------------------------------------------------------------------
MARCH 31,
1997 1996 1995 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 1,177,000 $ 4,859,000 $ 4,523,000 $ 4,637,000 $4,181,000
=========== =========== =========== =========== ==========
Net Income (Loss):
General Partner $ 6,000 $ 19,000 $ (6,000) $ 5,000 $ 5,000
Limited Partners 559,000 1,897,000 (569,000) 457,000 541,000
----------- ----------- ----------- ----------- ----------
$ 565,000 $ 1,916,000 $ (575,000) $ 462,000 $ 546,000
=========== =========== =========== =========== ==========
Total Distributions:
General Partner $ 5,000 $ 21,000 $ 18,000 $ 17,000 $ 12,000
=========== =========== =========== =========== ==========
Limited Partners $ 600,000 $ 2,741,000 $ 1,828,000 $ 1,649,000 $1,171,000
=========== =========== =========== =========== ==========
</TABLE>
The following summary of financial data is for the period since the Partnership
adopted the liquidation basis of accounting.
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 1, 1997 THROUGH
DECEMBER 31, 1997
---------------------
<S> <C> <C> <C> <C> <C>
Property Operating
Income, net $ 2,304,000
===========
Distributions to
Partners $ 1,782,000
===========
Net Assets in
Liquidation
at 12/31/97 $27,394,000
===========
DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993
--------------------------------------------------------------------
Total Assets $28,212,000 $29,134,000 $31,496,000 $32,737,000
=========== =========== =========== ===========
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OPERATIONS
Capital Resources and Liquidity
The Partnership completed its acquisition program in December 1988 and is
principally engaged in the operation of its properties. The Partnership's
original objective had been to hold its properties as long-term investments.
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<PAGE> 10
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Capital Resources and Liquidity (Cont'd.)
However, an Information Statement, dated May 5, 1993, mandated that the General
Partner seek a vote of the Limited Partners no later than December 31, 1996,
regarding prompt liquidation of the Partnership in the event that properties
with appraised values as of January 1993, which constituted at least one-half of
the aggregate appraised values of all Partnership properties as of that date,
are not sold or under contract for sale by the end of 1996. Given the mandate of
the May 5, 1993 Information Statement, at December 31, 1995, the General Partner
decided to account for the Partnership's properties as assets held for sale
instead of for investment. In a Consent Solicitation dated February 18, 1997,
the Partnership solicited and received the consent of the Limited Partners to
dissolve the Partnership and gradually settle and close the Partnership's
business and dispose of and convey the Partnership's property as soon as
practicable, consistent with obtaining reasonable value for the properties. The
Partnership's properties were held for sale throughout 1996 and 1997 and
continue to be held for sale.
Working capital is and will be principally provided 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 financing proceeds for distribution to the partners.
Regular distributions for the year ended December 31, 1997 represent net cash
flow from operations of the Partnership's properties and interest earned on the
temporary investment of working capital, net of capital reserve requirements.
Future cash distributions will be made principally to the extent of cash flow
attributable to the operations and sales of the Partnership's properties, after
capital reserve requirements. See Item 5 for a description of the Partnership's
distribution history. The Partnership believes that the cash generated from its
operations will provide the Partnership the funds necessary to meet all of its
ordinary obligations.
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.
In June 1993, the Partnership completed its solicitation of written consents
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 amending the
Partnership Agreement as contemplated by the Information Statement. The
amendments include, among other things, the payment of asset management and
leasing fees to the General Partner and the elimination of the General Partner's
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<PAGE> 11
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Capital Resources and Liquidity (Cont'd.)
residual interest and deferred leasing fees that were previously subordinated to
return of the Limited Partners' 9% Preferential Return. See Item 8, Note 4 to
the Financial Statements for discussion of fees paid to the General Partner for
the years ended December 31, 1997, 1996 and 1995.
On February 18, 1997, the General Partner mailed a Consent Solicitation to the
Limited Partners which sought their consent to dissolve the Partnership and sell
and liquidate all of its remaining properties as soon as practicable, consistent
with selling the Partnership's properties to the best advantage under the
circumstances. A majority in interest of the Limited Partners consented by March
13, 1997. As a result, the Partnership has adopted the liquidation basis of
accounting as of March 31, 1997. The difference between the adoption of the
liquidation basis of accounting as of March 13, 1997 and March 31, 1997 was not
material.
Under the liquidation basis of accounting, assets are stated at their estimated
net realizable values and liabilities are stated at their anticipated settlement
amounts. The valuation of assets and liabilities necessarily requires many
estimates and assumptions, and there are substantial uncertainties in carrying
out the dissolution of the Partnership. The actual values upon dissolution and
costs associated therewith could be higher or lower than the amounts recorded.
Since the approval of the February 18, 1997 Consent Solicitation, the General
Partner has been evaluating possible sales of Partnership properties,
individually and as a portfolio, to liquidate and wind up the Partnership.
Recently, the General Partner has solicited several offers from prospective
purchasers to acquire all of the Partnership's remaining properties in a single
transaction. The General Partner is evaluating these offers, and expects to
either accept an offer or counter one or more of the offers soon. The offers are
substantially similar in price, and value the Partnership's remaining properties
on a collective basis at the high end of the range that the General Partner
previously discussed in the February 18, 1997 Consent Solicitation. To help
evaluate these offers, the General Partner is also evaluating local market
conditions and potential sales of the properties on an individual basis. There
can be no assurance as to when or at what price properties will be sold. If an
agreement can be reached to sell the properties in a single transaction, the
General Partner expects to complete such a transaction in 1998.
January 1, 1998 Property Appraisals and Net Asset Value
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 mandates, 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
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<PAGE> 12
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Capital Resources and Liquidity (Cont'd.)
January 1, 1998 Property Appraisals and Net Asset Value (Cont'd.)
(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 this 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 know how long it will take to sell 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, over three years in connection with the January 1996 appraisals,
over approximately two years for the January 1997 appraisals and over the next
year for the 1998 appraisals.
Using the shorter-term investment methodology that is consistent with the
mandate of the 1993 amendment to the Partnership Agreement and the liquidation
of the Partnership, the appraiser estimated the value of the Partnership's
remaining properties at January 1, 1998 to be $32,713,000, net of estimated
selling costs.
The foregoing appraised value of the Partnership's remaining properties
indicates an estimated value of net assets in liquidation of $33,365,000 or
$6,345 per $10,000 of original investor subscription. (Net assets in liquidation
represent the appraised value of the Partnership's properties, cash, and other
assets, less all liabilities including accrued expenses for liquidation).
Other Matters
The General Partner and its affiliates are currently working to resolve the
potential impact of the year 2000 on the processing of date-sensitive
information by the Partnership's computerized information systems. The year 2000
problem is the result of computer programs being written using two digits
(rather than four) to define the applicable year. Any of the Partnership's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in miscalculations
or system failures. Based on preliminary information, the cost of addressing
potential problems is not currently expected to have a material adverse impact
on the Partnership's financial position, results of operations or cash flows in
future periods. However, the inability of the General Partner and its affiliates
or their suppliers or distributors and other vendors to resolve such processing
issues in a timely manner could have a material adverse impact on the
Partnership. Accordingly, the General Partner and its affiliates plan to devote
the necessary resources to resolve all significant year 2000 issues in a timely
manner.
Results of Operations
Year Ended December 31, 1997
Because the Partnership adopted the liquidation basis of accounting on March 31,
1997, a comparison of the results of operations is not practical. The Statement
of Net Assets
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<PAGE> 13
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Results of Operations (Cont'd.)
Year Ended December 31, 1997 (Cont'd.)
in Liquidation and Statement of Changes of Net Assets in Liquidation reflect the
Partnership in the process of liquidation. Prior financial statements reflect
the Partnership as a going concern. As the Partnership's assets (properties) are
sold, the results of operations will be generated from a smaller asset base and
are therefore not comparable. The Partnership's operating results have been
reflected on the Statement of Changes of Net Assets in Liquidation since March
31, 1997 (the date of adoption of the liquidation basis of accounting) and the
Statement of Operations for the three months ended March 31, 1997.
For the year ended December 31, 1997, the Partnership generated $3,019,000 of
net operating income from operation of its properties. The decrease in net
operating income for year ended December 31, 1997, when compared to 1996, was
primarily the result of the sale of Atrium Place in November 1996.
Interest income resulted from the temporary investment of Partnership working
capital. For the year ended December 31, 1997, interest income was approximately
$72,000.
General and administrative expenses for the year ended December 31, 1997 include
charges of $318,000 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 year ended December 31, 1997 are direct charges
of $517,000 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 increase in general and
administrative expenses for the year ended December 31, 1997, as compared to
1996, was primarily attributable to the increase in legal and professional
services, printing costs, postage and mailing expenses associated with the
Partnership's solicitation of the Limited Partners for the Liquidation of the
Partnership in March 1997.
Accrued expenses for liquidation, as reflected in the Statement of Net Assets in
Liquidation as of December 31, 1997, are not included in results of operations
for the three month period ended March 31, 1997. The liquidation basis of
accounting was adopted on March 31, 1997 therefore, it was not appropriate to
include such adjustments in the results of operations for prior periods. Accrued
expenses for liquidation as of December 31, 1997, includes estimates of costs to
be incurred in carrying out the dissolution and liquidation of the Partnership.
These costs include estimates of legal fees, accounting fees, tax preparation
and filing fees, professional services and the general partner's liability
insurance. The actual costs could vary significantly from the related provisions
due to the uncertainty related to the length of time required to complete the
liquidation and dissolution and the complexities which may arise in disposing of
the Partnership's remaining assets.
-13-
<PAGE> 14
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Results of Operations (Cont'd.)
Year Ended December 31, 1996
The increase in rental income for the year ended December 31, 1996, when
compared to 1995, was primarily attributable to: 1) Iomega's absorption of the
one remaining building thereby increasing the occupancy of that property to 100%
in August of 1995 ($90,000); 2)the increased occupancy at Creekridge from 91% in
1995 to 98% in 1996 ($166,000); and 3) the increased occupancy at Lakeland
Industrial Park from 96% in 1995 to 100% in 1996 ($74,000).
Interest income resulted from the temporary investment of Partnership working
capital. It was generally comparable to 1995 overall.
