<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1998
--------------------------------------------------------------
Commission file number 0-14633
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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 No.)
27611 La Paz Road, P.O. Box A-1, Laguna Niguel, California 92677-0100
- ---------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(949) 643-7700
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 12(g), 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
<PAGE> 2
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Net Assets in Liquidation - June 30, 1998 (Unaudited)
and December 31, 1997 (Audited)............................................ 3
Statements of Changes of Net Assets in Liquidation -
Three Months Ended June 30, 1998 and 1997 and Six Months Ended
June 30, 1998(Unaudited)................................................... 4
Statement of Operations (Unaudited) -
Three Months Ended March 31, 1997.......................................... 5
Statement of Cash Flows (Unaudited) -
Three Months Ended March 31, 1997.......................................... 6
Notes to Financial Statements (Unaudited).................................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................. 11
PART II. OTHER INFORMATION.......................................................... 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DAMSON/BIRTCHER REALTY INCOME FUND-II
STATEMENTS OF NET ASSETS IN LIQUIDATION
----------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS (Liquidation Basis):
- ---------------------------
Properties $ 23,200,000 $ 23,102,000
Investment in Cooper Village Partners 3,688,000 3,640,000
Cash and cash equivalents 1,402,000 1,455,000
Accounts receivable 88,000 121,000
Other assets 6,000 25,000
------------ ------------
Total Assets 28,384,000 28,343,000
------------ ------------
LIABILITIES (Liquidation Basis):
- --------------------------------
Accounts payable and accrued liabilities 609,000 667,000
Accrued expenses for liquidation 281,000 282,000
------------ ------------
Total Liabilities 890,000 949,000
------------ ------------
Net Assets in Liquidation $ 27,494,000 $ 27,394,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
STATEMENTS OF CHANGES OF NET ASSETS IN LIQUIDATION
(UNAUDITED)
----------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Three Months Six Months
Ended Ended Ended
June 30, 1998 June 30, 1997 June 30, 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net assets in liquidation at beginning
of period $ 27,474,000 $ 27,255,000 $ 27,394,000
Increase (decrease) during period:
Operating activities:
Property operating income, net 879,000 732,000 1,715,000
Equity in earnings of Cooper
Village Partners 93,000 76,000 182,000
Interest income 18,000 20,000 40,000
Leasing commissions (33,000) (30,000) (33,000)
General and administrative expenses (214,000) (255,000) (370,000)
------------ ------------ ------------
743,000 543,000 1,534,000
------------ ------------ ------------
Liquidating activities-distributions
to partners (723,000) (610,000) (1,434,000)
------------ ------------ ------------
Net increase (decrease) in assets
in liquidation 20,000 (67,000) 100,000
------------ ------------ ------------
Net assets in liquidation at end
of period $ 27,494,000 $ 27,188,000 $ 27,494,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
(UNAUDITED)
----------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Three Months
Ended
March 31, 1997
--------------
<S> <C>
REVENUES
- --------
Rental income $1,157,000
Interest income 20,000
----------
Total revenues 1,177,000
----------
EXPENSES
- --------
Operating expenses 255,000
Real estate taxes 187,000
Amortization 17,000
General and administrative 244,000
----------
Total expenses 703,000
----------
Income before equity
in earnings of Cooper Village Partners 474,000
Equity in earnings of Cooper
Village Partners 91,000
----------
NET INCOME $ 565,000
==========
NET INCOME ALLOCABLE TO:
General Partner $ 6,000
==========
Limited Partners $ 559,000
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
(UNAUDITED)
----------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Three Months
Ended
March 31, 1997
--------------
<S> <C>
Cash flows from operating activities:
Net income $ 565,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization 17,000
Equity in earnings of Cooper Village Partners (91,000)
Changes in:
Accounts receivable (14,000)
Accrued rent receivable 42,000
Prepaid expenses and other assets (26,000)
Accounts payable and accrued liabilities 68,000
-----------
Net cash provided by operating activities 561,000
Cash flows from investing activities:
Investments in real estate (61,000)
Distributions received from Cooper Village Partners 70,000
-----------
Net cash provided by investing activities 9,000
Cash flows from financing activities-distributions (605,000)
-----------
Net decrease in cash and cash
equivalents (35,000)
Cash and cash equivalents, beginning of period 1,639,000
-----------
Cash and cash equivalents, end of period $ 1,604,000
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
(1) Accounting Policies
The financial statements of Damson/Birtcher Realty Income Fund-II,
Limited Partnership (the "Partnership") included herein have been
prepared by the General Partner, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. These
financial statements include all adjustments which are of a normal
recurring nature and, in the opinion of the General Partner, are
necessary for a fair presentation. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted, pursuant to the rules and regulations of the
Securities and Exchange Commission. These financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1997.
