SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
September 30, 1996 0-14188
I.R.E. PENSION INVESTORS, LTD.-II
(Exact name of Registrant as specified in its
Certificate of Limited Partnership)
Florida 59-2582239
(State of Organization) (I.R.S. Employer Identification Number)
1750 E. Sunrise Boulevard
Fort Lauderdale, Florida 33304_
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (954) 760-5200
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Operations
For the Nine and Three Month Periods ended September 30, 1995 and 1996
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1995 1996 1995 1996
---- ---- ---- ----
Revenues:
Rental income $ 370,431 377,580 125,857 125,860
Interest income 67,620 68,111 23,364 23,452
Other income 200 680 60 530
------- ------- ------- -------
Total revenues 438,251 446,371 149,281 149,842
------- ------- ------- -------
Costs and expenses:
Depreciation 309,451 309,451 103,150 103,150
Property operations:
Property management fees
to affiliate 3,704 3,776 1,258 1,259
Other 5,578 4,340 1,655 1,012
General and administrative:
To affiliates 25,329 24,613 7,777 8,393
Other 28,344 37,502 4,476 8,927
------- ------- ------- ------
Total costs and expenses 372,406 379,682 118,316 122,741
------- ------- ------- -------
Net income $ 65,845 66,689 30,965 27,101
======= ======= ======= =======
Net income per weighted
average limited partnership
unit outstanding $ 1.32 1.35 .62 .55
======= ======= ======= =======
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Balance Sheets
December 31, 1995 and September 30, 1996
(Unaudited)
Assets
December 31, September 30,
1995 1996
---- ----
Cash and cash equivalents $ 470,925 323,417
Securities available for sale 1,350,087 1,650,615
Investments in real estate:
Office building 5,782,761 5,782,761
Warehouse building 2,247,267 2,247,267
----------- -----------
8,030,028 8,030,028
Less accumulated depreciation (3,624,114) (3,933,565)
----------- -----------
4,405,914 4,096,463
Other assets, net 3,077 100
---------- ----------
$ 6,230,003 6,070,595
========== ==========
Liabilities and Partners' Capital
Accrued expenses 45,366 119,949
Accounts payable 27,160 23,934
Other liabilities 223,988 177,562
Due to affiliates 1,387 2,690
---------- ----------
Total liabilities 297,901 324,135
Partners' capital:
49,041 limited partnership units issued
and outstanding for 1996 and 49,312
units for 1995 5,932,102 5,746,460
---------- ----------
$ 6,230,003 6,070,595
========== ==========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statement of Partners' Capital
For the Nine Months Ended September 30, 1996
(Unaudited)
Limited General
Partners Partners Total
-------- -------- -----
Balance at December 31, 1995 $ 5,934,192 (2,090) 5,932,102
Limited partner distributions (184,581) - (184,581)
Rescission of limited partner
units (67,750) - (67,750)
Net income 66,022 667 66,689
--------- ------- ---------
Balance at September 30, 1996 $ 5,747,883 (1,423) 5,746,460
========= ======= =========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1995 and 1996
(Unaudited)
1995 1996
-------- ------
Operating Activities:
Net income $ 65,845 66,689
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 309,451 309,451
Non-cash portion of rental income (25,371) (25,371)
Changes in operating assets and liabilities:
Increase (decrease) in accrued expenses,
accounts payable, other liabilities,
and due to affiliates 10,225 (16,145)
Decrease (increase) in other assets, net (784) 2,977
--------- ---------
Net cash provided by operating activities 359,366 337,601
--------- ---------
Investing Activities:
Decrease in securities available for sale 1,274,253 4,569,609
(Increase) in securities available for sale (1,330,274) (4,870,137)
--------- ---------
Net cash (used) in investing activities (56,021) (300,528)
--------- ---------
Financing Activities:
Limited partner distributions (184,920) (184,581)
--------- ---------
Net cash (used) in financing activities (184,920) (184,581)
--------- ---------
Increase (decrease) in cash and cash equivalents 118,425 (147,508)
Cash and cash equivalents at beginning of year 267,806 470,925
--------- ---------
Cash and cash equivalents at end of quarter $ 386,231 323,417
========= =========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Notes to Unaudited Financial Statements
September 30, 1996
Note 1 - General
The accompanying financial statements have been prepared by the Partnership in
accordance with the accounting policies described in its 1995 Annual Report and
should be read in conjunction with the notes to financial statements which
appear in that report.