On November 21, 1996, the Partnership sold Atrium Place, a single-story 23,970
square foot office building located on 1.74 acres of land in Arlington Heights,
Illinois to an unaffiliated third party. The sales price was $825,000 ($784,000
net of closing costs and escrow fees) and the net proceeds of the sale amounted
to approximately $720,000 after all prorations and credits to the buyer. In
December 1995, the General Partner had adjusted the carrying value of the
property in accordance with the guidelines of FAS 121, which resulted in a
write-down of $167,000 and an adjusted carrying value of $829,000. In September
1996, the General Partner adjusted the carrying value by another $75,000 to
$754,000 upon disposition. The resulting gain on sale, after taking into
consideration all costs of disposition, amounted to $30,000 as reflected in the
Statement of Operations. The General Partner was not paid a commission or
disposition fee as part of this transaction.
The decrease in operating expenses for the year ended December 31, 1996, as
compared to 1995, was attributable to several factors. At Lakeland Industrial
Park, roof repairs, property management wages, legal fees and marketing and
advertising costs were reduced in 1996. At Kennedy Corporate Center, landscaping
and snow removal costs incurred were lower in 1996 due to mild winter
conditions. Finally, as a result of the increased occupancy level at Iomega, the
tenant absorbed additional operating costs at the site as a result of its lease
arrangement.
The decrease in real estate taxes for the year ended December 31, 1996, as
compared to 1995, was primarily attributable to reductions in the annual tax
assessments for Kennedy Corporate Center and Lakeland Industrial Park and the
overall decrease in tax expenses resulting from the sale of Atrium Place in
November 1996. These decreases were partially offset by an increased tax
assessment for Creekridge.
The decrease in depreciation and amortization expenses for the year ended
December 31, 1996, as compared to 1995, was a result of the adoption and
implementation at December 31, 1995 of Statement of Financial Accounting
Standards, No. 121, "Accounting for the Impairment of Long-Lived Assets to Be
Disposed Of," pursuant to which "assets held for sale" are not depreciated.
General and administrative expenses for the year ended December 31, 1996
included charges of $348,000 from the General Partner and its affiliates for
services rendered in connection with administering the affairs of the
Partnership and operating the
-14-
<PAGE> 15
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Results of Operations (Cont'd.)
Year Ended December 31, 1996 (Cont'd.)
partnership's properties. Also included in general and administrative expenses
are direct charges of $336,000 relating to audit and tax preparation fees,
annual appraisal fees, legal fees, insurance, costs incurred in providing
information to the Limited Partners and other miscellaneous costs.
The decrease in general and administrative expenses for the year ended December
31, 1996, when compared to 1995, was primarily attributable to the decrease in
administrative expense reimbursements and leasing fees. The aforementioned
decrease was partially offset by higher professional fees incurred by the
Partnership.
During 1996, the Partnership made certain capital improvements to properties
held for sale that resulted in a corresponding increase in the properties'
valuation allowance. At December 31, 1996, the General Partner compared the
carrying value of each property to its apprasised value as of January 1, 1997
and determined that Ladera-II Shopping Center and Kennedy Corporate Center had
carrying values greater than their respective appraised values. As a result,
during the year ended December 31, 1996 the carrying values were adjusted by
$185,000 and $343,000 to $2,200,000 and $2,460,000, respectively. In addition,
the carrying value of Atrium Place was reduced in September 1996 by $75,000 in
order to reflect its approximate selling price and the carrying value of
Lakeland Industrial Park was increased by $40,000 to $5,300,000, its estimated
fair value less selling costs.
The increase in equity in earnings of Cooper Village Partners for the year ended
December 31, 1996, as compared to 1995, was primarily attributable to the
Partnership's portion (58%) of depreciation expenses incurred during 1995 that
were not incurred in 1996. As previously discussed, the Partnership no longer
depreciates its assets due to the adoption of Financial Accounting Standard No.
121. In addition, during 1996, a lease termination settlement in the amount of
$127,000 was collected from The Boston Stores and accordingly, was taken into
income in 1996. Finally, the adjustment to the carrying value of real estate in
1996 decreased to $412,000 from $1,360,000 in 1995.
Year Ended December 31, 1995
The decrease in rental income for the year ended December 31, 1995, as compared
to 1994, was primarily attributable to the following factors: At Iomega, rental
income decreased by $86,000, which was the result of the termination of a 19,400
square foot lease by Iomega Corporation at expiration in November 1994. At
Creekridge, revenue decreased by $44,000, which was primarily the result of
termination of two leases in March and April 1995. At Kennedy Corporate Center,
revenue decreased by $68,000, which was primarily a result of reduced operating
expense recoveries during 1995. The aforementioned decreases were partially
offset by increased revenues at Lakeland Industrial Park due to an increase in
occupancy level ($60,000).
Interest income resulted from the temporary investment of Partnership working
capital. The increase for the year ended December 31, 1995, as compared to 1994,
was attributable to a higher rate-of-return on short-term investments achieved
15
<PAGE> 16
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Results of Operations (Cont'd.)
Year Ended December 31, 1995 (Cont'd.)
during 1995. In addition, other miscellaneous revenues increased by $11,000 in
1995.
The decrease in operating expenses for the year ended December 1995, as compared
to 1994, was primarily attributable to a decrease in parking repairs and
maintenance, insurance and utilities at Lakeland Industrial Park.
The increase in real estate taxes for the year ended December 31, 1995, was
primarily attributable to an increase in real estate tax accrual at Kennedy
Corporate Center due to anticipated higher tax assessment ($46,000). The
aforementioned increase was partially offset by a decrease in real estate taxes
at Atrium, which was a result of a $25,000 tax refund in 1995.
General and administrative expenses for the year ended December 31, 1995
included charges of $415,000 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 are direct charges of $273,000 relating to audit and
tax preparation fees, annual appraisal fees, legal fees, insurance, costs
incurred in providing information to the Limited Partners and other
miscellaneous costs.
The increase in general and administrative expenses for the year ended December
31, 1995, as compared to 1994, was primarily attributable to an increase in
legal and professional services, leasing fees paid to the General Partner and
its affiliates for leasing services rendered in connection with leasing space in
the Partnership's properties. In addition, appraisal fees and administrative
wages were higher during 1995. The aforementioned increases were partially
offset by a decrease in asset management fees.
Given the mandate of the May 5, 1993 Information Statement, the General Partner
decided to account for the Partnership's properties as assets held for sale,
instead of for investment as of December 31, 1995. 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, 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 therefore reduced their 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.
-16-
<PAGE> 17
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Recent Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes
standards for the reporting and display of comprehensive income and its
components (revenue, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS 130 requires all items that are
necessary to be recognized under accounting standards as components of
comprehensive income to be reported in a financial statement that is displayed
with the same prominence as other financial statements. SFAS 130 does not
require a specific format for that financial statement, but requires that an
enterprise display an amount representing total comprehensive income for the
period covered by that financial statement. SFAS 130 requires an enterprise to
(a) classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS 130 is effective for fiscal
years beginning after December 15, 1997. The adoption of SFAS 130 will not have
an impact on the Partnership's financial reporting.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosure About Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 131 establishes standards for public business enterprises to report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to stockholders. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. This statement supersedes FASB Statement No. 14, "Financial Reporting
for Segments of a Business Enterprise," but retains the requirement to report
information about major customers. It amends FASB Statement No. 94,
"Consolidation of All Majority-Owned Subsidiaries," to remove the special
disclosure requirements for previously unconsolidated subsidiaries. SFAS 131
requires, among other items, that a public business enterprise report a measure
of segment profit or loss, certain specific revenue and expense items, segment
assets, information about the revenues derived from the enterprise's products or
services and major customers. SFAS 131 also requires that the enterprise report
descriptive information about the way that the operating segments were
determined and the products and services provided by the operating segments.
SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative information
for earlier years is to be restated. SFAS 131 need not be applied to interim
financial statements in the initial year of its application, but comparative
information for interim periods in the initial year of application is to be
reported in financial statements for interim periods in the second year of
application. The adoption of SFAS 131 will not have a material impact on the
Partnership's financial reporting.
-17-
<PAGE> 18
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DAMSON/BIRTCHER REALTY INCOME FUND-II
LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.................................................... F-3
Financial Statements:
Statement of Net Assets in Liquidation as of December 31, 1997............ F-4
Statement of Changes of Net Assets in Liquidation for the Nine Months
Ended December 31, 1997................................................... F-5
Balance Sheet as of December 31, 1996..................................... F-6
Statements of Operations for the Three Months Ended March 31, 1997
and the Years Ended December 31, 1996 and 1995............................ F-7
Statements of Changes in Partners' Capital for the Three Months Ended
March 31, 1997 and the Years Ended December 31, 1996 and 1995............. F-8
Statements of Cash Flows for the Three Months Ended March 31, 1997
and the Years Ended December 31, 1996 and 1995............................ F-9
Notes to Financial Statements................................................F-10
Schedule:
III - Real Estate in Liquidation and Accumulated Depreciation as of
December 31, 1997............................................................F-21
Information required by other schedules called for under Regulation S-X is
either not applicable or is included in the financial statements.
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Independent Auditors' Report.................................................... F-24
Financial Statements:
Statement of Net Assets in Liquidation as of December 31, 1997............ F-25
Statement of Changes of Net Assets in Liquidation for the Nine Months
Ended December 31, 1997................................................... F-26
Balance Sheet as of December 31, 1996..................................... F-27
Statements of Operations for the Three Months Ended March 31, 1997
and the Years Ended December 31, 1996 and 1995............................ F-28
</TABLE>
F-1
<PAGE> 19
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
COOPER VILLAGE PARTNERS
(A General Partnership)
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE (Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Statements of Changes in Partners' Capital for the Three Months Ended
March 31, 1997 and for the Years Ended December 31, 1996
and 1995.................................................................. F-29
Statements of Cash Flows for the Three Months Ended March 31, 1997
and the Years Ended December 31, 1996 and 1995............................ F-30
Notes to Financial Statements............................................. F-31
Schedule:
III --Real Estate in Liquidation and Accumulated Depreciation as of
December 31, 1997......................................................... F-37
Information required by other schedules called for under Regulation S-X is
either not applicable or is included in the financial statements.
