SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File Number
December 31, 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 Office) (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
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
Documents Incorporated by Reference
Portions of the Prospectus of the Registrant, dated October 4, 1985, are
incorporated by reference into Part IV.
<PAGE>
PART I
ITEM 1. BUSINESS
I.R.E. PENSION INVESTORS, LTD.-II, a limited partnership organized under the
laws of the State of Florida as of September 30, 1985, is primarily engaged in
the business of operating and holding for investment, income producing real
properties. Registrant did not utilize borrowings in connection with the
purchase of its properties. The Partnership commenced a public offering of its
units of limited partnership interest in October 1985. The required escrow
relative to Registrant was reached and subscription funds were transferred to
Registrant on December 26, 1985 ("Inception"). The Registrant closed the
offering in October 1987, having raised $12,373,750 in capital and issued 49,491
units of limited partnership interest at $250 per unit. Galleria Professional
Building and a minority interest in One West Nine Mile Joint Venture were
acquired during 1986 and the Federal Express Distribution Center was acquired
during 1987. During December 1991, the One West Nine Mile Joint Venture was
sold. No properties were purchased or sold during 1996.
Uninvested cash of Registrant is deposited in demand accounts with commercial
banks and may be invested temporarily in U.S. Treasury Bills, certificates of
deposit or other interest bearing accounts or investments.
Alan B. Levan and I.R.E. Pension Advisors II, Corp. are the general partners of
Registrant. I.R.E. Pension Advisors II, Corp., as Managing General Partner,
manages and controls Registrant's affairs and has general responsibility and the
ultimate authority in all matters affecting Registrant's business.
Affiliates of the general partners of Registrant also own and operate their own
improved real estate and may have investment objectives and policies similar to
those of Registrant. Registrant may be in competition with other limited
partnerships served by affiliates of the Managing General Partner or by other
companies wherein the individual general partner is a controlling stockholder.
On December 31, 1996, Registrant had no employees. The balance of information
required in Item 1 is either inapplicable or not material to an understanding of
the Registrant's business.
ITEM 2. PROPERTIES
The properties listed below are not utilized by Registrant but are held for
investment. All are zoned for their current uses.
Galleria Professional Office Building 60,965 square owned
Fort Lauderdale, FL feet leasable
Federal Express Distribution Center 37,500 square owned
Jacksonville, FL feet leasable
ITEM 3. LEGAL PROCEEDINGS
Kugler, et al., (formerly Martha Hess, et al.) on behalf of themselves and all
others similarly situated, v. Gordon, Boula, Financial Concepts, Ltd., KFB
Securities, Inc., et al. In the Circuit Court of Cook County, Illinois. On or
about May 20, 1988, an individual investor filed the above referenced 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.
This matter has been in the Courts since 1988 and in October 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 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP INTEREST AND
RELATED SECURITY HOLDER MATTERS
a) There is no established public trading market for Registrant's units of
limited partnership interest.
b) There are approximately 1,904 holders of units of limited partnership
interest as of December 31, 1996.
c) See Item 6.-Selected Financial Data regarding Registrant's distributions,
incorporated herein by reference as if set forth herein.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
ITEM 6. SELECTED FINANCIAL DATA
For the five years ended December 31, 1996.
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Revenues $ 520,980 524,908 543,753 588,142 595,779
========== ========== ========== ========== ==========
Net income (loss) $ (32,453) 2,237 (656,016) 93,716 (6,107)
========== ========== ========== ========== ==========
Net income (loss) per
weighted average
limited partnership
unit outstanding $ (.65) .04 (13.17) 1.88 (.12)
========== ========== ========== ========== ==========
Total assets $ 7,615,420 7,321,582 6,364,252 6,230,003 5,818,603
========== ========== ========== ========== ==========
Partners' capital $ 7,231,845 6,987,522 6,084,946 5,932,102 5,612,362
========== ========== ========== ========== ==========
Distributions per
weighted average
limited partnership
unit outstanding $ 11.25 5.00 5.00 5.00 5.00
========== ========== ========== ========== ==========
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF I.R.E. PENSION INVESTORS, LTD. - II
A description of the Partnership's investment properties follows:
* Galleria Professional Building ("Galleria") - A 61,000 square foot
office building located in Fort Lauderdale, Florida.
* Federal Express Distribution Center ("Federal Express") - A 38,000
square foot warehouse building located in Jacksonville, Florida.
The Partnership was organized in September 1985 and is engaged in the business
of operating and holding for investment, income producing real properties. In
December 1986, the Partnership acquired Galleria and in December 1987, the
Partnership acquired Federal Express. Both of the above properties are net
leased to their tenants.
