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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2000
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Commission file number 0-14633
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 13-3294820
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27611 La Paz Road, P.O. Box 30009, Laguna Niguel, California 92607-0009
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(Address of principal executive offices) (Zip Code)
(949) 643-7700
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 12(g), 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Net Assets in Liquidation - September 30, 2000
(Unaudited) and December 31, 1999 (Audited)....................... 3
Statements of Changes of Net Assets in Liquidation -
Three and Nine Months ended September 30, 2000 and 1999
(Unaudited)....................................................... 4
Notes to Financial Statements (Unaudited)......................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 12
Item 3. Quantitative and Qualitative Market Risk Disclosures.............. 18
PART II. OTHER INFORMATION................................................. 19
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
STATEMENTS OF NET ASSETS IN LIQUIDATION
September 30, December 31,
2000 1999
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(unaudited)
ASSETS (Liquidation Basis):
Properties $ -- $ 7,689,000
Cash and cash equivalents 2,186,000 6,418,000
Cash held in escrow 38,000 553,000
Receivables, net 10,000 14,000
Notes receivable 7,455,000 --
Other assets 28,000 29,000
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Total Assets 9,718,000 14,703,000
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LIABILITIES (Liquidation Basis):
Accounts payable and accrued liabilities 101,000 210,000
Deferred lease liability 70,000 --
Accrued expenses for liquidation 214,000 310,000
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Total Liabilities 385,000 520,000
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Net Assets in Liquidation $9,332,000 $14,183,000
========== ===========
The accompanying notes are an integral part of these financial statements.
3
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
STATEMENTS OF CHANGES OF NET ASSETS IN LIQUIDATION
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
2000 1999 2000 1999
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net assets in liquidation
at beginning of period $ 9,205,000 $ 28,129,000 $ 14,183,000 $ 27,752,000
Increase (decrease) during period:
Operating activities:
Property operating income, net -- 753,000 133,000 2,225,000
Equity in earnings of Cooper
Village Partners -- 65,000 -- 263,000
Interest income 170,000 33,000 600,000 65,000
Miscellaneous income -- -- 87,000 --
Leasing commissions -- (95,000) -- (197,000)
General and administrative expenses -- (176,000) -- (496,000)
----------- ------------ ------------ ------------
170,000 580,000 820,000 1,860,000
----------- ------------ ------------ ------------
Liquidating activities:
Gain (loss) on sale of real estate 17,000 (339,000) 184,000 (339,000)
Gain from sale of Partnership's Interest
in Cooper Village Shopping Center -- 263,000 -- 263,000
Liquidation expenses (60,000) -- (104,000) --
Distributions to partners -- (606,000) (5,751,000) (1,509,000)
----------- ------------ ------------ ------------
(43,000) (682,000) (5,671,000) (1,585,000)
----------- ------------ ------------ ------------
Net increase (decrease) in assets
in liquidation 127,000 (102,000) (4,851,000) 275,000
----------- ------------ ------------ ------------
Net assets in liquidation at
end of period $ 9,332,000 $ 28,027,000 $ 9,332,000 $ 28,027,000
=========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
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, 1999.
Sale of the Properties
The Partnership sold five of its six remaining properties during the year
ended December 31, 1999 and on February 9, 2000, sold its last remaining
property, Iomega Business Park (see Note 5).
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.
Segment Reporting
The Partnership adopted Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). 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
5
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
(1) Accounting Policies (Cont'd.)
Segment Reporting (Cont'd.)
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. Given that the Partnership is in the process of
liquidation, the Partnership has identified only one operating business
segment which is the business of asset liquidation. The adoption of SFAS
131 did not have an impact on the Partnership's financial reporting.
Rental income from Iomega Corporation totaled $0 and $337,000 for the three
months ended September 30, 2000 and 1999, respectively, or approximately 0%
and 29%, respectively, of the Partnership's total rental income. For the
nine months there ended, rental income from Iomega Corporation totaled
$102,000 and $977,000 or 100% and 30% of the Partnership's total rental
income.
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 September 30, 2000 and 1999 the
Partnership incurred approximately $6,000 and $21,000, respectively, of
such expenses. For the nine months there ended, such expenses amounted to
$16,000 and $90,000, respectively.
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 $0 and $43,000,
respectively, for the three months ended September 30, 2000 and 1999 and
$7,000 and $122,000 for the nine months there ended. In addition, an
affiliate of the General Partner received $7,000 and
6
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
(2) Transactions with Affiliates (Cont'd.)
$26,000 for the three months ended September 30, 2000 and 1999,
respectively, as reimbursement of costs of on-site property management
personnel and other reimbursable expenses. These payments amounted to
$8,000 and $88,000 for the nine months there ended.
Leasing fees for the three months ended September 30, 2000 and 1999,
included charges of $0 and $7,000, respectively, from the General Partner
and its affiliates for leasing services rendered in connection with leasing
space in a Partnership property after expiration or termination of leases.