</TABLE>
F-2
<PAGE> 20
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
INDEPENDENT AUDITORS' REPORT
To Birtcher/Liquidity Properties, as General Partner of Damson/Birtcher Realty
Income Fund-II, Limited Partnership:
We have audited the financial statements of Damson/Birtcher Realty Income
Fund-II, Limited Partnership as listed in the accompanying index. In connection
with our audits of the financial statements, we also have audited the financial
statement schedule listed in the accompanying index. These financial statements
and the financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and 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, the financial statements referred to above present fairly, in
all material respects, the net assets in liquidation as of December 31, 1997 and
financial position as of December 31, 1996 of Damson/Birtcher Realty Income
Fund-II, and the changes of net assets in liquidation for the nine months ended
December 31, 1997 and the results of its operations and its cash flows for the
three months ended March 31, 1997 and each of the years in the two-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles applied on the bases of accounting discussed in note 2. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in notes 1 and 2 to the financial statements, Damson/Birtcher
Realty Income Fund-II has changed its basis of accounting as of March 31, 1997
from the going-concern basis to the liquidation basis.
KPMG PEAT MARWICK LLP
Orange County, California
March 6, 1998
F-3
<PAGE> 21
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
STATEMENT OF NET ASSETS IN LIQUIDATION
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS (Liquidation Basis):
Properties $23,102,000
Investment in Cooper Village Partners 3,640,000
Cash and cash equivalents 1,455,000
Accounts receivable 121,000
Other assets 25,000
-----------
Total Assets 28,343,000
-----------
LIABILITIES (Liquidation Basis):
Accounts payable and accrued liabilities 667,000
Accrued expenses for liquidation 282,000
-----------
Total Liabilities 949,000
-----------
Net Assets in Liquidation $27,394,000
===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-4
<PAGE> 22
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
STATEMENT OF CHANGES OF NET ASSETS IN LIQUIDATION
FOR THE NINE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Net assets in liquidation at March 31, 1997 $27,255,000
Increase (decrease) during period:
Operating activities:
Property operating income, net 2,304,000
Equity in earnings of Cooper Village Partners 203,000
Interest income 52,000
General and administrative expenses (591,000)
Leasing commissions (47,000)
-----------
1,921,000
Liquidating activities -- distribution to partners (1,782,000)
-----------
Net increase in assets in liquidation 139,000
-----------
Net assets in liquidation at December 31, 1997 $27,394,000
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 23
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-------------
<S> <C>
ASSETS
Properties held for sale (net of valuation
allowance of $1,028,000) $ 22,318,000
Investment in Cooper Village Partners 3,630,000
Cash and cash equivalents 1,639,000
Accounts receivable 30,000
Accrued rent receivable 436,000
Prepaid expenses and other assets, net 159,000
------------
$ 28,212,000
============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 636,000
------------
Partners' capital (deficit):
Limited Partners 27,746,000
General Partner (170,000)
------------
27,576,000
Commitments and contingencies ------------
$ 28,212,000
============
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-6
<PAGE> 24
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED FOR THE YEARS
MARCH 31, ENDED DECEMBER 31,
1997 1996 1995
------------ ----------------------------
<S> <C> <C> <C>
REVENUES:
Rental income $1,157,000 $4,760,000 $4,430,000
Interest and other income 20,000 69,000 93,000
Gain on sale of property -- 30,000 --
---------- ---------- ----------
Total revenues 1,177,000 4,859,000 4,523,000
---------- ---------- ----------
EXPENSES:
Operating expenses 255,000 1,039,000 1,111,000
Real estate taxes 187,000 682,000 722,000
Depreciation and amortization 17,000 73,000 1,252,000
General and administrative 244,000 684,000 688,000
Adjustment to carrying value of
real estate -- 563,000 707,000
---------- ---------- ----------
Total expenses 703,000 3,041,000 4,480,000
---------- ---------- ----------
Income before equity in earnings
(loss) of Cooper Village Partners 474,000 1,818,000 43,000
Equity in earnings (loss) of
Cooper Village Partners 91,000 98,000 (618,000)
---------- ---------- -----------
NET INCOME (LOSS) $ 565,000 $1,916,000 $ (575,000)
========== ========== ===========
NET INCOME (LOSS) ALLOCABLE TO:
General Partner $ 6,000 $ 19,000 $ (6,000)
========== ========== ===========
Limited Partners $ 559,000 $1,897,000 $ (569,000)
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-7
<PAGE> 25
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND THE YEARS ENDED DECEMBER 31,
1996 AND 1995
-----------------------------------------------------------
GENERAL LIMITED
PARTNER PARTNERS TOTAL
-----------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1994 $(144,000) $30,987,000 $30,843,000
Net loss (6,000) (569,000) (575,000)
Distributions (18,000) (1,828,000) (1,846,000)
---------- ------------ ------------
Balance, December 31, 1995 (168,000) 28,590,000 28,422,000
Net income 19,000 1,897,000 1,916,000
Distributions (21,000) (2,741,000) (2,762,000)
---------- ------------ ------------
Balance, December 31, 1996 (170,000) 27,746,000 27,576,000
Net income 6,000 559,000 565,000
Distributions (5,000) (600,000) (605,000)
---------- ------------ ------------
Balance, March 31, 1997 $(169,000) $27,705,000 $27,536,000
========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-8
<PAGE> 26
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED FOR THE YEARS
MARCH 31, ENDED DECEMBER 31,
------------ -----------------------------------
1997 1996 1995
------------ -----------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 565,000 $1,916,000 $ (575,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 17,000 73,000 1,252,000
Equity in (earnings) loss of Cooper
Village Partners (91,000) (98,000) 618,000
Adjustment to carrying value of
real estate -- 563,000 707,000
Gain on sale of property -- (30,000) --
Changes in:
Accounts receivable (14,000) (1,000) 2,000
Accrued rent receivable 42,000 91,000 (56,000)
Prepaid expenses and other assets (26,000) 11,000 (61,000)
Accounts payable and accrued
liabilities 68,000 (76,000) 59,000
---------- ---------- ----------
Net cash provided by operating
activities 561,000 2,449,000 1,946,000
---------- ---------- ----------
Cash flows from investing activities:
Investments in real estate (61,000) (247,000) (410,000)
Proceeds from sale of property -- 784,000 --
Distributions received from
Cooper Village Partners 70,000 360,000 307,000
---------- ---------- ----------
Net cash provided by (used in)
investing activities 9,000 897,000 (103,000)
---------- ---------- ----------
Cash flows from financing activities -
distributions (605,000) (2,762,000) (1,846,000)
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents (35,000) 584,000 (3,000)
Cash and cash equivalents, beginning
of period 1,639,000 1,055,000 1,058,000
---------- ---------- ----------
Cash and cash equivalents, end
of period $1,604,000 $1,639,000 $1,055,000
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-9
<PAGE> 27
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Operations
Damson/Birtcher Realty Income Fund-II, Limited Partnership (the
"Partnership") is a limited partnership formed on September 13, 1985, under
the laws of the State of Delaware for the purpose of acquiring and
operating income-producing retail, commercial and industrial properties.
The General Partner of the Partnership is Birtcher/Liquidity Properties, a
general partnership consisting of LF Special Fund I, L.P. ("LF-I"), a
California limited partnership and Birtcher Investors, a California limited
partnership. Birtcher Investors, or its affiliates, provides day-to-day
administration, supervision and management of the Partnership and its
properties.
In January 1993, the General Partner filed an Information Statement with
the Securities and Exchange Commission seeking consent of the Limited
Partners to amend the Partnership Agreement. 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 Statements,
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 amendment modified the Partnership Agreement to eliminate the General
Partner's 10% subordinated interest in distributions of Distributable Cash
(net cash from operations) and to reduce its subordinated interest in such
distributions from 10% to 1%. The amendment also modified the Partnership
Agreement to eliminate the General Partner's 10% subordinated interest in
Sale or Financing Proceeds (net cash from sale or financing of Partnership
property) and to reduce its subordinated interest in such proceeds from 15%
to 1%. In lieu thereof, the Partnership Agreement now provides for the
Partnership's payment to the General Partner of an annual asset management
fee equal initially to .75% of the aggregate appraised value of the
Partnership's properties. At January 1, 1997 and 1996 the portfolio was
appraised at an aggregate value of approximately $32,713,000 and
$30,355,000 (unaudited), respectively, which includes the Partnership's
interest in Cooper Village Partners which was appraised at $3,683,000
(unaudited) and $3,735,000 (unaudited), respectively. The factor used to
calculate the annual asset management fee is reduced by .10% each year
beginning after December 31, 1996 (e.g., from .75% in 1996 to .65% in 1997
and .55% in 1998).
The amendment modified the Partnership Agreement to eliminate the
subordination provisions with respect to future property disposition fees
payable under that section and authorizes payment to the General Partner
and its affiliates of the foregoing property disposition fees as earned.
The fees will not be subordinated to the return to the Limited Partners
Preferred Return and Adjusted Invested Capital or any other amount. The
disposition fees will be paid to the General Partner or its affiliates in
an amount equal to 50% of the competitive real estate brokerage commission
that would be charged by unaffiliated third parties providing comparable
services in the area in which a property is located, but in no event more
than three percent of the gross sale price of the property, and is to be
reduced by the amount by which any brokerage or similar commissions paid to
any unaffiliated third parties in connection with the sale of the property
exceed three percent of the gross sale price. This amount is not payable,
unless and to the extent that the sale price of the property in question,
net of any other brokerage
F-10
<PAGE> 28
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(1) Organization and Operations (Cont'd.)
commissions (but not other costs of sale), exceeds the appraised value of
the property as of January 1, 1993.
The amendment states that the Partnership is no longer authorized to pay
the General Partner or its affiliates any insurance commission or any
property financing fees. No such commission or fees have been paid or
accrued by the Partnership since its inception.
The amendment modified the provisions of the Partnership Agreement
regarding allocations of Partnership income, gain and other tax items
between the General Partner and the Limited Partners primarily to conform
to the changes in the General Partner's interest in distributions of
Distributable Cash and Sale or Financing Proceeds effected by the
amendment.
It is not anticipated that the adoption and implementation of the amendment
will have any material adverse effect on future allocations of income,
gain, loss or other tax items to the Limited Partners. However, if any of
the Partnership's properties are sold for a gain, a special allocation to
the General Partner would have the effect of reducing the amount of Sale or
Financing Proceeds otherwise distributable to the Limited Partners and
correspondingly increasing the amount of such distributions to be retained
by the General Partner. The amount of such distributions to be affected
would be approximately equal to any deficit balance in the General
Partner's capital account in the Partnership at the time of the allocation.