Note 2 - Litigation
In connection with certain litigation relating to an action filed by an
individual investor against two individual defendants, who allegedly sold
securities without being registered as securities brokers, two corporations
organized and controlled by such individuals, and against approximately sixteen
publicly offered limited partnerships, including the Partnership, (See Item 3.
"Litigation", Kugler, et.al. v. Gordon, Boula, et.al. in the Partnership's 1995
Annual Report) in April 1996, the Court entered summary judgment against the
Partnership. As a result of the summary judgment, on October 22, 1996, funds
were placed in escrow to rescind sales of 271 Partnership units. Approximately
$113,000 was placed in escrow representing $67,750 for the rescission of units
and $45,250 for interest through October 22, 1996, as computed by Plaintiffs'
counsel, but not including attorney's fees to plaintiffs' counsel. The
accompanying financial statements reflect a liability of approximately $120,000
relating to the rescission of units. As of June 30, 1996, approximately $47,000
of accrued expense was previously established and approximately $5,000 was
charged to general and administrative, other for the three month period ended
September 30, 1996. During the quarter ended September 30, 1996, partners'
capital, units outstanding, per unit information, including income per unit
amounts, were adjusted for the rescission of units.
Note 3 - Other Liabilities
Other liabilities consist principally of deferred rental income on the Galleria
Professional Building lease and relates to non-level payments being recognized
ratably over the term of the lease in accordance with generally accepted
accounting principles (GAAP) instead of as received under the terms of the
lease.
Note 4 - Compensation to General Partners and Affiliates
During the nine and three month periods ended September 30, 1995 and 1996
compensation to general partners and affiliates were as follows:
Nine Months Ended Three Months Ended
September 30 September 30,
------------ -------------
1995 1996 1995 1996
---- ---- ---- ----
Reimbursement for
administrative and
accounting services $ 25,329 24,613 7,777 8,393
Property management fees 3,704 3,776 1,258 1,259
------- ------- ------ ------
Total $ 29,033 28,389 9,035 9,652
======= ======= ===== =====
Note 5 - Securities Available for Sale
The Partnership's securities are available for sale and are carried at fair
value, with any related unrealized appreciation and or depreciation reported as
a separate component of partners capital. At December 31, 1995, the Partnership
owned one treasury bill that matured in February 1996 in which cost approximated
fair value. At September 30, 1996, the Partnership owned one treasury bill that
matures in November 1996 in which cost approximates fair value.
Note 6 - Management Representation
In the opinion of Partnership Management, all adjustments, none of which were
other than normal recurring accruals, necessary for a fair presentation of the
accompanying financial information have been included.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
September 30, 1996
A description of the Partnership's investment properties follows:
* Federal Express Distribution Center ("Federal Express") - A 38,000 square
foot warehouse building located in Jacksonville, Florida.
* Galleria Professional Building ("Galleria") - A 61,000 square foot office
building located in Fort Lauderdale, Florida.
Galleria and Federal Express are net leased to their tenants.
Rental income increased approximately $7,000 for the nine month periods ended
September 30, 1996 as compared to the 1995 period as a result of a scheduled
rental increase at Federal Express, effective July 1995.
Other general and administrative expenses increased approximately $9,000 for the
nine month period ended September 30, 1996 primarily due to an increase in an
expense accrual and legal fees associated with the litigation discussed in note
2 and legal fees for the preparation of draft sale contract and review of lease
of Federal Express. The increase of approximately $4,000 in other general and
administrative expenses for the three month period ended September 30, 1996 as
compared to the same period in 1995 was primarily due to an increase in an
expense accrual associated with litigation discussed in note 2.