Liquidation Basis of Accounting
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 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 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. 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 through March 31, 1997,
therefore, is not practical. The Statements of Net Assets in
Liquidation and Statements 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.
On April 30, 1998, the General Partner accepted an offer to purchase
all of the Partnership's properties for $33,680,000, subject to
customary contingencies, including due diligence review by the
purchaser and negotiation of a definitive Purchase and Sale Agreement
(the "Purchase Offer"). At that time, the buyer anticipated closing the
transaction in approximately 60-90 days.
7
<PAGE> 8
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
(1) Accounting Policies (Cont'd.)
Since that time, the General Partner and the buyer have been working to
finalize a definitive Purchase and Sale Agreement, but have not yet
completed that negotiation. The most significant open issue is the
purchase price, which in the Purchase Offer was based upon certain
assumptions concerning existing occupancy, the lease-up of vacant space
and the required capital expenditures to complete the lease-up.
Several of the Partnership's properties have not performed to
expectations. For instance, Delta Dental, which is a major tenant at
Creekridge, has told the General Partner that it is building its own
building and will not renew its lease when it expires in February 1999.
The buyer has reduced its offer based upon lower than expected revenue
and the anticipated cost to reconfigure, build out and lease this
space. The parties are therefore likely to agree to a final purchase
price between $31,000,000 and $33,000,000 and are negotiating a formula
to credit the Partnership should any space be leased before the final
closing of the sale.
The General Partner believes that the parties will reach agreement and
currently anticipates finalization of a definitive Purchase and Sale
Agreement by August 31, 1998. Once that is accomplished, the General
Partner estimates that closing will take approximately 45-75 additional
days.
Earnings Per Unit
The Partnership Agreement does not designate investment interests in
units. All investment interests are calculated on a "percent of
Partnership" basis, in part to accommodate reduced rates on sales
commissions for subscriptions in excess of certain specified amounts.
A Limited Partner who was charged a reduced sales commission or no
sales commission was credited with proportionately larger Invested
Capital and therefore had a disproportionately greater interest in the
capital and revenues of the Partnership than a Limited Partner who paid
commissions at a higher rate. As a result, the Partnership has no set
unit value as all accounting, investor reporting and tax information is
based upon each investor's relative percentage of Invested Capital.
Accordingly, earnings or loss per unit is not presented in the
accompanying financial statements.
(2) Transactions with Affiliates
The Partnership has no employees and, accordingly, the General Partner
and its affiliates perform services on behalf of the Partnership in
connection with administering the affairs of the Partnership. The
General Partner and affiliates are reimbursed for their general and
administrative costs actually incurred and associated with services
performed on behalf of the Partnership. For the three months ended June
30, 1998 and 1997 the Partnership incurred approximately $43,000 and
$34,000, respectively, of such expenses. For the six months there
ended, these expenses amounted to $69,000 and $57,000, respectively.
8
<PAGE> 9
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
(2) Transactions with Affiliates (Cont'd.)