The Limited Partners have certain priorities in the allocation of cash
distributions by the Partnership. Out of each distribution of net cash, the
Limited Partners generally have certain preferential rights to receive
payments that, together with all previous payments to them, would provide
an overall 9% per annum (cumulative non-compounded) return (a "9%
Preferential Return") on their investment in the Partnership. Any
distributions not equaling this 9% Preferential Return in any quarter are
to be made up in subsequent periods if and to the extent distributable cash
is available.
Distributable cash from operations is paid out each quarter in the
following manner: 99% to the Limited Partners and 1% to the General
Partner. These payments are made each quarter to the extent that there is
sufficient distributable cash available.
Sale or financing proceeds are to be distributed, to the extent available,
as follows: (i) to the Limited Partners until all cash distributions to
them amount to a 9% Preferential Return on their investment cumulatively
from the date of their admission to the Partnership, (ii) then to the
Limited Partners in an amount equal to their investment; and (iii) the
remainder, 99% to Limited Partners and 1% to the General Partner.
Although the unpaid 9% Preferential Return to the Limited Partners
aggregates approximately $29,625,000 as of December 31, 1997, it is
anticipated that the limited partners will not realize this return due to a
comparable liquidation value of $27,394,000. See Information Statement
dated February 18, 1997 for further discussion.
Income or loss for financial statement purposes is allocated 99% to the
Limited Partners and 1% to the General Partner.
F-11
<PAGE> 29
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(1) Organization and Operations (Cont'd.)
The amendment modified the Partnership Agreement so as to restrict the
Partnership from entering into a future "Reorganization Transaction" (as
defined in the amendment) sponsored by the General Partner or any of its
affiliates unless such transaction is approved by a "supermajority" of at
least 80% in interest of the Limited Partners and the General Partner.
The amendment also prohibits the modification of this restriction on
Reorganization Transactions without the approval of at least 80% in
interest of the Limited Partners.
The Partnership's original investment objectives contemplated that it would
hold its properties for a period of at least five years, with decisions
about the actual timing of property sales or other dispositions to be left
to the General Partner's discretion based on the anticipated remaining
economic benefits of continued ownership and other factors.
On February 18, 1997, the Partnership mailed a Consent Solicitation to the
Limited Partners which sought their consent to dissolve the Partnership and
sell and liquidate all of its remaining properties as soon as practicable,
consistent with obtaining reasonable value for the Partnership's
properties. A majority in interest of the Limited Partners consented by
March 13, 1997. As a result, the Partnership has adopted the liquidation
basis of accounting as of March 31, 1997. The difference between the
adoption of the liquidation basis of accounting as of March 13, 1997 and
March 31, 1997 was not material.
Under the liquidation basis of accounting, assets are stated at their
estimated net realizable values and liabilities are stated at their
anticipated settlement amounts. The valuation of assets and liabilities
necessarily requires many estimates and assumptions, and there are
substantial uncertainties in carrying out the dissolution of the
Partnership. The actual values upon dissolution and costs associated
therewith could be higher or lower than the amounts recorded.
The Partnership adopted the liquidation basis of accounting on March 31,
1997. Comparison of results to prior years, therefore, is not practical.
The Statement of Net Assets in Liquidation and Statement of Changes of Net
Assets in Liquidation reflect the Partnership in the process of
liquidation. Prior financial statements reflect the Partnership as a going
concern.
Since the approval of the February 18, 1997 Consent Solicitation, the
General Partner has been evaluating possible sales of Partnership
properties, individually and as a portfolio, to liquidate and wind up the
Partnership. Recently, the General Partner has solicited several offers
from prospective purchasers to acquire all of the Partnership's remaining
properties in a single transaction. The General Partner is evaluating these
offers, and expects to either accept an offer or counter one or more of the
offers soon. The offers are substantially similar in price, and value the
Partnership's remaining properties on a collective basis at the high end of
the range that the General Partner previously discussed in the February 18,
1997 Consent Solicitation. To help evaluate these offers, the General
Partner is also evaluating local market conditions and potential sales of
the properties on an individual basis. There can be no assurance as to when
or at what price properties will be sold. If an agreement can be reached to
sell the properties in a single transaction, the General Partner expects to
complete such a transaction in 1998.
As of December 31, 1995 the General Partner decided to treat its properties
as held for sale, instead of for investment, for financial statement
purposes. Since adoption of the 1993 amendment, the General Partner has
considered several preliminary indications of interest from third parties
to acquire some or all of the Partnership's properties. Apart from the sale
of Atrium Place, these transactions never materialized, primarily because
the General Partner rejected as too low the valuations of the Partnership's
remaining properties as proposed by the potential purchasers. The
Partnership's properties were held for sale throughout 1996 and 1997 and
continue to be held for sale.
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" and the liquidation basis of accounting adopted
on March 31, 1997 (see Note 2), the carrying value of these properties was
evaluated to ensure that each property is carried on the Partnership's
balance sheet at the lower of cost or fair value less estimated selling
costs and estimated net realizable value, respectively. The General Partner
estimated fair value for this purpose based on appraisals performed as of
January 1, 1998 at December 31, 1997 and as of January 1, 1997 at December
31, 1996.
F-12
<PAGE> 30
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(1) Organization and Operations (Cont'd.)
The January 1, 1998 appraisals assume that the properties will be sold
within approximately the next year and that the sales will take place on a
property by property basis between willing buyers and willing sellers.
Among the strategies the General Partner will consider to accomplish the
dissolution is a sale of the Partnership's portfolio in a single
transaction, or a sale of some or all of the Partnership's properties in a
"package" with properties of affiliated partnerships. If the properties
were sold in a "package" such sale would most likely result in a lower
aggregate sales price, but more rapid distribution of dissolution proceeds
to the Limited Partners, as compared to a series of individual sale
transactions. Furthermore, fair value can only be determined based upon
sales to third parties, and sales proceeds could differ substantially from
appraised values.
(2) Summary of Significant Accounting Policies
Liquidation Basis
The Partnership adopted the liquidation basis of accounting as of March 31,
1997. The liquidation basis of accounting is appropriate when liquidation
appears imminent, the Partnership can no longer be classified as a going
concern and the net realizable values of the Partnership's assets are
reasonably determinable. Under this method of accounting, assets and
liabilities are stated at their estimated net realizable values and costs
of liquidating the Partnership are provided to the extent reasonably
determinable.
Carrying Value of Real Estate (prior to the adoption of the liquidation
basis of accounting)
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.
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 reviews
its estimates of fair value, which are decreased or increased up to the
original carrying value. Finally, assets held for sale are no longer
depreciated. The adoption of FAS 121 did not have a material impact on the
Partnership's operations or financial position as the General Partner
adopted FAS 121 at December 31, 1995 and prior to December 31, 1995, the
Partnership did not have 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
a 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 were greater than its appraised value, less
estimated selling costs, the General Partner reduced the carrying value of
the property by the
F-13
<PAGE> 31
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(2) Summary of Significant Accounting Policies (Cont'd.)
Carrying Value of Real Estate (Cont'd)
difference. Using this methodology, the General Partner determined that
Atrium Place, Kennedy Corporate Center, Lakeland Industrial Park and Cooper
Village (58% interest) had carrying values greater than they had appraised
values, and therefore reduced their 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.
Utilizing the same methodology, assuming a twelve month holding period, for
the year ended December 31, 1996, the General Partner determined that
LaderaII Shopping Center and Kennedy Corporate Center had carrying values
greater than their respective appraised values, less selling costs. As a
result, the carrying values were adjusted by $185,000 and $343,000 to
$2,200,000 and $2,460,000, respectively. In addition, the carrying value of
Atrium Place was reduced in September 1996 by $75,000 in order to reflect
its approximate selling price and the carrying value of Lakeland Industrial
Park was increased by $40,000 to $5,300,000, its estimated fair value less
selling costs.
Cash and Cash Equivalents
The Partnership invests its excess cash balances in short-term investments
(cash equivalents). These investments are stated at cost, which
approximates market, and consist of money market, certificates of deposit
and other non- equity-type cash investments. Cash equivalents at December
31, 1997 and 1996, totaled $1,403,000 and $1,442,000, respectively. Cash
equivalents are defined as temporary non-equity investments with original
maturities of three months or less, which can be readily converted into
cash and are not subject to changes in market value.
Depreciation
Through December 31, 1995, depreciation expense was computed using the
straight-line method. Rates used in the determination of depreciation were
based upon the following estimated useful lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings 30
Building improvements 3 to 30
</TABLE>
Revenue Recognition
Through March 31, 1997, rental income pertaining to operating lease
agreements which specify scheduled rent increases or free rent periods, was
recognized on a straight-line basis over the period of the related lease
agreement. After March 31, 1997, rental income has been recognized
according to the lease terms.
F-14
<PAGE> 32
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(2) Summary of Significant Accounting Policies (Cont'd.)
Income Taxes
Income taxes are not levied at the Partnership level, but rather on the
individual partners; therefore, no provision or liability for Federal and
State income taxes has been reflected in the accompanying financial
statements.
Following are the Partnership's assets and liabilities as determined in
accordance with generally accepted accounting principles ("GAAP")
(liquidation basis of accounting and going concern basis) and for federal
income tax reporting purposes at December 31:
<TABLE>
<CAPTION>
1997 1996
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
(LIQUIDATION) (UNAUDITED) (GOING CONCERN) (UNAUDITED)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Assets $28,343,000 $35,416,000 $28,212,000 $35,864,000
Total
Liabilities $ 949,000 $ 667,000 $ 636,000 $ 636,000
</TABLE>
Following are the differences between Financial Statement and tax return
income:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) per Financial
Statements (period ending March
31, 1997 for 1997) $ 565,000 $1,916,000 $(575,000)
Change in net assets in
liquidation from operating
activities for the nine months
ended December 31, 1997 1,921,000 -- --
Adjustment to carrying value of
real estate -- 563,000 707,000
Equity in loss of Cooper
Village due to adjustment in
carrying value -- 239,000 789,000
Depreciation differences on
investments in real estate (1,406,000) (1,482,000) (304,000)
Loss on sale of property in
excess of book value -- (1,184,000) --
Other 55,000 70,000 94,000
- -------------------------------------------------------------------------------------------
Taxable income per Federal tax
return (unaudited) $1,135,000 $ 122,000 $ 711,000
===========================================================================================
</TABLE>
F-15
<PAGE> 33
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(2) Summary of Significant Accounting Policies (Cont'd.)