The lease on Federal Express expires on June 30, 1997. Management has approached
Federal Express to discuss renewal, however, Federal Express has deferred such
discussion until later in 1996 or early 1997.
At September 30, 1996, the Partnership had cash and cash equivalents amounting
to approximately $323,000 and Treasury Bills of approximately $1.7 million
included in securities available for sale. Management is of the opinion that the
Partnership's present liquidity, based on its current activities is adequate to
meet anticipated, normal operating requirements during the near term.
In addition to the items discussed above, the Partnership's long term prospects
will be primarily effected by future net income at Galleria and renewal of the
Federal Express lease. Additionally, in October 1996, approximately $113,000 was
placed in escrow to rescind sale of 271 Partnership units in connection with the
litigation discussed in note 2. Due to the uncertainties involving the real
estate market and the renewal status of the Federal Express lease renewal,
management cannot reasonably determine the Partnership's long term liquidity
position.
Except for historical information contained herein, the matters discussed in
this report are forward-looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, including but not limited
to, economic, competitive and other factors affecting the Company's operations,
markets, products and services, expansion strategies and other factors discussed
elsewhere in this report and the documents filed by the Company with the
Securities and Exchange Commission. Many of these factors are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained in this report
will, in fact, occur.
<PAGE>
I.R.E. Pension Investors, Ltd. -II
(A Florida Limited Partnership)
Part II - Other Information
September 30, 1996
Item 1 - Legal Proceedings
Kugler, et.al., on behalf of themselves and all others similarly situated, v.
Gordon, Boula, Financial Concepts, Ltd., et.al. In the Circuit Court of Cook
County, Illinois. In connection with certain litigation relating to an action
filed by an individual investor against two individual defendants, who allegedly
sold securities without being registered as securities brokers, two corporations
organized and controlled by such individuals, and against approximately sixteen
publicly offered limited partnerships, including the Partnership, (See Item 3.
"Litigation", Kugler, et.al. v. Gordon, Boula, et.al. in the Partnership's 1995
Annual Report) in April 1996, the Court entered summary judgment against the
Partnership. As a result of the summary judgment, on October 22, 1996, funds
were placed in escrow to rescind sales of 271 Partnership units. Approximately
$113,000 was placed in escrow representing $67,750 for the rescission of units
and $45,250 for interest through October 22, 1996, as computed by Plaintiffs'
counsel, but not including attorney's fees to plaintiffs' counsel. The
accompanying financial statements reflect a liability of approximately $120,000
relating to the rescission of units. As of June 30, 1996, approximately $47,000
of accrued expense was previously established and approximately $5,000 was
charged to general and administrative, other for the three month period ended
September 30, 1996. During the quarter ended September 30, 1996, partners'
capital, units outstanding, per unit information, including income per unit
amounts, were adjusted for the rescission of units.
Item 2 through 5
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibit 27 - Financial data schedule
b. No report on Form 8-K was filed during the quarter ended September 30,
1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
I.R.E. PENSION INVESTORS, LTD.-II
Registrant
By: I.R.E. Pension Advisors II, Corp.
Managing General Partner of Registrant
Date: November 8, 1996 By: /s/ Glen R. Gilbert
Glen R. Gilbert, Senior Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the third
quarter Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000775440
<NAME> I.R.E. Pension Investors, Ltd. - II
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 323,417
<SECURITIES> 1,650,615
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,030,028
<DEPRECIATION> 3,933,565
<TOTAL-ASSETS> 6,070,595
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,746,460
<TOTAL-LIABILITY-AND-EQUITY> 6,070,595
<SALES> 0
<TOTAL-REVENUES> 446,371
<CGS> 0
<TOTAL-COSTS> 379,682
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 66,689
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,689
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.35
</TABLE>