For the nine months there ended, such fees were $2,000 and $65,000,
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 .35% for
2000 and .45% for 1999 of the aggregate appraised value of the
Partnership's properties. Appraised value was determined by the General
Partner's estimate of fair value. Such fees for the three months ended
September 30, 2000 and 1999, amounted to $0 and $28,000, and for the nine
months there ended, they amounted to $4,000 and $87,000, respectively.
Since the Partnership has sold all of its properties, the Partnership no
longer pays an asset management fee.
The amended Partnership Agreement provides for the Partnership's payment to
the General Partner of a property disposition fee if and to the extent that
the sale price of the property in question, net of any brokerage
commissions (but not other costs of sale), exceeds the appraised value of
the property as of January 1993. For the nine months ended September 30,
1999, a fee of $207,500 was earned and paid on the sale of Creekridge
Business Center.
In addition to the aforementioned, the General Partner was also paid $0 and
$20,000, related to the Partnership's portion (58%) of asset management
fees, property management fees, leasing fees, reimbursement of on-site
property management personnel and other reimbursable expenses for Cooper
Village Partners for the three months ended September 30, 2000 and 1999,
respectively. For the nine months there ended, these payments amounted to
$0 and $59,000, respectively. Cooper Village Shopping Center was sold in
September 1999.
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
(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, except
for the following:
Bigelow Diversified Secondary Partnership Fund 1990 litigation
On March 25, 1997, a limited partner named Bigelow/Diversified Secondary
Partnership Fund 1990 L.P. 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.
In September 1998, Bigelow/Diversified Secondary Partnership 1990 informed
the Partnership that it was filing suit in the Delaware Chancery Court
against Damson/Birtcher Partners, Birtcher Investors, Birtcher Liquidity
Properties, Birtcher Investments, BREICORP, LF Special Fund I, LP, LF
Special Fund II. LP, Arthur Birtcher, Ronald Birtcher, Robert Anderson,
Richard G. Wollack and Brent R. Donaldson alleging a purported class action
on behalf of the limited partners of Damson/Birtcher Realty Income Fund-I,
Damson/Birtcher Realty Income Fund-II and Real Estate Income Partners III
alleging breach of fiduciary duty and incorporating the allegations set
forth in the previously dismissed March 25, 1997 complaint filed in the
Court of Chancery of Philadelphia County. Plaintiff has engaged in
preliminary discovery and the parties have held settlement discussions.
In March 2000, defendants informed the Court and plaintiff that they would
bring a Motion for Summary Judgment against the named plaintiff based upon
the allegations set forth in plaintiff's complaint. On April 14, 2000,
Bigelow/Diversified Secondary Partnership Fund 1990 filed a First Amended
Class Action and Derivative Complaint against Damson/Birtcher Partners,
Birtcher Investors, Birtcher/Liquidity Properties, Birtcher Partners,
Birtcher Properties, Birtcher Ltd., Birtcher Investments, BREICORP, L.F.
Special Fund II, L.P., L.F.
8
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
(3) Commitments and Contingencies (Cont'd.)
Litigation (Cont'd.)
Bigelow Diversified Secondary Partnership Fund 1990 litigation (Cont'd.)
Special Fund I, L.P., Liquidity Fund Asset Management, Inc., Arthur
Birtcher, Ronald Birtcher, Robert Anderson, Richard G. Wollack and Brent R.
Donaldson, the Partnership, Damson/Birtcher Realty Income Fund-I and Real
Estate Income Partners III, alleging breach of fiduciary duty, breach of
contract, and a derivative claim for breach of fiduciary duty. Defendants
have answered the First Amended Complaint.
Madison Partnership and ISA Partnership Litigation
On April 2, 1999, Madison Partnership Liquidity Investors XVI, LLC and ISA
Partnership Liquidity Investors filed a purported class and derivative
action in the California Superior Court in Orange County, California
against Damson Birtcher Partners, Birtcher/Liquidity Properties, Birtcher
Partners, Birtcher Investors, Birtcher Investments, Birtcher Limited,
Breicorp LP Special Fund II, L.P., Liquidity Fund Asset Management, Inc.,
Robert M. Anderson, Brent R. Donaldson, Arthur B. Birtcher, Ronald E.
Birtcher, and Richard G. Wollack, Defendants, and Damson/Birtcher Realty
Income Fund-I, Damson/Birtcher Realty Income Fund-II, and Real Estate
Income Partners III, Nominal Defendants. The complaint asserts claims for
breach of fiduciary duty and breach of contract. The gravamen of the
complaint is that the General Partners of these limited partnerships have
not undertaken all reasonable efforts to expedite liquidation of the
Partnerships' properties and to maximize the returns to the Partnerships'
limited partners. The complaint seeks unspecified monetary damages,
attorneys' fees and litigation expenses, and an order for dissolution of
the partnerships and appointment of an independent liquidating trustee. The
Partnership moved to stay or dismiss the case on the grounds that the
pending Bigelow class action, discussed above, raises essentially the same
claims. The court granted the Partnership's motion and ordered a stay of
the litigation pending re-evaluation at a May 23, 2000 status conference.