Significant Tenants
Rental income from Iomega Corporation totaled $1,216,000 in 1997,
$1,210,000 in 1996 and $1,120,000 in 1995, or approximately 25%, 25% and
24%, respectively, of the Partnership's total rental income. Rental income
from Delta Dental Corporation totaled $860,000 in 1997, $755,000 in 1996
and $701,000 in 1995, or approximately 18%, 16% and 16%, respectively, of
the Partnership's total rental income.
Earnings and Distributions 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.
Estimations
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses or changes in net assets during the reporting period. Actual
results could differ from those estimates.
Investment in Cooper Village
The Partnership uses the equity method of accounting to account for its
investment in Cooper Village Partners inasmuch as control of Cooper Village
Partners is shared jointly between the Partnership and Real Estate Income
Partners III, Limited Partnership. The accounting policies of Cooper
Village Partners are consistent with those of the Partnership.
(3) Investment in Cooper Village Partners
During 1987 and 1988, Cooper Village Partners ("CV Partners"), a California
general partnership consisting of the Partnership and Real Estate Income
Partners III, Limited Partnership ("Fund III"), an affiliated limited
partnership, acquired Cooper Village. In connection therewith, the
Partnership and Fund III contributed capital contributions of $5,937,000
(58%) and $4,300,000 (42%), respectively, and share in the profits, losses
and distributions of CV Partners in proportion to their respective
ownership interests.
F-16
<PAGE> 34
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(3) Investment in Cooper Village Partners (Cont'd.)
Condensed summary financial information for CV Partners is presented below.
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Condensed Statement of Net Assets in Liquidation:
Property $6,102,000
Cash and Other Assets 401,000
Liabilities (144,000)
----------
Net assets in liquidation $6,359,000
==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Condensed Balance Sheet:
Property held for sale (net of
valuation allowance of $1,772,000) $6,011,000
Cash and Other Assets 460,000
----------
Total Assets $6,471,000
==========
Accounts Payable and
Accrued Liabilities $ 114,000
Partners' Capital $6,357,000
----------
Total Liabilities and
Partners' Capital $6,471,000
==========
NINE MONTHS
Condensed Statement of Changes ENDED DECEMBER 31,
Of Net Assets in Liquidation: 1997
----------
Net Assets in Liquidation
at March 31, 1997 $6,384,000
Increase (decrease) during period:
Operating Activities 345,000
Liquidating Activities (370,000)
----------
Net decrease in Assets in
Liquidation (25,000)
----------
Net Assets in Liquidation at
December 31, 1997 $6,359,000
==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS YEARS ENDED
ENDED MARCH 31, DECEMBER 31,
Condensed Statements of Operations: 1997 1996 1995
--------------- ---------- ----------
<S> <C> <C> <C>
Rental and Other Income $ 242,000 $1,072,000 $1,046,000
Operating and Other Expenses (84,000) (483,000) (498,000)
Adjustment to Carrying Value
of Real Estate - (412,000) (1,360,000)
Depreciation and Amortization (2,000) (8,000) (253,000)
---------- ----------- -----------
Net Income (Loss) $ 156,000 $ 169,000 $(1,065,000)
========== =========== ============
</TABLE>
F-17
<PAGE> 35
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(4) 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 years ended December 31, 1997, 1996 and 1995 the
Partnership was charged with approximately $114,000, $130,000 and $161,000,
respectively, of such expenses.
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 $159,000 in 1997, $168,000
in 1996 and $158,000 in 1995. The General Partner was also paid a leasing
fee for services rendered in connection with leasing space in a partnership
property after the expiration or termination of any lease of such space
including renewal options. Such fees amounted to $35,000, $19,000 and
$55,000 for the years ended December 31, 1997, 1996, and 1995,
respectively. As reimbursement of costs for on-site property management
personnel and other related costs, an affiliate of the General Partner
received $109,000 in 1997, $108,000 in 1996 and $122,000 in 1995. In
addition to the aforementioned, the General Partner was also paid $51,000,
$54,000 and $51,000 related to the Partnership's portion (58%) of property
management fees, leasing fees, reimbursement of on-site property management
personnel and other reimbursable expenses for CV Partners for the year
ended December 31, 1997, 1996 and 1995, respectively.
The amended Partnership Agreement provides for the Partnership's payment to
the General Partner of an annual asset management fee equal to .65% (75% in
1996) 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 year ended December 31, 1997, 1996 and 1995, amounted to
$170,000, $199,000 and $199,000, respectively. In addition to the
aforementioned, the General Partner was also paid $23,000, $28,000 and
$34,000, related to the Partnership's portion (58%) of asset management
fees for Cooper Village Partners for the years ended December 31, 1997,
1996 and 1995, respectively.
(5) Gain on Disposition of Assets
On November 21, 1996, the Partnership sold Atrium Place, a single-story
23,970 square foot office building located on 1.74 acres of land in
Arlington Heights, Illinois to an unaffiliated third party. The sales price
was $825,000 ($784,000 net of closing costs and escrow fees) and the net
proceeds of the sale amounted to approximately $720,000 after all
prorations and credits to the buyer. In December 1995, the General Partner
had adjusted the carrying value of the property in accordance with the
guidelines of FAS 121, which resulted in a write-down of $167,000 and an
adjusted carrying value of $829,000. In September 1996, the General Partner
adjusted the carrying value by another $75,000 to $754,000 upon
disposition. The resulting gain on sale, after taking into consideration
all costs of disposition, amounted to $30,000 as reflected in the Statement
of Operations. The General Partner was not paid a commission or disposition
fee as part of this transaction.
F-18
<PAGE> 36
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(6) Commitments and Contingencies
Litigation
So far as is known to the General Partner, neither the Partnership nor its
properties are subject to any material pending legal proceedings, however:
On March 25, 1997, a limited partner named Bigelow/Diversified Secondary
Partnership Fund 1990 filed a purported class action lawsuit in the Court
of Common Pleas of Philadelphia County against Damson/Birtcher Partners,
Birtcher Investors, Birtcher/Liquidity Properties, Birtcher Investments,
L.F. Special Fund II, L.P., L.F. Special Fund I, L.P., Arthur Birtcher,
Ronald Birtcher, Robert Anderson, Richard G. Wollack and Brent R. Donaldson
alleging breach of fiduciary duty and breach of contract and seeking to
enjoin the Consent Solicitation dated February 18, 1997. On April 18, 1997,
the court denied the plaintiff's motion for a preliminary injunction. On
June 10, 1997, the court dismissed the plaintiff's complaint on the basis
of lack of personal jurisdiction and forum non conveniens.
On June 13, 1997, the Partnership, its affiliated partnership, Real Estate
Income Partners III, and their general partner, Birtcher/Liquidity
Properties, filed a complaint for declaratory relief in the Court of
Chancery in Delaware against Bigelow/Diversified Secondary Partnership Fund
1990 L.P. The complaint seeks a declaration that the vote that the limited
partners of the Partnership and Real Estate Income Partners III took
pursuant to the respective consent solicitations dated February 18, 1997
were effective to dissolve the respective partnerships and complied with
applicable law, that the actions of the General Partner in utilizing the
consent solicitations to solicit the vote of the limited partners did not
breach any fiduciary or contractual duty to such limited partners, and an
award of costs and fees to the plaintiffs. The defendant has answered the
complaint. The parties have initiated discovery. No motions are pending at
this time.
Future Minimum Annual Rentals
The Partnership has determined that all leases which had been executed as
of December 31, 1997, are properly classified as operating leases for
financial reporting purposes. Future minimum annual rental income to be
received under such leases as of December 31, 1997, is as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C> <C>
1998 $3,535,000
1999 2,628,000
2000 1,588,000
2001 764,000
2002 474,000
Thereafter --
----------
$8,989,000
==========
</TABLE>
Certain of these leases also provide for, among other things: tenant
reimbursements to the Partnership of certain operating expenses; payments
of additional rents in amounts equal to a set percentage of the tenant's
annual revenue in excess of specified levels; and escalations in annual
rents based upon the Consumer Price Index.
F-19
<PAGE> 37
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(7) Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1996
-----------------------------
<S> <C> <C>
Real estate taxes $354,000 $352,000
Security deposits 157,000 161,000
Accounts payable and other 156,000 123,000
-------- --------
$667,000 $636,000
======== ========
</TABLE>
(8) Accrued Expenses for Liquidation
Accrued expenses for liquidation as of December 31, 1997, includes
estimates of costs to be incurred in carrying out the dissolution and
liquidation of the Partnership. These costs include estimates of legal
fees, accounting fees, tax preparation and filing fees, other
professional services and the general partner's liability insurance.
(9) Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995
------------------------------
<S> <C> <C>
Balance at beginning of year $ -- $ 23,000
Additions -- --
Writeoffs -- (23,000)
--------- --------
Balance at end of year $ -- $ --
========= ========
</TABLE>
(10) Subsequent Events
On February 28, 1998, the Partnership made an aggregate cash
distribution of $705,000 to its Limited Partners.
F-20
<PAGE> 38
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE IN LIQUIDATION AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. C COL. D COL. E COL. F COL. H COL. I
------ ------ ------ ------ ------ ------ ------
COSTS CAPITALIZED
INITIAL COST SUBSEQUENT GROSS AMOUNT AT WHICH
TO PARTNERSHIP(c) TO THE ACQUISITION CARRIED AT CLOSE OF PERIOD(b)
------------------- ------------------ ----------------------------
BUILDINGS BUILDINGS ACCUM.