Rental income increased for the year ended December 31, 1996 as compared to the
comparable period in 1995 and 1994 as a result of a scheduled rental increase at
Federal Express, effective July 1995.
Interest income increased for the year ended December 31, 1995 as compared to
the comparable period in 1994 primarily due to increases in funds available for
investment and yields on those investments.
Other income decreased for the year ended December 31, 1995 as compared to the
same period in 1994 due principally to decreased fees from investor transfers of
partnership units.
During 1996, the carrying value of Federal Express was reduced approximately
$100,000 to its estimated fair value. During 1994, the carrying value of
Galleria was reduced approximately $686,000 to its estimated fair value. This
was based upon the existing lease terms as indicated in note 2 of Notes to
Financial Statements and independent appraisals performed on the Partnership's
properties .
General and administrative expense to affiliates decreased for the year ended
December 31, 1995 as compared to the 1994 comparable period primarily due to
decreased costs associated with administrative and accounting service
reimbursements. These cost reimbursements are associated with filing
requirements to regulatory agencies, tax return preparation, general accounting
services and monitoring of pending litigation.
Other general and administrative expenses increased for the year ended December
31, 1996 as compared to the same period in 1995 primarily due to legal fees and
costs associated with the litigation discussed in Item 3. "Legal Proceedings"
Kugler, et.al. v. Gordon, Boula, et.al. Also contributing to the increase were
legal fees incurred for the preparation of a sale contract on Federal Express.
Such costs were written off when the contract was terminated. Other general and
administrative expenses decreased for the year ended December 31, 1995 as
compared to the comparable period in 1994 primarily due to a reduction in
auditing fees and bank charges associated with the partners' distribution
account.
The lease on Federal Express expires on June 30, 1997. Federal Express has
expressed their intention to relocate to a larger facility and has requested an
extension of their lease through March 1998. It is anticipated that the
extension will be granted and the Partnership has begun the search for either a
replacement tenant or a buyer for the property.
When the Partnership acquired the Galleria Professional Building in 1986, it
executed a net lease with the seller, leasing the property back to the seller on
a totally net basis. The lease requires a minimum annual rental of $217,000 per
annum plus 10% of the property income, as defined, between $217,000 and $467,000
and 50% of the property income in excess of $467,000. Based on operations of the
property, reflected in information provided by the tenant, no percentage rent is
to be paid for 1996.
At December 31, 1996, the Partnership had approximately $333,000 of cash and
cash equivalents and approximately $1.6 million in Treasury Bills included in
securities available for sale. The Partnership has been paying distributions of
2% per annum of original capital on a quarterly basis since the fourth quarter
of 1990.
In addition to the items discussed above, the Partnership's long term prospects
will be primarily affected by future net income at Galleria and finding a
replacement for or sale of the Federal Express building. Due to the
uncertainties involving the real estate market and the status of the Federal
Express building, 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, property values 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)
ITEM 8. INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report
Financial Statements:
Balance Sheets - December 31, 1995 and 1996
Statements of Operations - For each of the Years in the Three Year Period
ended December 31, 1996
Statements of Partners' Capital - For each of the Years in the Three Year
Period ended December 31, 1996
Statements of Cash Flows - For each of the Years in the Three Year Period
ended December 31, 1996
Notes to Financial Statements
ITEM 14. FINANCIAL STATEMENT SCHEDULES
III. Properties and Accumulated Depreciation - December 31, 1996.
All other schedules are omitted as the required information is either not
applicable or is presented in the financial statements and related notes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
I.R.E. Pension Investors, Ltd. - II:
We have audited the financial statements of I.R.E. Pension Investors, Ltd. - II
(a Florida Limited Partnership), as listed in the accompanying index. In
connection with our audits of the financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
financial statements and financial statement schedule are the responsibility of
I.R.E. Pension Investors, Ltd. - II's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of I.R.E. Pension Investors, Ltd.