The court lifted the stay on May 23, 2000. Plaintiffs have initiated
document discovery. Plaintiffs have moved to certify the class and the
parties are engaged in discovery regarding class certification. The motion
to certify the class is currently scheduled to be heard on December 14,
2000.
(4) Accrued Expenses for Liquidation
Accrued expenses for liquidation as of September 30, 2000, include
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. During the three
months ended September 30, 2000, the Partnership incurred $34,000 of such
expenses. At September 30, 2000, the General Partner re-evaluated the
estimated costs to wind up and dissolve the Partnership given the
uncertainty involved with the ongoing litigation. The provision for
liquidation expenses was accordingly increased by $60,000 to reflect the
revised estimates. The increase was primarily the result of attorney fees
incurred to date in association with the litigation.
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
(4) Accrued Expenses for Liquidation (Cont'd.)
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. The accrued expenses for
liquidation do not take into consideration the possible outcome of the
ongoing litigation. Such costs are unknown and are not estimable at this
time.
(5) Gain on Sale of Real Estate
On February 9, 2000, the Partnership sold Iomega Business Center to ANA
Development, L.C. ("ANA"), for a purchase price of $8,085,000. ANA is a
local real estate developer that is not affiliated in any way with the
Partnership or the General Partner, or any of the General Partner's
principals or affiliates. ANA did not hire the General Partner or any
affiliate to perform asset management or property management services for
this property after close of the sale. The Partnership was represented by a
third-party broker, and ANA was represented by an ANA-affiliated broker in
this transaction. Collectively, these brokers were to be paid a commission
not to exceed $242,550.
ANA delivered approximately $400,000 cash to escrow (portions of which were
used in connection with closing costs and rent prorations), plus two
promissory notes in the face amount of $6,468,000 (the "First Note") and
$1,217,000 (the "Second Note"), respectively. The First Note bears 9%
interest, with monthly payments based upon a 20-year amortization schedule.
It was due on June 15, 2000 and is secured by a first deed of trust and
assignment of rents and leases on Iomega. The Second Note bears 12%
interest, with monthly payments of interest only. In addition, any "net
cash flow" generated by Iomega will be paid to the Partnership and applied
against principal and interest payable under the Second Note. The Second
Note was due on June 15, 2000 and is secured by a second deed of trust and
assignment of rents and leases on Iomega, plus first deeds of trust
encumbering two other parcels of real estate located in Salt Lake City,
Utah and Davis County, Utah, plus a pledge of the ANA-affiliated broker's
commission.
Shortly before closing, Iomega Corporation, which had leased the entire
property since the Partnership originally purchased it, disclosed that it
would not renew its lease on one of the buildings. To close the sale, the
Partnership agreed to lease back the building from ANA for a term ending
May 31, 2001. Iomega Corporation has not yet vacated the premises and has,
in fact, signed two sub-leases (at different rental rates) covering the
building it had announced it would vacate. The leases terminate May 31,
2003. So long as the Second Note is outstanding in full, the Partnership
has no rental obligation under the leaseback; if the Second Note is partly
paid off, the Partnership's rental obligation will commence
proportionately. Upon repayment in full of the Second Note, the Partnership
will place in escrow the total estimated rental payments for the balance of
the leaseback period. Thereafter, the Partnership will continue to receive
all rental payments paid by Iomega Corporation or any other subtenant. ANA
failed to pay off the First Note and Second Note on their original maturity
date, June 15, 2000. The Partnership extended the payment date to September
26, 2000 (or October 26, 2000 if ANA obtained a binding loan commitment
from an institutional lender) in exchange for personal guarantees of the
indebtedness by the three principals of ANA.
10
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
(5) Gain on Sale of Real Estate (Cont'd.)
On September 26, 2000, ANA failed to make the payment or obtain a binding
loan commitment from an institutional lender. After discussions with ANA,
the Partnership agreed to extend the payment period to November 3, 2000
with notification to ANA that the Partnership would foreclose if ANA failed
to make the payment at that time. On November 7, 2000, ANA received a
binding loan commitment from an institutional lender, subject to a real
estate appraisal and other contingencies, in the amount of $6,060,000. The
loan is expected to fund on or before December 15, 2000, at which time ANA
has agreed to pay off both the First Note and the Second Note in full.
At September 30, 2000, management's estimate of the Partnership's rental
obligation was $70,000 as reflected on the Statement of Net Assets in
Liquidation for the period. The actual rental obligation could vary
significantly from the management's estimate due to the uncertainty related
to the complexities which may arise in the collection of the Second Note.