AND AND DEPRE-
IMPROVE- IMPROVE- CARRYING IMPROVE- CIATION DATE DEBRECIABLE
DESCRIPTION (a) LAND MENTS MENTS COSTS(b) LAND MENTS TOTAL(d) (d) ACQUIRED LIFE(e)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lakeland Industrial Park
Milwaukee, WI 270 5,973 1,292 (2,409) 268 4,858 5,126 - 12/19/85 30 years
and
11/25/86
Kennedy Corporate Center
Palatine, IL 641 4,252 925 (3,196) 574 2,048 2,622 - 01/08/86 30 years
Iomega/Northpointe
Business Center
Roy, UT 672 7,834 491 (2,631) 672 5,694 6,366 - 01/31/86 30 years
Ladera Shopping Center,
Phase II
Albuquerque, NM 829 2,241 114 (959) 821 1,404 2,225 - 02/07/86 30 years
Creekridge Center
Bloomington, MN 1,312 11,304 465 (6,318) 966 5,797 6,763 - 09/23/86 30 years
------ ------- ------ --------- ------ ------- ------- ----
TOTAL $3,724 $31,604 $3,287 $(15,513) $3,301 $19,801 $23,102 -
====== ======= ====== ========= ====== ======= ======= ====
</TABLE>
NOTE: Columns B and G are either none or are not applicable.
See notes to table on following page.
F-21
<PAGE> 39
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
(a) For a description of the properties, see "Item 2. Properties." This
schedule does not include the investment in Cooper Village Partners which
is accounted for under the equity method of accounting.
(b) Upon adoption of the liquidation basis of accounting on March 31, 1997,
accumulated depreciation was deleted through an adjustment to the cost of
the properties.
At December 31, 1996, the General Partner determined that Ladera-II
Shopping Center and Kennedy Corporate Center had carrying values greater
than their respective appraised values, less selling costs, and therefore
provided an aggregate valuation allowance of $528,000 against property held
for sale. In addition, the carrying value of Lakeland Industrial Park was
increased by $40,000 to $5,300,000, its estimated fair value less selling
costs.
At December 31, 1995, the General Partner determined that Atrium Place,
Kennedy Corporate Center, and Lakeland Industrial Park had carrying values
greater than they had appraised values less selling costs, and therefore
provided a valuation allowance of $707,000 against the properties held for
sale.
The aggregate cost of land, buildings and improvements for Federal income
tax purposes (unaudited) was $41,769,000 as of December 31, 1997. The
differences between the aggregate cost of land, buildings and improvements
for tax reporting purposes as compared to financial reporting purposes are
primarily attributable to: 1) amounts received under rental agreements for
non-occupied space, which were recorded as income for tax reporting
purposes but were recorded as a reduction of the corresponding property
basis for financial reporting purposes, and; 2) the adjustments to the
carrying value of real estate for financial statement purposes have no
effect for tax reporting purposes.
(c) The initial cost to the Partnership includes acquisition fees paid to the
General Partner.
(d) RECONCILIATION OF REAL ESTATE
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
-----------------------------------
<S> <C> <C>
Balance at beginning of year $33,386,000 $35,518,000
Additions during the year:
Improvements 238,000 247,000
Other(*) (10,522,000) --
Reductions during the year:
Sale of real estate -- (1,816,000)
Adjustment to the carrying
value of real estate -- (563,000)
----------- -----------
Balance at end of year $23,102,000 $33,386,000
=========== ===========
</TABLE>
(*) Results from reclassification of deferred rent receivable and leasing
commissions to real estate and deletion of accumulated depreciation upon the
adoption of the liquidation basis of accounting on March 31, 1997.
F-22
<PAGE> 40
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
NOTES TO SCHEDULE III (Cont'd.)
RECONCILIATION OF ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
---------------------------------------------
<S> <C> <C>
Balance at beginning of year $ 11,068,000 $12,131,000
Accumulated depreciation
on real estate sold -- (1,063,000)
Adjustment upon adoption of liquidation
basis of accounting (11,068,000) --
------------ -----------
Balance at end of year $ -- $11,068,000
============ ===========
</TABLE>
(e) Through December 31, 1995, depreciation expense was computed based upon the
following estimated useful lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings 30
Building improvements 3 to 30
</TABLE>
Due to the adoption of FAS 121 on December 31, 1995, and the
Liquidation Basis of Accounting on March 31, 1997, properties held for
sale were not depreciated in 1996 or 1997.
F-23
<PAGE> 41
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
INDEPENDENT AUDITORS' REPORT
To Damson/Birtcher Realty Income Fund-II, Limited Partnership and
Real Estate Income Partners III, Limited Partnership as
General Partners of Cooper Village Partners:
We have audited the financial statements of Cooper Village Partners, a general
partnership, as listed in the accompanying index. In connection with our audits
of the financial statements, we also have audited the financial statement
schedule listed in the accompanying index. These financial statements and the
financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and 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, the financial statements referred to above present fairly, in
all material respects, the net assets in liquidation as of December 31, 1997 and
financial position as of December 31, 1996 of Cooper Village Partners, and the
changes of net assets in liquidation for the nine months ended December 31, 1997
and the results of its operations and its cash flows for the three months ended
March 31, 1997 and each of the years in the two-year period ended December 31,
1996, in conformity with generally accepted accounting principles applied on the
bases of accounting as discussed in note 2. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in notes 1 and 2 to the financial statements, the Partnership has
changed its basis of accounting as of March 31, 1997 from the going-concern
basis to the liquidation basis.
KPMG PEAT MARWICK LLP
Orange County, California
March 6, 1998
F-24
<PAGE> 42
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
STATEMENT OF NET ASSETS IN LIQUIDATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS (Liquidation Basis):
<S> <C>
Property $6,102,000
Cash and cash equivalents 324,000
Accounts receivable 71,000
Other assets 6,000
----------
Total Assets 6,503,000
----------
LIABILITIES (Liquidation Basis):
Accounts payable and accrued liabilities 135,000
Accrued expenses for liquidation 9,000
----------
Total Liabilities 144,000
----------
Net Assets in Liquidation $6,359,000
==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-25
<PAGE> 43
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
STATEMENT OF CHANGES OF NET ASSETS IN LIQUIDATION
FOR THE NINE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C> <C>
Net assets in liquidation at March 31, 1997 $6,384,000
Increase (decrease) during period:
Operating activities:
Property operating income, net 381,000
Interest income 16,000
General and administrative expenses (39,000)
Leasing commissions (13,000)
----------
345,000
Liquidating activities -- distribution to partners (370,000)
----------
Net decrease in assets in liquidation (25,000)
----------
Net assets in liquidation at December 31, 1997 $6,359,000
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 44
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-----------
ASSETS
<S> <C>
Property held for sale (net of valuation
allowance of $1,772,000) $ 6,011,000
Cash and cash equivalents 355,000
Accounts receivable 40,000
Accrued rent receivable 47,000
Prepaid expenses and other assets, net 18,000
-----------
$ 6,471,000
===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 114,000
-----------
Partners' capital 6,357,000
Commitments and contingencies
-----------
$ 6,471,000
===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-27
<PAGE> 45
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED FOR THE YEARS
MARCH 31, ENDED DECEMBER 31,
------------ ---------------------------------
1997 1996 1995
---------- ---------------------------------
<S> <C> <C> <C>
REVENUES:
Rental income $ 238,000 $1,051,000 $1,025,000
Interest and other income 4,000 21,000 21,000
--------- ---------- ----------
Total revenues 242,000 1,072,000 1,046,000
--------- ---------- ----------
EXPENSES:
Operating expenses 72,000 277,000 296,000
Real estate taxes -- 148,000 136,000
Depreciation and amortization 2,000 8,000 253,000
Adjustment to carrying value of
real estate -- 412,000 1,360,000
General and administrative 12,000 58,000 66,000
--------- ---------- ----------
Total expenses 86,000 903,000 2,111,000
--------- ---------- ----------
NET INCOME (LOSS) $ 156,000 $ 169,000 $(1,065,000)
========= ========== ============
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-28
<PAGE> 46
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
THE YEARS ENDED DECEMBER 31,
1996 AND 1995
------------------------------------------------------------------------
GENERAL GENERAL
PARTNER PARTNER TOTAL
DAMSON/BIRTCHER REAL ESTATE
REALTY INCOME INCOME
FUND II PARTNERS III
------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1994 $4,817,000 $3,586,000 $ 8,403,000
Net loss (618,000) (447,000) (1,065,000)
Distributions (307,000) (223,000) (530,000)
----------- ----------- ------------
Balance, December 31, 1995 3,892,000 2,916,000 6,808,000
Net income 98,000 71,000 169,000
Distributions (360,000) (260,000) (620,000)
----------- ----------- ------------
Balance, December 31, 1996 3,630,000 2,727,000 6,357,000
Net income 90,000 66,000 156,000
Distributions (70,000) (50,000) (120,000)
----------- ----------- ------------
Balance, March 31, 1997 $3,650,000 $2,743,000 $6,393,000
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-29
<PAGE> 47
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED FOR THE YEARS
MARCH 31, ENDED DECEMBER 31,
------------ ----------------------------------
1997 1996 1995
------------ ----------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 156,000 $ 169,000 $(1,065,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 2,000 8,000 253,000
Adjustment to carrying value of
real estate -- 412,000 1,360,000
Changes in:
Accounts receivable (24,000) 5,000 (8,000)
Accrued rent receivable 2,000 10,000 4,000
Prepaid expenses and other assets 1,000 (3,000) (10,000)
Accounts payable and accrued
liabilities 17,000 3,000 26,000
--------- --------- -----------
Net cash provided by operating
activities 154,000 604,000 560,000
Cash flows from investing activities -
investments in real estate (22,000) (37,000) (22,000)
Cash flows from financing activities -
distributions (120,000) (620,000) (530,000)
--------- --------- -----------
Net increase (decrease) in cash and
cash equivalents 12,000 (53,000) 8,000
Cash and cash equivalents,
beginning of period 355,000 408,000 400,000
---------- ---------- ----------
Cash and cash equivalents,
end of period $ 367,000 $ 355,000 $ 408,000
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-30
<PAGE> 48
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(1) Organization
Cooper Village Partners, (the "Partnership") was formed on December 18,
1987 under the laws of the State of California. The General Partners of the
Partnership are Damson Birtcher Realty Income Fund II, Limited Partnership
("Fund II") and Real Estate Income Partners III, Limited Partnership ("Fund
III"). During 1987 and 1988, The Partnership acquired Cooper Village
Shopping Center in Mesa, Arizona. In connection with this acquisition, Fund
II and Fund III contributed capital of $5,937,000 (58%) and $4,300,000
(42%), respectively. Fund II and Fund III share in the profits, losses and
distributions of the Partnership in proportion to their respective
ownership interests. The Partnership maintains its accounting records and
prepares its financial statements in accordance with generally accepted
accounting principles.