An affiliate of the General Partner provides property management
services with respect to the Partnership's properties and receives a
fee for such services not to exceed 6% of the gross receipts from the
properties under management provided that leasing services are
performed, otherwise not to exceed 3%. Such fees amounted to
approximately $42,000 and $37,000, respectively, for the three months
ended June 30, 1998 and 1997 and $89,000 and $78,000 for the six months
there ended. In addition, an affiliate of the General Partner received
$34,000 and $26,000 for the three months ended June 30, 1998 and 1997,
respectively, as reimbursement of costs of on-site property management
personnel and other reimbursable expenses. These reimbursements
amounted to $58,000 and $56,000 for the six months there ended.
Leasing fees for the three months ended June 30, 1998 and 1997,
included charges of $23,000 and $17,000, respectively, from the General
Partner and its affiliates for leasing services rendered in connection
with leasing space in a Partnership property after expiration or
termination of leases. For the six months there ended, such fees were
$26,000 and $17,000, respectively.
As previously reported, on June 24, 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 were implemented by the Partnership as contemplated by
the Information Statement as amendments to the Partnership Agreement,
and are reflected in these financial statements as such.
The amended Partnership Agreement provides for the Partnership's
payment to the General Partner of an annual asset management fee equal
to .55% for 1998 and .65% for 1997 of the aggregate appraised value of
the Partnership's properties as determined by independent appraisal
undertaken in January of each year. Such fees for the three months
ended June 30, 1998 and 1997, amounted to $40,000 and $42,000,
respectively and for the six months there ended they amounted to
$80,000 and $84,000, respectively.
In addition to the aforementioned, the General Partner was also paid
$21,000 and $19,000, related to the Partnership's portion (58%) of
asset management fees, property management fees, leasing fees,
reimbursement of on-site property management personnel and other
reimbursable expenses for Cooper Village Partners for the three months
ended June 30, 1998 and 1997, respectively. For the six months there
ended, these payments amounted to $40,000 and $37,000, respectively.
(3) 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.
On March 25, 1997, a limited partner named Bigelow/Diversified
Secondary
9
<PAGE> 10
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
(3) Commitments and Contingencies (Cont'd.)
Litigation (Cont'd.)
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.
(4) Accrued Expenses for Liquidation
Accrued expenses for liquidation as of June 30, 1998, 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.
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.
10
<PAGE> 11
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
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. 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, were 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 as of March 13, 1997,
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 1997 and continue to be held for sale.
On April 30, 1998, the General Partner accepted an offer to purchase
all of the Partnership's properties for $33,680,000, subject to
customary contingencies, including due diligence review by the
purchaser and negotiation of a definitive Purchase and Sale Agreement
(the "Purchase Offer"). At that time, the buyer anticipated closing the
transaction in approximately 60-90 days.
Since that time, the General Partner and the buyer have been working to
finalize a definitive Purchase and Sale Agreement, but have not yet
completed that negotiation. The most significant open issue is the
purchase price, which in the Purchase Offer was based upon certain
assumptions concerning existing occupancy, the lease-up of vacant space
and the required capital expenditures to complete the lease-up.
Several of the Partnership's properties have not performed to
expectations. For instance, Delta Dental, which is major tenant at
Creekridge, has told the General Partner that it is building its own
building and will not renew its lease when it expires in February 1999.
The buyer has reduced its offer based upon lower than expected revenue
and the anticipated cost to reconfigure, build out and lease this
space. The parties are therefore likely to agree to a final purchase
price between $31,000,000 and $33,000,000 and are negotiating a formula
to credit the Partnership should any space be leased before the final
closing of the sale.
The General Partner believes that the parties will reach agreement and
currently anticipates finalization of a definitive Purchase and Sale
Agreement by August 31, 1998. Once that is accomplished, the General
Partner estimates that closing will take approximately 45-75 additional
days.
11
<PAGE> 12
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Liquidity and Capital Resources (Cont'd.)