The Partnership realized a gain on the sale of $184,000, in excess of its
carrying value, after deducting for closing costs, prorations and
management's estimate of the Partnership's rental obligation. As of June
30, 2000, management lowered its estimate of the Partnership's rental
obligation under the leaseback arrangement from $218,000 (at March 31,
2000) to $87,000 and as of September 30, 2000, it was lowered again to
$70,000. The June 2000 revision resulted from the General Partner
successfully sub-leasing through May 31, 2003, the building the Partnership
was responsible for under the leaseback arrangement with the buyer of the
property. The September 2000 revision resulted from ANA's failure to make
payment on the Second Note. In addition, a commission of $121,000 that was
previously payable to an affiliate of the buyer, upon payment in full of
the Second Note, was eliminated due to ANA's failure to pay off the Second
Note on its original maturity date of June 15, 2000.
(6) Subsequent Events
On October 19, 2000, Grape Investors, LLC ("Grape"), the holder of 6.0001%
of the limited partnership interests of the Partnership, settled its
portion of the purported class action lawsuits entitled
"Bigelow/Diversified Secondary Partnerships Fund 1990 Litigation" and
"Madison Partnership and ISA Partnership Litigation". In exchange for a
complete settlement and release from Grape, the Partnership paid Grape its
pro rata share of the proceeds available for distribution from the
liquidation of the Partnership's properties. Grape's final distribution was
$134,000, or approximately $42 per $1,000 of original investment, plus its
6.0001% interest in all amounts that are received in respect of principal
and interest payments on the Iomega Note. The General Partner also paid
$1.00 for all of Grape's interest in the Partnership.
11
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Since the completion of its acquisition program in December 1988, the
Partnership has been primarily 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, 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 1999 and five of its six remaining properties were sold
by year-end. The Partnership's remaining property was sold on February 9,
2000. (See Note 5 to the financial statements for further discussion).
In November 1998, the Partnership entered into a definitive Purchase and
Sale Agreement with Abbey Investments, Inc. to sell all the Partnership's
properties for a purchase price ranging between $32,250,000 and
$33,000,000, depending on final occupancy rates at the time of closing.
However, in January 1999, the agreement was terminated because Abbey had
requested a material reduction in the purchase price (approximately 11%),
which the Partnership did not agree to.
On April 30, 1999, the Partnership and Praedium Performance Fund IV
("Praedium") executed a Purchase and Sale Agreement to sell all of the
Partnership's properties except its interest in Cooper Village shopping
center to Praedium for $29,000,000. Praedium deposited $222,400 into
escrow, pending completion of its due diligence inspection and review.
Praedium's contingency period expired on June 14, 1999. During and after
the contingency period, Praedium, in a series of negotiations with the
Partnership, sought reductions in the purchase price of each of the
properties and declined to include Iomega and Ladera-II in its offers.
During this time, the General Partner negotiated with Praedium, and also
sought other purchasers for the properties, both individually and as a
group. Finally, in late July 1999, the Partnership declined Praedium's
offer to purchase only Creekridge Center, Kennedy Corporate Center-I and
Lakeland Industrial Park for a materially reduced purchase price and
terminated its dealings with Praedium.
Sale of the Properties
During the three month period ended September 30, 1999, the Partnership
sold five of its six properties (including its 58% interest in Cooper
Village Shopping Center) in three separate transactions, and on February 9,
2000, it sold its final property as set forth below:
12
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DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Liquidity and Capital Resources (Cont'd.)
Sale of the Properties (Cont'd.)
Cooper Village
On September 21, 1999, the Partnership sold its 58% interest in Cooper
Village Shopping Center (co-owned with an affiliated partnership), in Mesa,
Arizona to Old Vine Corporation ("Old Vine"), a local shopping center
operator that is not affiliated in any way with the Partnership, its
General Partner or any of its principals or affiliates. The sale price for
the Partnership's 58% interest was $3,581,500.
The buyer was represented by a third-party broker in the transaction. The
Partnership's allocation of the broker commission paid was $46,000 from the
sale proceeds. The General Partner was not paid any property disposition
fee in connection with the sale. Old Vine has hired an affiliate of
Birtcher to perform certain onsite property management services (not
accounting or asset management), pursuant to a contract that is cancelable
at any time upon 30 days notice.
The proceeds from the sale of Cooper Village Shopping Center were
distributed to the Partnership and its affiliated partnership during the
fourth quarter of 1999.
Ladera-II
On September 22, 1999, the Partnership sold Ladera-II Shopping Center, in
Albuquerque, New Mexico to CA New Mexico, LLC, a wholly-owned subsidiary of
CenterAmerica Trust ("CenterAmerica"), a Houston-based real estate
investment trust that is not affiliated in any way with the Partnership,
its General Partner or any of its principals or affiliates. The sale price
was $1,176,000.
