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 the Quarter Ended Commission File Number
March 31, 1996 0-14188
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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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
$250 Per Unit - Minimum Purchase 20 Units/
8 Units for Individual Retirement Accounts,
Keogh Plans and Corporate Pension Plans
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
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<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Operations
Three Month Periods ended March 31, 1995 and 1996
(Unaudited)
Three Months Ended
March 31,
------------------
1995 1996
---- ----
Revenues:
Rental income $ 122,287 125,860
Interest income 21,888 22,378
Other income 80 60
------- -------
Total revenues 144,255 148,298
------- -------
Costs and expenses:
Depreciation 103,150 103,150
Property operations:
Property management fees
to affiliate 1,223 1,259
Other 1,964 1,655
General and administrative:
To affiliates 8,722 8,669
Other 15,557 15,131
------- -------
Total costs and expenses 130,616 129,864
------- -------
Net income $ 13,639 18,434
======= =======
Net income per weighted
average limited partnership
unit outstanding $ .27 .37
======= =======
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 March 31, 1996
(Unaudited)
Assets
December 31, March 31,
1995 1996
---- ----
Cash and cash equivalents $ 470,925 264,798
Securities available for sale 1,350,087 1,609,427
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) (3,727,264)
----------- -----------
4,405,914 4,302,764
Other assets, net 3,077 1,689
---------- ----------
$ 6,230,003 6,178,678
========== ==========
Liabilities and Partners' Capital
Accrued expenses 45,366 45,920
Accounts payable 27,160 26,328
Other liabilities 223,988 215,531
Due to affiliates 1,387 2,003
---------- ----------
Total liabilities 297,901 289,782
Partners' capital:
49,312 limited partnership units issued
and outstanding 5,932,102 5,888,896
---------- ----------
$ 6,230,003 6,178,678
========== ==========
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 Three Months Ended March 31, 1996
(Unaudited)
Limited General
Partners Partners Total
-------- -------- -----
Balance at December 31, 1995 $ 5,934,192 (2,090) 5,932,102
Limited partner distributions (61,640) - (61,640)
Net income 18,250 184 18,434
--------- ------- ---------
Balance at March 31, 1996 $ 5,890,802 (1,906) 5,888,896
========= ======== =========
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 Three Months Periods ended March 31, 1995 and 1996
(Unaudited)
1995 1996
-------- ------
Operating Activities:
Net income $ 13,639 18,434
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 103,150 103,150
Non-cash portion of rental income (8,457) (8,457)
Changes in operating assets and liabilities:
Increase in accrued expenses,
accounts payable, other liabilities,
and due to affiliates 32,680 338
Decrease in other assets, net 1,702 1,388
--------- ----------
Net cash provided by operating activities 142,714 114,853
--------- ----------
Investing Activities:
Decrease in securities available for sale - 1,350,087
(Increase) in securities available for sale (18,515) (1,609,427)
--------- ----------
Net cash (used) in investing activities (18,515) (259,340)
--------- ----------
Financing Activities:
Limited partner distributions (61,640) (61,640)
-------- ---------
Net cash (used) in financing activities (61,640) (61,640)
-------- ---------
Increase (decrease) in cash and cash equivalents 62,559 (206,127)
Cash and cash equivalents at beginning of year 267,806 470,925
-------- ----------
Cash and cash equivalents at end of quarter $ 330,365 264,798
======== ==========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Notes to Unaudited Financial Statements
March 31, 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
- -------------------
During May 1988, an individual investor filed an action 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
Registrant, interests in which were sold by the individual and corporate
defendants.
Plaintiff alleged that the sale of limited partnership interests in the
Partnership (among other affiliated and unaffiliated partnerships) by persons
and corporations not registered as securities brokers under the Illinois
Securities Act constitutes a violation of such Act, and that the Plaintiff, and
all others who purchased securities through the individual or corporate
defendants, should be permitted to rescind their purchases and recover their
principal plus 10% interest per year, less any amounts received. The
Partnership's securities were properly registered in Illinois and the basis of
the action relates solely to the alleged failure of the Broker Dealer to be
properly registered.
In November 1988, Plaintiff's class action claims were dismissed by the Court.