On February 18, 1997, the General Partners mailed a Consent Solicitation to
the Limited Partners of Funds II and III which sought their consent to
dissolve those Partnerships and sell and liquidate all of their remaining
properties (including the Partnership's property) as soon as practicable,
consistent with obtaining reasonable value for the Partnership's property.
A majority in interest of the Limited Partners of Funds II and III
consented by March 13, 1997. As a result, the General Partner, as well as
the Partnership, have adopted the liquidation basis of accounting as of
March 31, 1997. The difference between the adoption of the liquidation
basis of accounting as of March 13, 1997 and March 31, 1997 was not
material.
Under the liquidation basis of accounting, assets are stated at their
estimated net realizable values and liabilities are stated at their
anticipated settlement amounts. The valuation of assets and liabilities
necessarily requires many estimates and assumptions, and there are
substantial uncertainties in carrying out the dissolution of the
Partnership. The actual values upon dissolution and costs associated
therewith could be higher or lower than the amounts recorded.
The Partnership adopted the liquidation basis of accounting on March 31,
1997. Comparison of results to prior years, therefore, is not practical.
The Statement of Net Assets in Liquidation and Statement of Changes of Net
Assets in Liquidation reflect the Partnership in the process of
liquidation. Prior financial statements reflect the Partnership as a going
concern.
As of December 31, 1995, the General Partners decided to treat their
properties, as well as the Partnership's property, as held for sale,
instead of for investment, for financial statement purposes. Since 1993,
the General Partners have considered several preliminary indications of
interest from third parties to acquire the Partnership's property. The
Partnership's sole property was held for sale throughout 1996 and 1997 and
it is currently held for sale.
In connection with their consideration of these alternatives, and 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" and the liquidation basis of accounting (see Note
2), the carrying value of the Partnership's property was evaluated to
ensure it is carried on the Partnership's balance sheet at the lower of
cost or fair value less estimated selling costs and estimated net
realizable value, respectively. The General Partners' estimated fair value
for this purpose was based on an appraisal performed as of January 1, 1998
at December 31, 1997 and as of January 1, 1997 at December 31, 1996.
F-31
<PAGE> 49
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(1) Organization (Cont'd.)
The January 1, 1998 appraisal assumes that the property will be sold within
approximately the next year and that the sale will take place on an
individual property basis between a willing buyer and a willing seller.
Among the strategies the General Partners will consider to accomplish the
dissolution is a sale of the Partnership's property in a single
transaction, or the sale of the Partnership's property in a "package" with
properties of affiliated partnerships. If the property was sold in a
"package," such sale would most likely result in a lower sale price, but
more rapid distribution of dissolution proceeds to the General Partners, as
compared to an individual property sale transaction. Furthermore, fair
value can only be determined based upon sales to third parties, and sales
proceeds could differ substantially from appraised values.
(2) Summary of Significant Accounting Policies
Liquidation Basis
The Partnership adopted the liquidation basis of accounting as of March 31,
1997. The liquidation basis of accounting is appropriate when liquidation
appears imminent, the Partnership can no longer be classified as a going
concern and the net realizable values of the Partnership's assets are
reasonably determinable. Under this method of accounting, assets and
liabilities are stated at their estimated net realizable values and costs
of liquidating the Partnership are provided to the extent reasonably
determinable.
Carrying Value of Real Estate (prior to the adoption of the liquidation
basis of accounting)
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 management 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.
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 Partners review
their estimate of fair value, which is decreased or increased up to the
original carrying value. Finally, assets held for sale are no longer
depreciated. The initial adoption of FAS 121 did not have a material impact
on the Partnership's operations or financial position as the General
Partners adopted FAS 121 at December 31, 1995 and prior to December 31,
1995 the Partnership did not have any property held for sale.
As noted above, as of December 31, 1995 the General Partners decided to
account for the Partnership's property as an asset held for sale, assuming
a 12 month holding period, instead of for investment. Accordingly, the
General Partners compared the carrying value of the property to its
appraised value as of January 1, 1996. The carrying value of the property
and certain related assets was greater than it's appraised value, less
selling costs, and the
F-32
<PAGE> 50
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(2) Summary of Significant Accounting Policies (Cont'd.)
Carrying Value of Real Estate (prior to the adoption of the liquidation
basis of accounting) (Cont'd.)
General Partner reduced the carrying value of the property by the
difference of $1,360,000. At December 31, 1996, after comparing the
carrying value to the January 1, 1997 appraised value, the property's carry
value was adjusted by an additional $412,000.
Cash and Cash Equivalents
The Partnership invests its excess cash balances in short-term investments
("cash equivalents"). These investments are stated at cost, which
approximates market, and consist of money market accounts, certificates of
deposit and other nonequity-type cash investments. Cash equivalents at
December 31, 1997 and 1996, totaled $289,000 and $301,000, respectively.
Cash equivalents are defined as temporary non-equity investments with
original maturities of three months or less, which can be readily converted
into cash and are not subject to changes in market value.
Depreciation
Through December 31, 1995 depreciation expense was computed using the
straight-line method. Rates used in the determination of depreciation were
based upon the following estimated useful lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings 30
Building improvements 3 to 30
</TABLE>
Revenue Recognition
Through March 31, 1997, rental income pertaining to operating lease
agreements which specify scheduled rent increases or free rent periods, is
recognized on a straight-line basis over the period of the related lease
agreement. After March 31, 1997, rental income has been recognized
according to the lease terms.
Estimations
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partners to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses or changes in net assets during the reporting period. Actual
results could differ from those estimates.
F-33
<PAGE> 51
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(2) Summary of Significant Accounting Policies (Cont'd.)
Income Taxes
Income taxes are not levied at the Partnership level, therefore, no
provision or liability for Federal and State income taxes has been
reflected in the accompanying financial statements.
Following are the Partnership's assets and liabilities as determined in
accordance with generally accepted accounting principles ("GAAP")
(liquidation basis of accounting and going concern basis) and for federal
income tax reporting purposes at December 31:
<TABLE>
<CAPTION>
1997 1996
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
(LIQUIDATION) (UNAUDITED) (GOING CONCERN) (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Assets $ 6,502,000 $6,507,000 $ 6,471,000 $ 6,883,000
Total
Liabilities $ 144,000 $ 135,000 $ 114,000 $ 114,000
</TABLE>
Following are the differences between Financial Statement and tax return
income:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) per Financial
Statements (period ended March
31, 1997 for 1997) $ 156,000 $ 169,000 $(1,065,000)
Change in net assets in
liquidation from operating
activities for the nine months
ended December 31, 1997 345,000 -- --
Depreciation differences on
investments in real estate (221,000) (219,000) 25,000
Adjustment to carrying value of
real estate -- 412,000 1,360,000
Other 7,000 10,000 4,000
- ------------------------------------------------------------------------------------------------------------
Taxable income per Federal tax
return (unaudited) $ 287,000 $ 372,000 $ 324,000
============================================================================================================
</TABLE>
(3) Transactions with Affiliates
The Partnership has no employees and, accordingly, Birtcher Properties, an
affiliate of the General Partner of Fund II and Fund III and its affiliates
perform services on behalf of the Partnership in connection with
administering the affairs of the Partnership. Birtcher Properties and
affiliates are reimbursed for their general and administrative costs
actually incurred and associated with services performed on behalf of the
Partnership. For the years ended December 31, 1997, 1996 and 1995, the
Partnership was charged with approximately $1,000, $1,000 and $0,
respectively, of such expenses.
F-34
<PAGE> 52
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(3) Transactions with Affiliates (Cont'd.)
An affiliate of the General Partner of Fund II and Fund III provides
property management services with respect to the Partnership's property and
receives a fee for such services not to exceed 6% of the gross receipts
from the property under management provided that leasing services were
performed, otherwise not to exceed 3%. Such fees amounted to approximately
$47,000 in 1997, $54,000 in 1996 and $52,000 in 1995. In addition, as
reimbursement of costs for on-site property management personnel and other
related costs, an affiliate of the General Partner received $37,000 in
1997, $35,000 in 1996 and $33,000 in 1995, as reimbursement of costs for
on-site property management personnel and other reimbursable costs.
The amended Partnership Agreements for Fund II and Fund III provide for
payments to Birtcher Properties or its affiliates of an annual asset
management fee equal to .65% (75% in 1996) of the aggregate appraised value
of Cooper Village as determined by independent appraisal undertaken in
January of each year. Such fees for the years ended December 31, 1997, 1996
and 1995, amounted to $39,000, $48,000 and $58,000, respectively. In
addition, the amended Partnership Agreements for Fund II and Fund III
provide for payment to the General Partner or its affiliates of a leasing
fee for services rendered in connection with leasing space in the
Partnership property after the expiration or termination of any lease of
such space including renewal options. Fees for leasing services for the
years ended December 31, 1997, 1996 and 1995, amounted to $6,000, $3,000
and $2,000, respectively.
(4) Commitments and Contingencies
Litigation
The Partnership is not a party to any material pending legal proceedings
other than ordinary routine litigation incidental to its business. It is
the General Partners' belief, that the outcome of these proceedings will
not be material to the business, financial condition, or results of
operations of the Partnership.
Future Minimum Annual Rentals
The Partnership has determined that all leases which had been executed as
of December 31, 1997, are properly classified as operating leases for
financial reporting purposes. Future minimum annual rental income to be
received under such leases as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C> <C>
1998 $ 679,000
1999 641,000
2000 533,000
2001 386,000
2002 315,000
Thereafter 1,559,000
----------
$4,113,000
==========
</TABLE>
Certain of these leases also provide for, among other things: tenant
reimbursements to the Partnership of certain operating expenses; payments
of additional rents in amounts equal to a set percentage of the tenant's
annual revenue in excess of specified levels; and escalations in annual
rents based upon the Consumer Price Index.
F-35
<PAGE> 53
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(5) Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
Real estate taxes $ 70,000 $ 74,000
Accounts payable and other 29,000 5,000
Security deposits 36,000 35,000
-------- --------
$135,000 $114,000
======== ========
</TABLE>
(6) Accrued Expenses for Liquidation
Accrued expenses for liquidation as of December 31, 1997, includes
estimates of costs to be incurred in carrying out the dissolution and
liquidation of the Partnership. These costs include estimates of legal
fees, accounting fees, tax preparation and filing fees, other professional
services and the general partner's liability insurance.