CenterAmerica and the Partnership were each represented by third-party
brokers in the transaction. The brokers were paid an aggregate $49,657 from
the sale proceeds. The General Partner was not paid a disposition fee in
connection with the transaction. CenterAmerica did not hire the General
Partner or any affiliate to perform asset management or property management
services for this property.
The Rubin Pachulsky Dew Transaction
On September 23, 1999, the Partnership sold Creekridge Business Center, in
Bloomington, Minnesota, Kennedy Corporate Center, in Palatine, Illinois and
Lakeland Business Center, in Milwaukee, Wisconsin to Rubin Pachulsky Dew
Properties, LLC ("Rubin Pachulsky Dew") for $8,300,000, $2,600,000, and
$5,200,000, respectively, or an aggregate purchase price of $16,100,000.
Rubin Pachulsky Dew is a third-party real estate investment entity that is
not affiliated in any way with the Partnership, its General Partner or any
of its principals or affiliates.
The purchase price for the Creekridge Business Center was effectively
reduced by approximately $905,000 in a tenant improvement allowance. As
previously reported,
13
<PAGE> 14
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.)
Sale of the Properties (Cont'd.)
The Rubin Pachulsky Dew Transaction (Cont'd.)
the Partnership had entered into a lease for the 42,203 square foot space
at Creekridge Center that was vacated by Delta Dental. Pursuant to that
lease, the Partnership granted the tenant an allowance of up to
approximately $905,000 for tenant improvements, pending agreement regarding
the design for building out the space.
Rubin Pachulsky Dew was represented by a third-party broker in the
transaction. The broker was paid $161,000 from the sale proceeds. Since the
sale price of Creekridge Business Center exceeded the January 1, 1993
appraised value ($6,400,000), pursuant to the 1993 Amendment of the
Partnership Agreement, the General Partner earned and was paid a property
disposition fee of $207,500 in connection with the sale.
Rubin Pachulsky Dew has hired an affiliate of Birtcher as property manager
for the properties for a fee that is approximately the same as the fee the
Partnership previously paid to the General Partner for property management.
In addition, Rubin Pachulsky Dew has hired an affiliate of Birtcher to
provide certain asset management services for the properties, and will pay
an incentive fee approximately equal to 10% of the profits, if any, after
Rubin Pachulsky Dew has received a 15% return on its investment. The
incentive fee, if earned, is not payable until the last property is sold or
four years from date of purchase, whichever comes first. The property
management agreement is cancelable at any time upon 60 days notice, but the
incentive fee will survive termination of the contract.
A portion of the proceeds from the sale of the properties to Rubin
Pachulsky Dew continues to be held in escrow. A sum equal to two and
one-half percent of the purchase price was held back as a potential source
of payment for any claims that may arise related to a Partnership breach of
certain representations and warranties related to the sale (expiring on
September 23, 2000) and for any litigation costs that may arise (released
to the Partnership on March 23, 2000). The remaining cash held in escrow
relates to holdbacks for tax prorations.
Iomega Business Center
On February 9, 2000, the Partnership sold Iomega Business Center to ANA
Development, L.C. ("ANA"), for a purchase price of $8,085,000. ANA is a
local real estate developer that is not affiliated in any way with the
Partnership or the General Partner, or any of the General Partner's
principals or affiliates. ANA did not hire the General Partner or any
affiliate to perform asset management or property management services for
this property after close of the sale. The Partnership was represented by a
third-party broker, and ANA was represented by an ANA-affiliated broker in
this transaction. Collectively, these brokers were to be paid a commission
not to exceed $242,550.
14
<PAGE> 15
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.)
Sale of the Properties (Cont'd.)
Iomega Business Center (Cont'd.)
ANA delivered approximately $400,000 cash to escrow (portions of which were
used in connection with closing costs and rent prorations), plus two
promissory notes in the face amount of $6,468,000 (the "First Note") and
$1,217,000 (the "Second Note"), respectively. The First Note bears 9%
interest, with monthly payments based upon a 20-year amortization schedule.
It was due on June 15, 2000 and is secured by a first deed of trust and
assignment of rents and leases on Iomega. The Second Note bears 12%
interest, with monthly payments of interest only. In addition, any "net
cash flow" generated by Iomega will be paid to the Partnership and applied
against principal and interest payable under the Second Note. The Second
Note was due on June 15, 2000 and is secured by a second deed of trust and
assignment of rents and leases on Iomega, plus first deeds of trust
encumbering two other parcels of real estate located in Salt Lake City,
Utah and Davis County, Utah, plus a pledge of the ANA-affiliated broker's
commission.