- - II, at December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/S/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
March 21, 1997
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Balance Sheets
December 31, 1995 and 1996
Assets
1995 1996
---- ----
Cash and cash equivalents $ 470,925 332,701
Securities available for sale 1,350,087 1,590,253
Investments in real estate:
Office building 5,782,761 5,782,761
Warehouse building 2,247,267 2,147,267
--------- ---------
8,030,028 7,930,028
Less accumulated depreciation (3,624,114) (4,036,716)
--------- -----------
4,405,914 3,893,312
Other assets, net 3,077 2,337
--------- ----------
$ 6,230,003 5,818,603
========= =========
Liabilities and Partners' Capital
Accrued expenses 45,366 6,787
Accounts payable 27,160 27,424
Other liabilities 223,988 169,105
Due to affiliates 1,387 2,925
--------- ---------
Total liabilities 297,901 206,241
Partners' capital:
49,041 limited partnership units issued
and outstanding for 1996 and 49,312
limited partnership units issued and
outstanding for 1995 5,932,102 5,612,362
--------- ---------
$ 6,230,003 5,818,603
========= =========
See accompanying notes to financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Operations
For each of the Years in the Three Year Period ended December 31, 1996
1994 1995 1996
---- ---- ----
Revenues:
Rental income $ 489,147 496,290 503,440
Interest income 53,276 91,562 91,599
Other income 1,330 290 740
---------- -------- --------
Total revenues 543,753 588,142 595,779
--------- -------- --------
Costs and expenses:
Depreciation 412,602 412,602 412,602
Provision to state real estate
at fair value 686,000 - 100,000
Property operations:
Property management fees to affiliate 4,891 4,963 5,034
Other 8,651 7,235 5,353
General and administrative:
To affiliates 39,989 32,113 32,878
Other 47,636 37,513 46,019
---------- -------- --------
Total costs and expenses 1,199,769 494,426 601,886
--------- -------- --------
Net income (loss) $ (656,016) 93,716 (6,107)
========= ======== ========
Net income (loss) per weighted average
limited partnership unit outstanding $ (13.17) 1.88 (.12)
======== ====== ========
See accompanying notes to financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Partners' Capital For
each of the Years in the Three Year Period ended December 31, 1996
Limited General
Partners Partners Total
-------- -------- -----
Balance at December 31, 1993 $ 6,983,989 3,533 6,987,522
Limited partner distributions (246,560) - (246,560)
Net (loss) (649,456) (6,560) (656,016)
---------- ------ ----------
Balance at December 31, 1994 6,087,973 (3,027) 6,084,946
Limited partner distributions (246,560) - (246,560)
Net income 92,779 937 93,716
--------- ------ ---------
Balance at December 31, 1995 5,934,192 (2,090) 5,932,102
Limited partner distributions (245,883) - (245,883)
Rescission of limited partner
units (67,750) - (67,750)
Net loss (5,496) (611) (6,107)
--------- ------- ---------
Balance at December 31, 1996 $ 5,615,063 (2,701) 5,612,362
========= ====== =========
See accompanying notes to financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Cash Flows
For each of the Years in the Three Year Period Ended December 31, 1996
1994 1995 1996
---- ---- ----
Operating Activities:
Net income (loss) $ (656,016) 93,716 (6,107)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 412,602 412,602 412,602
Provision to state real estate
at fair value 686,000 - 100,000
Non-cash portion of rental income (33,828) (33,828) (33,828)
Changes in operating assets and liabilities
Increase (decrease) in accrued
expenses, accounts payable, other
liabilities and due to affiliates (20,926) 52,423 (57,832)
Decrease (increase) in other
assets, net (9,660) 600 740
-------- -------- --------
Net cash provided by operating
activities 378,172 525,513 415,575
-------- -------- --------
Investing Activities:
Redemption and sale of securities
available for sale - 2,567,409 6,209,829
Purchase of securities
available for sale (1,265,073) (2,643,243) (6,449,995)
---------- ---------- ----------
Net cash used in
investing activities (1,265,073) (75,834) (240,166)
---------- ---------- ---------
Financing Activities:
Rescisson of limited partner
units - - (67,750)
Limited partner distributions (246,560) (246,560) (245,883)
---------- --------- ---------
Net cash used by financing
activities (246,560) (246,560) (313,633)
-------- -------- --------
Increase (decrease) in cash and
cash equivalents (1,133,461) 203,119 (138,224)
Cash and cash equivalents at
beginning of year 1,401,267 267,806 470,925
--------- --------- ---------
Cash and cash equivalents
at end of year $ 267,806 470,925 332,701
========= ========= =========
See accompanying notes to financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Notes to Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
I.R.E. Pension Investors, Ltd. - II (the "Partnership") was organized on
September 30, 1985 in accordance with the provisions of the Florida Uniform
Limited Partnership Act to invest in, hold and manage income producing real
estate. A sufficient amount of capital was raised to allow funds to be released
from escrow to the Partnership on December 26, 1985. The Partnership closed its
offering of limited partnership units in October 1987 after having raised
$12,373,750.
The Managing General Partner has complete authority in the management and
control of the Partnership. I.R.E. Pension Advisors II, Corp. is the Managing
General Partner and Alan B. Levan is the individual General Partner of the
Partnership. The General Partners may serve in the same capacity for other
entities having similar investment objectives. Should any conflicts of interest
arise among these entities, the management of the managing general partners
will, at their sole discretion, resolve such conflicts.