The prospective buyer (the "Purchaser") is Abbey Investments, Inc., an
affiliate of The Abbey Company. The Abbey Company is a Southern
California-based real estate operating company founded in 1990. The
Purchaser is not affiliated in any way with the Partnership or the
General Partner, or any of the General Partner's principals or
affiliates.
The Purchaser currently does not own or operate real property outside
of Southern California. Therefore, it is seeking to negotiate a
property management agreement with Birtcher to manage the properties
after the closing.
There can be no assurance that the proposed sale of the properties will
be completed.
Regular distributions through June 30, 1998 represent cash flow
generated from operations of the Partnership's properties and interest
earned on the temporary investment of working capital net of capital
improvement reserve requirements. In December 1996, the Partnership
made a special distribution of $720,000 representing 100% of the net
proceeds from the sale of Atrium Place. Future cash distributions will
be made principally to the extent of cash flow attributable to
operations and sales of the Partnership's properties and interest
earned on the investment of capital reserve, after providing for
capital reserve and payment for capital improvements to the
Partnership's properties.
Results of Operations for the Three Months Ended June 30, 1998
Because the Partnership adopted the liquidation basis of accounting on
March 31, 1997, a comparison of the results of operations is not
practical. 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 Statements of Changes of Net Assets in
Liquidation since March 31, 1997 (the date of adoption of the
liquidation basis of accounting).
For the three months ended June 30, 1998, the Partnership generated
$879,000 of net operating income from operation of its properties
(exclusive of Cooper Village Partners). The increase in net operating
income for the three months ended June 30, 1998, as compared to the
same period in 1997, was primarily the result of an increase in rental
revenue at Creekridge ($53,000) due to a higher overall occupancy in
1998. In addition, operating expense recoveries were higher at Kennedy
($54,000) and Lakeland ($12,000) as compared to 1997.
Interest income resulted from the temporary investment of Partnership
working capital. For the three months ended June 30, 1998, interest
income was approximately $18,000.
General and administrative expenses for the three months ended June 30,
1998 include charges of $106,000 from the General Partner and its
affiliates for services rendered in connection with administering the
12
<PAGE> 13
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Cont'd.)
Results of Operations for the Three Months Ended June 30, 1998
(Cont'd.)
affairs of the Partnership and operating the Partnership's properties.
Also included in general and administrative expenses for the three
months ended June 30, 1998 are direct charges of $108,000 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 decrease in general and administrative expenses for the three
months ended June 30, 1998, as compared to the corresponding period in
1997, was primarily attributable to the decrease in legal, professional
services and mailing costs associated with the Partnership's
solicitation of the Limited Partners consent for the liquidation of the
Partnership in 1997.
Accrued expenses for liquidation, as reflected in the Statements of Net
Assets in Liquidation since March 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 June 30, 1998, 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
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
So far as is known to the General Partner, neither the Partnership nor
its properties are subject to any material pending legal proceedings.
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
27 - Financial Data Schedule
b) Reports on Form 8-K:
None filed in quarter ended June 30, 1998.
14
<PAGE> 15
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAMSON/BIRTCHER REALTY INCOME FUND-II
<TABLE>
<S> <C> <C> <C>
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: August 10, 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: August 10, 1998 By: /s/ Brent R. Donaldson
-------------------------------------
Brent R. Donaldson
President
Liquidity Fund Asset Management, Inc.
</TABLE>
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENT OF
NET ASSETS IN LIQUIDATION OF DAMSON BIRTCHER REALTY INCOME FUND II AND IS
QUALIFIED IN INTSENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,402,000
<SECURITIES> 0
<RECEIVABLES> 88,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,496,000
<PP&E> 23,200,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,384,000
<CURRENT-LIABILITIES> 890,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 27,494,000
<TOTAL-LIABILITY-AND-EQUITY> 28,384,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0<F1>
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0<F1>
<INCOME-TAX> 0<F1>
<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>