Shortly before closing, Iomega Corporation, which had leased the entire
property since the Partnership originally purchased it, disclosed that it
would not renew its lease on one of the buildings. To close the sale, the
Partnership agreed to lease back the building from ANA for a term ending
May 31, 2001. Iomega Corporation has not yet vacated the premises and has,
in fact, signed two sub-leases (at different rental rates) covering the
building it had announced it would vacate. The leases terminate May 31,
2003. So long as the Second Note is outstanding in full, the Partnership
has no rental obligation under the leaseback; if the Second Note is partly
paid off, the Partnership's rental obligation will commence
proportionately. Upon repayment in full of the Second Note, the Partnership
will place in escrow the total estimated rental payments for the balance of
the leaseback period. Thereafter, the Partnership will continue to receive
all rental payments paid by Iomega Corporation or any other subtenant. ANA
failed to pay off the First Note and Second Note on their original maturity
date, June 15, 2000. The Partnership has extended the payment date to
September 26, 2000 (or October 26, 2000 if ANA has obtained a binding loan
commitment from an institutional lender) in exchange for personal
guarantees of the indebtedness by the three principals of ANA.
On September 26, 2000, ANA failed to make the payment or obtain a binding
loan commitment from an institutional lender. After discussions with ANA,
the Partnership agreed to extend the payment period to November 3, 2000
with notification to ANA that the Partnership would foreclose if ANA failed
to make the payment at that time. On November 7, 2000, ANA received a
binding loan commitment from an institutional lender, subject to a real
estate appraisal and other contingencies, in the amount of $6,060,000. The
loan is expected to fund on or before December 15, 2000, at which time ANA
has agreed to pay off both the First Note and the Second Note in full.
At September 30, 2000, management's estimate of the Partnership's rental
obligation was $70,000 as reflected on the Statement of Net Assets in
Liquidation for the period. The actual rental obligation could vary
significantly from the management's estimate due to the uncertainty related
to the complexities which may arise in the collection of the Second Note.
15
<PAGE> 16
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.)
Sale of the Properties (Cont'd.)
Iomega Business Center (Cont'd.)
The Partnership realized a gain on the sale of $184,000, in excess of its
carrying value, after deducting for closing costs, prorations and
management's estimate of the Partnership's rental obligation. As of June
30, 2000, management lowered its estimate of the Partnership's rental
obligation under the leaseback arrangement from $218,000 (at March 31,
2000) to $87,000 and as of September 30, 2000 it was lowered again to
$70,000. The June 2000 revision resulted from the General Partner
successfully sub-leasing through May 31, 2003, the building the Partnership
was responsible for under the leaseback arrangement with the buyer of the
property. The September 2000 revision resulted from ANA's failure to make
payment on the Second Note. In addition, a commission of $121,000 that was
previously payable to an affiliate of the buyer upon payment in full of the
Second Note, was eliminated due to ANA's failure to pay off the Second Note
on its original maturity date of June 15, 2000.
Other Matters
Regular distributions through the year ended December 31, 1999 represented
net cash flow from the operation of the Partnership's properties and
interest earned on the temporary investment of working capital, net of
capital reserve requirements. On December 8, 1999, the Partnership made a
special distribution of $14,001,000 representing a portion of the proceeds
from the sale of five of its six remaining properties. Another special
distribution of $5,751,000 was made on March 1, 2000. This last special
distribution arose out of discussions with the named plaintiffs and their
lawyers in the purported class action lawsuits. It represents the
culmination of further, private discussions with representatives of Grape
Investors, LLC ("Grape"), the holder of the largest investor position in
the Partnership (6.0001% of the limited partnership interests). Grape
Investors agreed that for a period of 24 months, it will not involve itself
in any way or support any effort to seek, or cause anyone else to seek, the
addition of new general partners, the appointment of a receiver, or the
removal of the General Partner. Grape Investors also agreed to either
abstain or vote against any such action or proposal.
On October 19, 2000, Grape settled its portion of the purported class
action lawsuits entitled "Bigelow/Diversified Secondary Partnerships Fund
1990 Litigation" and "Madison Partnership and ISA Partnership Litigation".
In exchange for a complete settlement and release from Grape, the
Partnership paid Grape its pro rata share of the proceeds available for
distribution from the liquidation of the Partnership's properties. Grape's
final distribution was $134,000, or approximately $42 per $1,000 of
original investment, plus its 6.0001% interest in all amounts that are
received in respect of principal and interest payments on the Iomega Note.
The General Partner also paid $1.00 for all of Grape's interest in the
Partnership.
16
<PAGE> 17
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.)
Other Matters (Cont'd.)
Two lawsuits remain pending against the Partnership and its General Partner
and certain of its affiliates that seek, among other things, unspecified
monetary damages. Since these cases are in the preliminary discovery phase,
there is unavoidable uncertainty regarding their ultimate resolution. The
Partnership Agreement mandates that the General Partner provide for all of
the Partnership's liabilities and obligations, including contingent
liabilities, before distributing liquidation proceeds to its partners.
Therefore, the amount and timing of any distribution of liquidation
proceeds will be determined by the General Partner in light of these and
other relevant considerations.