(7) Subsequent Events
On March 5, 1998, the Partnership made an aggregate cash distribution of
$140,000 to its General Partners.
F-36
<PAGE> 54
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
SCHEDULE III
REAL ESTATE IN LIQUIDATION AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. C COL. D COL. E COL. F COL. H COL. I
------ ------ ------ ------ ------ ------ ------
COSTS CAPITALIZED
INITIAL COST SUBSEQUENT GROSS AMOUNT AT WHICH
TO PARTNERSHIP(C) TO THE ACQUISITION CARRIED AT CLOSE OF PERIOD(B)
------------------ ------------------ ----------------------------
BUILDINGS BUILDINGS
AND AND ACCUM.
IMPROVE- IMPROVE- CARRYING IMPROVE- DEPRE- DATE DEBRECIABLE
DESCRIPTION (A) LAND MENTS MENTS COSTS(b) LAND MENTS TOTAL CIATION ACQUIRED LIFE(d)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cooper Village Shopping $ 2,756 $ 6,430 $ 785 $ (3,869) $ 2,748 $ 3,354 $ 6,102 - 12/30/87 30 years
Center and
12/30/88
------- ------- ------ ---------- -------- ------- ------- -----
TOTAL $ 2,756 $ 6,430 $ 785 $ (3,869) $ 2,748 $ 3,354 $ 6,102 -
======= ======= ====== ========== ======== ======= ======= =====
</TABLE>
NOTE: Columns B and G are either none or are not applicable.
F-37
<PAGE> 55
COOPER VILLAGE PARTNERS
(A GENERAL PARTNERSHIP)
NOTES TO SCHEDULE III
(a) For a description of the property, see "Item 2. Properties."
(b) Upon adoption of the liquidation basis of accounting on March 31, 1997,
accumulated depreciation was deleted through an adjustment to the cost of
the property.
At December 31, 1995, the General Partner determined that the Partnership's
property had a carrying value greater than its appraised value less selling
cost, and therefore provided a valuation allowance of $1,360,000 against
property held for sale.
At December 31, 1996, the General Partner determined that the Partnership's
property had a carrying value greater than its appraised value less selling
cost, and therefore provided an additional valuation allowance of $412,000
against property held for sale.
The aggregate cost of land, buildings and improvements for Federal income
tax purposes (unaudited) was $9,814,000 as of December 31, 1997. The
differences between the aggregate cost of land, buildings and improvements
for tax reporting purposes as compared to costs for financial reporting
purposes are primarily attributable to: 1) amounts received under rental
agreements for non-occupied space, which were recorded as income for tax
reporting purposes but were recorded as a reduction of the corresponding
property basis for financial reporting purposes, and; 2) the adjustments to
the carrying value of real estate for financial statement purposes no
effect for tax reporting purposes.
(c) The initial cost to the Partnership includes acquisition fees paid to
Birtcher Investments and Equity Properties Inc.
(d) Through December 31, 1995, depreciation was computed based upon the
following estimated useful lives:
<TABLE>
<CAPTION>
Years
----
<S> <C>
Buildings 30
Building Improvements 3 to 30
</TABLE>
Due to the adoption of FAS 121 on December 31, 1995 and the liquidation
basis of accounting on March 31, 1997, the property held for sale was not
depreciated in 1996 or 1997.
F-38
<PAGE> 56
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
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 and the General Partner have no directors or executive officers.
The General Partner of the Partnership is Birtcher/Liquidity Properties, a
California general partnership of which Birtcher Investors, a California limited
partnership, and LF Special Fund I, L.P., a California limited partnership, are
the general partners. Under the terms of the Partnership Agreement, Birtcher
Investors is responsible for the day-to-day management of the Partnership's
assets.
The general partner of LF Special Fund I, L.P., is Liquidity Fund Asset
Management, Inc., a California corporation affiliated with Liquidity Financial
Group, L.P. The principals and officers of Liquidity Fund Asset Management, Inc.
are as follows:
O Richard G. Wollack, Chairman of the Board
O Brent R. Donaldson, President
O Deborah M. Richard, Chief Financial Officer
The general partner of Birtcher Investors is Birtcher Investments, a California
general partnership. Birtcher Investments' general partner is Birtcher Limited,
a California limited partnership and its general partner is BREICORP, a
California corporation. The principals and relevant officers of BREICORP are as
follows:
O Ronald E. Birtcher, Co-Chairman of the Board
O Arthur B. Birtcher, Co-Chairman of the Board
O Robert M. Anderson, Executive Director
Item 11. EXECUTIVE COMPENSATION
The following table sets forth the fees, compensation and other expense
reimbursements paid to the General Partner and its affiliates in all capacities
for each year in the three-year period ended December 31, 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1997 1996 1995
---------------------------------------------------------
<S> <C> <C> <C>
General Partner's 1% share of
distributable cash $ 24,000 $ 21,000 $ 18,000
Asset management fees 170,000 199,000 199,000
Property management fees 159,000 168,000 158,000
Property management expense
reimbursements 109,000 108,000 122,000
Other expense reimbursements 114,000 130,000 161,000
Leasing fee 35,000 19,000 55,000
-------- ------- -------
TOTAL $611,000 $645,000 $713,000
======== ======== ========
</TABLE>
-18-
<PAGE> 57
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of January 31, 1998, there was no entity or individual holding more than 5%
of the limited partnership interests of the Registrant.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning transactions to which the Registrant was or is to be
a party in which the General Partner or its affiliates had or are to have a
direct or indirect interest, see Notes 1, 3, and 4 to the Financial Statements
in Item 8, which information is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a) 1. and 2. Financial Statements and Financial Statements Schedules:
See accompanying Index to Financial Statements and Schedules to Item 8,
which information is incorporated herein by reference.
3. Exhibits:
Articles of Incorporation and Bylaws
(a) Agreement of Limited Partnership incorporated by reference to
Exhibit No. 3.1 to the Partnership's registration statement on
Form S-11 (Commission File No. 2-99421), dated August 5, 1985, as
filed under the Securities Act of 1933.
10. Material Contracts
(a) Form of Property Management Agreement between Birtcher Properties
and the Registrant incorporated by reference to Exhibit No. 10.1
of the Partnership's registration statement on Form S-11
(Commission File No. 2-99421), as filed September 24, 1985, under
the Securities Act of 1933. (SUPERSEDED)
(b) Letter of Intent regarding Purchase and Sale of Real Property
(Cooper Village, Phase I) dated September 3, 1987, by and between
Arizona Building and Development, the Wolfswinkel Group and
Birtcher Realty Corporation incorporated by reference to Exhibit
19(a) of the Partnership's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1987.
(c) Agreement of Purchase and Sale of Real Property (Cooper Village,
Phase I) dated November 13, 1987, by and between Broadway Village
Partners and Birtcher Acquisition Corporation incorporated by
reference to Form 8-K, as filed December 30, 1987.
-19-
<PAGE> 58
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(Cont'd.)
(d) Agreement of General Partnership, dated December 15, 1987, by and
between Damson/Birtcher Realty Income Fund-II, Limited
Partnership and Real Estate Income Partners III, Limited
Partnership incorporated by reference to Form 8-K, as filed
December 30, 1987.
(e) Property Management Agreement dated October 24, 1991, between
Glenborough Management Corporation and the Registrant for Atrium
Place, Creekridge Center, Iomega/Northpointe Business Center,
Kennedy Corporate Center I, Ladera II Shopping Center and
Lakeland Industrial Park. Incorporated by reference to Exhibit 1
of the Partnership's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991. (SUPERSEDED)
(f) Property Management Agreement dated October 24, 1991, between
Glenborough Management Corporation and Cooper Village Partners
for Cooper Village Shopping Center. Incorporated by reference to
Exhibit 2 of the Partnership's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1991. (SUPERSEDED)
(g) Agreement for Partnership Administrative Services dated October
24, 1991, between Glenborough Management Corporation and the
Registrant for the services described therein. Incorporated by
reference to Exhibit 3 of the Partnership's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1991. (SUPERSEDED)
(h) Property Management Agreement, dated October 29, 1993, between
Birtcher Properties and the Registrant for Atrium Place,
Creekridge Center, Iomega Business Center, Kennedy Corporate
Center-I, Ladera-II Shopping Center, and Lakeland Industrial
Park. Incorporated by reference to Exhibit 1 of the Partnership's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1991. (SUPERSEDED)
(I) Property Management Agreement, dated October 29, 1993, between
Birtcher Properties and Cooper Village Partners for Cooper
Village Shopping Center. Incorporated by reference to Exhibit 2
of the Partnership Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993.
(27) Financial Data Schedule
b) Reports on Form 8-K:
None filed for the year ended December 31, 1997.
-20-
<PAGE> 59
DAMSON/BIRTCHER REALTY INCOME FUND-II,
LIMITED PARTNERSHIP
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.
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: March 30, 1998 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: March 30, 1998 By: /s/ Brent R. Donaldson
---------------------------------------
Brent R. Donaldson
President
Liquidity Fund Asset Management, Inc.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Birtcher/Liquidity
Properties (General Partner of the Registrant) and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Arthur B. Birtcher Co-Chairman of the Board -- March 30, 1998
- ---------------------- BREICORP
Arthur B. Birtcher
/s/ Ronald E. Birtcher Co-Chairman of the Board -- March 30, 1998
- ---------------------- BREICORP
Ronald E. Birtcher
/s/ Richard G. Wollack Chairman of Liquidity Fund March 30, 1998
- ---------------------- Asset Management, Inc.
Richard G. Wollack
</TABLE>
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH DAMSON BIRTCHER REALTY INCOME
FUND II
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,455,000
<SECURITIES> 0
<RECEIVABLES> 121,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,601,000
<PP&E> 23,102,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,343,000
<CURRENT-LIABILITIES> 949,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 27,394,000
<TOTAL-LIABILITY-AND-EQUITY> 28,343,000
<SALES> 0
<TOTAL-REVENUES> 0<F1>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0<F1>
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Statement of Operations is not presented in liquidation
Basis of Accounting.
</FN>
</TABLE>