Amended complaints, including additional named plaintiffs, were filed subsequent
to the dismissal of the class action claims. Motions to dismiss were filed on
behalf of the Partnership and the other co-defendants. In December 1989, the
Court ordered that the Partnership and the other co-defendants rescind sales of
any plaintiff that brought suit within three years of the date of sale. In
accordance with the Court's order, in April 1990, funds were placed in escrow to
rescind sales of 179 Partnership units. Approximately $52,000 was placed in
escrow representing $34,700 for the recision of units and $17,300 for interest
thereon. The financial statements reflected the recision of units as a reduction
of partners' capital and included the interest portion as a charge to general
and administrative, other in 1990.
Plaintiffs appealed, among other items, the Court's order with respect to
plaintiffs that brought suit after three years of the date of sale. In February
1993, the Appellate court ruled that the statute of limitations was tolled
during the pendency of the class action claims. Therefore, those investors that
purchased partnership interests after November 28, 1995 may be entitled to
rescission. In September 1995, plaintiffs filed a motion for leave to file
consolidated class action amendments and a new motion for class certification.
In October 1995, an answer was filed admitting certain allegations but denying
that plaintiffs had demonstrated entitlement to recovery under the Illinois
Securities Act. In December 1995, plaintiffs filed a motion for summary judgment
arguing that the Court already has ruled against defendants on the only
outstanding issue, whether class members gave the required notice within six
months of the time they learned of their rights. A hearing for summary judgment
was held in March 1996 and in April 1996, the court entered summary judgement
against the Partnership.
Plaintiffs filing for summary judgment includes class members with original
investments of $67,750 and total claims relating to those investments of
approximately $110,000 plus attorney's fees. A provision of $46,000 has been
made in the accompanying financial statements for interest on amounts that would
be due upon rescission, however, the financial statements do not reflect a
rescission of the units. Accordingly partners' capital, units outstanding, per
unit information, including income (loss) per unit amounts, have not been
adjusted for the potential 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 three month periods ended March 31, 1995 and 1996 compensation to
general partners and affiliates were as follows:
Three Months Ended
March 31,
------------------
1995 1996
---- ----
Reimbursement for
administrative and
accounting services $ 8,722 8,669
Property management fees 1,223 1,259
------- -------
Total $ 9,945 9,928
====== =======
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 March 31, 1996, the Partnership owned one treasury bill that
matures in May 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
March 31, 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 $4,000 for the three month period ended
March 31, 1996 as compared to the 1995 period as a result of a scheduled rental
increase at Federal Express, effective July 1995.
At March 31, 1996, the Partnership had cash and cash equivalents amounting to
approximately $265,000 and approximately $1.6 million in Treasury Bills 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, the Partnership might have to pay out
approximately $110,000 plus attorney's fees in connection with the the
litigation discussed in note 2. Due to the uncertain economic climate in general
and the real estate market in particular, management cannot reasonably determine
the Partnership's long term liquidity position.
<PAGE>
I.R.E. Pension Investors, Ltd. -II
(A Florida Limited Partnership)
Part II - Other Information
March 31, 1996
Item 1 through 5
- ----------------
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Index to exhibits
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession - Not applicable.
(4) Instruments defining the rights of security holders, including
indentures - Not applicable.
(10) Material contracts - Not applicable.
(11) Statement re computation of per unit earnings - Not applicable.
(15) Letter re unaudited interim financial information - Not
applicable.
(18) Letter re change in accounting principles - Not applicable.
(19) Report furnished to security holders - Not applicable.
(22) Published report regarding matters submitted to vote of security
holders - Not applicable.
(23) Consents of experts and counsel - Not applicable.
(24) Power of attorney - Not applicable.
(27) Financial data schedule - Included as Exhibit 27.
(99) Additional exhibits - Not applicable.
b. Reports on Form 8-K
None.
<PAGE>
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: May 14, 1996 By: /s/ Glen R. Gilbert
--------------------
Glen R. Gilbert, Senior Vice President
and Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<NAME> I.R.E. PENSION INVESTORS, LTD. - II
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
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<SECURITIES> 1,609,427
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<PP&E> 8,030,028
<DEPRECIATION> 3,727,264
<TOTAL-ASSETS> 6,178,678
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0
0
<COMMON> 0
<OTHER-SE> 5,888,896
<TOTAL-LIABILITY-AND-EQUITY> 6,178,678
<SALES> 0
<TOTAL-REVENUES> 148,298
<CGS> 0
<TOTAL-COSTS> 129,864
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 18,434
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<EPS-PRIMARY> 0.37
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</TABLE>