Year 2000
As of December 31, 1999, the Partnership's accounting systems and the
investor services system used to track the limited partners' interests,
distributions and tax information were tested and appeared to be free of
year 2000 bugs. The Partnership's remaining property was also reviewed
utilizing the Building Owners and Managers Association ("BOMA") industry
standards as a guideline for necessary corrections and those corrections
were successful. As of September 30, 2000, the Partnership did not
experience any significant issues or problems relating to year 2000. The
cost of the Partnership's accounting systems upgrade was borne by the
General Partner and was not reimbursed by the Partnership.
Results of Operations for the Three Months Ended September 30, 2000
Because the Partnership has been liquidating its assets, a
quarter-to-quarter comparison of the results of operations is not
practical. As the Partnership's assets (properties) were sold, the results
of operations have been generated from a smaller asset base, and are
therefore not comparable. The Partnership completed the sale of five of its
six remaining properties in three separate transactions during 1999 and
sold its last property in February 2000. The Partnership's operating
results have been reflected on the Statements of Changes of Net Assets in
Liquidation.
For the three months ended September 30, 2000, the Partnership generated no
net operating income/loss from the operation of property as all of its
properties have been sold. The decrease in net operating income for the
three months ended September 30, 2000 when compared to the same period in
1999 was primarily attributable to the sale of five of its six remaining
properties during September 1999 and the sale of Iomega Business Center on
February 9, 2000.
Interest income resulted from the temporary investment of Partnership
working capital and from the interest income earned on Notes Receivable.
For the three months ended September 30, 2000, interest income was
approximately $170,000. The increase in interest income was reflective of
the temporary investment of cash and cash equivalent balances that were
generated from the sale of the properties and from the interest income
earned on Notes Receivable.
17
<PAGE> 18
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Results of Operations for the Three Months Ended September 30, 2000
(Cont'd.)
Miscellaneous income for the nine months ended September 30, 2000, resulted
from a real estate tax refund that was generated by successful tax appeals
for the 1992, 1993 and 1994 tax years at Kennedy Corporate Center. Kennedy
Corporate Center was sold by the Partnership in September 1999.
The gain on sale of real estate for the nine months ended September 30,
2000, relates to the sale of Iomega Business Center on February 9, 2000. As
of June 30, 2000, management lowered its estimate of the Partnership's
rental obligation under the leaseback arrangement from $218,000 (at March
31, 2000) to $87,000 and as of September 30, 2000, it was lowered again to
$70,000. The June 2000 revision resulted from the General Partner
successfully sub-leasing through May 31, 2003, the building the Partnership
was responsible for under the leaseback arrangement with the buyer of the
property. The September 2000 revision resulted from ANA's failure to make
payment on the Second Note. In addition, a commission of $121,000 that was
previously payable to an affiliate of the buyer upon payment in full of the
Second Note, was eliminated due to ANA's failure to pay off the Second Note
on its original maturity date of June 15, 2000. See Note 5 to the Financial
Statements for further discussion.
Accrued expenses for liquidation as of September 30, 2000, include
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, and other
professional services. During the three months ended September 30, 2000,
the Partnership incurred $34,000 of such expenses. At September 30, 2000,
the General Partner re-evaluated the estimated costs to wind up and
dissolve the Partnership given the uncertainty involved with the ongoing
litigation. The provision for liquidation expenses was accordingly
increased by $60,000 to reflect the revised estimates. The increase was
primarily the result of attorney fees incurred to date in association with
the litigation. The allowance for accrued expenses for liquidation does
not, however, reflect any costs of the ongoing litigation due to the
uncertainty associated with those matters.
Liquidation expenses incurred for the three months ended September 30, 2000
include charges of $6,000 from the General Partner and its affiliates for
services rendered in connection with administering the affairs of the
Partnership. Also included in liquidation expenses incurred for the three
months ended September 30, 2000 are direct charges of $28,000 relating to
audit fees, tax preparation fees, legal and professional fees, costs
incurred in providing information to the Limited Partners and other
miscellaneous costs.
ITEM 3. QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES
As of September 30, 2000, the Partnership had cash equivalents of
$1,426,000 invested in interest-bearing certificates of deposit. These
investments are subject to interest rate risk due to changes in interest
rates upon maturity. Declines in interest rates over time would reduce
Partnership interest income.
18
<PAGE> 19
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
So far as is known to the General Partner, neither the Partnership nor its
properties are subject to any material pending legal proceedings, except
for the following:
Bigelow Diversified Secondary Partnership Fund 1990 litigation
On March 25, 1997, a limited partner named Bigelow/Diversified Secondary
Partnership Fund 1990 L.P. 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.
In September 1998, Bigelow/Diversified Secondary Partnership 1990 informed
the Partnership that it was filing suit in the Delaware Chancery Court
against Damson/Birtcher Partners, Birtcher Investors, Birtcher Liquidity
Properties, Birtcher Investments, BREICORP, LF Special Fund I, LP, LF
Special Fund II. LP, Arthur Birtcher, Ronald Birtcher, Robert Anderson,
Richard G. Wollack and Brent R. Donaldson alleging a purported class action
on behalf of the limited partners of Damson/Birtcher Realty Income Fund-I,
Damson/Birtcher Realty Income Fund-II and Real Estate Income Partners III
alleging breach of fiduciary duty and incorporating the allegations set
forth in the previously dismissed March 25, 1997 complaint filed in the
Court of Chancery of Philadelphia County. Plaintiff has engaged in
preliminary discovery and the parties have held settlement discussions.
In March 2000, defendants informed the Court and plaintiff that they would
bring a Motion for Summary Judgment against the named plaintiff based upon
the allegations set forth in plaintiff's complaint. On April 14, 2000,
Bigelow/Diversified Secondary Partnership Fund 1990 filed a First Amended
Class Action and Derivative Complaint against Damson/Birtcher Partners,
Birtcher
19
<PAGE> 20
DAMSON/BIRTCHER REALTY INCOME FUND-II, LIMITED PARTNERSHIP
ITEM 1. LEGAL PROCEEDINGS (Cont'd.)
Bigelow Diversified Secondary Partnership Fund 1990 litigation (Cont'd.)
Investors, Birtcher/Liquidity Properties, Birtcher Partners, Birtcher
Properties, Birtcher Ltd., Birtcher Investments, BREICORP, L.F. Special
Fund II, L.P., L.F. Special Fund I, L.P., Liquidity Fund Asset Management,
Inc., Arthur Birtcher, Ronald Birtcher, Robert Anderson, Richard G. Wollack
and Brent R. Donaldson, the Partnership, Damson/Birtcher Realty Income
Fund-I and Real Estate Income Partners III, alleging breach of fiduciary
duty, breach of contract, and a derivative claim for breach of fiduciary
duty. Defendants have answered the First Amended Complaint.
Madison Partnership and ISA Partnership Litigation
On April 2, 1999, Madison Partnership Liquidity Investors XVI, LLC and ISA
Partnership Liquidity Investors filed a purported class and derivative
action in the California Superior Court in Orange County, California
against Damson Birtcher Partners, Birtcher/Liquidity Properties, Birtcher
Partners, Birtcher Investors, Birtcher Investments, Birtcher Limited,
Breicorp LP Special Fund II, L.P., Liquidity Fund Asset Management, Inc.,
Robert M. Anderson, Brent R. Donaldson, Arthur B. Birtcher, Ronald E.
Birtcher, and Richard G. Wollack, Defendants, and Damson/Birtcher Realty
Income Fund-I, Damson/Birtcher Realty Income Fund-II, and Real Estate
Income Partners III, Nominal Defendants. The complaint asserts claims for
breach of fiduciary duty and breach of contract. The gravamen of the
complaint is that the General Partners of these limited partnerships have
not undertaken all reasonable efforts to expedite liquidation of the
Partnerships' properties and to maximize the returns to the Partnerships'
limited partners. The complaint seeks unspecified monetary damages,
attorneys' fees and litigation expenses, and an order for dissolution of
the partnerships and appointment of an independent liquidating trustee. The
Partnership moved to stay or dismiss the case on the grounds that the
pending Bigelow class action, discussed above, raises essentially the same
claims. The court granted the Partnership's motion and ordered a stay of
the litigation pending re-evaluation at a May 23, 2000 status conference.
The court lifted the stay on May 23, 2000. Plaintiffs have initiated
document discovery. Plaintiffs have moved to certify the class and the
parties are engaged in discovery regarding class certification. The motion
to certify the class is currently scheduled to be heard on December 14,
2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 - Financial Data Schedule
(b) Reports on Form 8-K:
None filed in the quarter ended September 30, 2000.
20
<PAGE> 21
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
By: BIRTCHER/LIQUIDITY By: BIRTCHER INVESTORS,
PROPERTIES a California limited partnership
(General Partner)
By: BIRTCHER INVESTMENTS,
a California general partnership,
General Partner of Birtcher Investors
By: BIRTCHER LIMITED,
a California limited partnership,
General Partner of Birtcher
Investments
By: BREICORP,
a California corporation,
formerly known as Birtcher
Real Estate Inc., General
Partner of Birtcher Limited
Date: November 14, 2000 By: /s/ Robert M. Anderson
---------------------------
Robert M. Anderson
Executive Director
BREICORP
By: LF Special Fund I, L.P.,
a California limited partnership
By: Liquidity Fund Asset Management, Inc.,
a California corporation, General
Partner of LF Special Fund I, L.P.
Date: November 14, 2000 By: /s/ Brent R. Donaldson
-----------------------------------
Brent R. Donaldson
President
Liquidity Fund Asset Management,
Inc.
21
<PAGE> 22
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
27 Financial Data Schedule