Basis of Financial Statement Presentation - The financial statements have been
prepared in conformity with generally accepted accounting principles ("GAAP").
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the statements of financial condition and income and expenses for
the periods presented. Actual results could differ significantly from those
estimates. A material estimate that is susceptible to significant change in the
next year relates to the determination of the allowance to state real estate at
fair value.
Compensation to General Partners and Affiliates
The General Partners and/or their affiliates are entitled to receive
compensation only as specified by the Partnership Agreement. The determination
of amount and timing of payment is subject to certain limitations and to cash
distribution preferences of limited partners. Following is a brief description
of such compensation and the services to be rendered:
Underwriting Commissions:
Due upon the sale of Partnership units of interest.
Non-recurring Acquisition Fees:
Principally for evaluating and selecting real property for potential
purchase by the Partnership.
Property Management Fee:
Due for services in connection with the continuing professional
property management of the Partnership properties.
Partnership Management Fee:
Due for services rendered in evaluating and selecting properties for
the Partnership, reviewing cash requirements including the
determination of the amount and timing of distributions, if any, making
decisions as to the nature and terms of the acquisition and disposition
of such properties, selecting, retaining and supervising consultants,
contractors, architects, engineers, lenders, borrowers, agents and
others and otherwise generally managing the day-to-day operations of
the Partnership.
Subordinated Real Estate Commissions:
Related to sales of Partnership properties.
Interest in Cash from Sales or Financing:
Due also for services as listed under "Partnership Management Fee".
Interest in Net Income and Net Loss as Determined for Federal Income Tax
Purposes:
1% of net losses and the greater of (a) 1% of net income or (b) an
amount of such net income which is in proportion to the percentage of
cash distributed to the General Partners as a Partnership Management
Fee or for their Interest in Cash From Sales or Financing.
Cash and cash equivalents
Cash equivalents include liquid investments with a maturity of three months or
less.
Securities Available for Sale
The Partnership's securities are classified as available for sale. In accordance
with Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities ("FAS 115") issued in May 1993 by the
Financial Accounting Standards Board ("FASB"), these securities are carried at
fair value, with any related unrealized appreciation or and 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 December 31, 1996, the Partnership owned one
treasury bill that matures in February 1997 in which cost approximated fair
value.
Properties
The properties are stated at the lower of cost or fair value in the accompanying
statements of financial condition. An allowance is provided, by property, in the
event the carrying value of the property is greater than its fair value. The
office building and distribution center are depreciated using the straight-line
method over an estimated useful life of 20 years.
Income Taxes
The payment of income taxes is the obligation of the individual partners;
therefore, there is no provision for income taxes in the accompanying financial
statements. The Partnership's tax returns have not been examined by Federal or
state taxing authorities.
Net income or loss reported for income tax purposes involves, among other
things, various determinations relating to properties purchased. Although
management of the Partnership believes that such determinations are appropriate,
there can be no assurance that the Internal Revenue Service will not contest the
Partnership's tax treatment of various items or, if contested, such treatment
will be sustained by the Courts. Further, there is a possibility that the
Treasury will amend existing regulations or promulgate new regulations, and such
action may be retroactive. Accordingly, the tax status of the Partnership and
the availability of prior and future income tax benefits to limited partners may
be adversely affected.
Financial Reporting
The Partnership maintains its accounting records on a modified cash basis. The
accompanying financial statements are presented on an accrual basis.
Rental Income
Rental income is recognized under the operating method whereby aggregate rentals
are reported as income over the life of the lease and the costs and expenses are
charged against such revenue. Rental income, from leases with non-level
payments, is recognized ratably over the term of the lease.
New Accounting Standards
In 1995, the FASB issued Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." ("FAS 121"). FAS 121 requires that long-lived assets, assets
held for sale and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In
performing the review for recoverability, the entity should estimate the future
cash flows expected to result from the use of the asset and its eventual
disposition. If the sum of the expected future cash flows (undiscounted and
without interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized. Measurement of an impairment loss for long-lived
assets and identifiable intangibles that an entity expects to hold and use
should be based on the fair value of the asset. FAS 121 was effective for
financial statements for fiscal years beginning after December 15, 1995. Earlier
application was encouraged. Management is of the opinion that adoption of FAS
121 did not have a material effect on financial position or results of
operations, upon adoption on January 1, 1996.
(2) PROPERTIES
Following is a brief description of the property investments made by the
Partnership.
Galleria Professional Building
On December 31, 1986, the Partnership purchased a six story office building
containing 60,965 square feet of net leasable area in Fort Lauderdale, Florida.
The Partnership owns a leasehold interest in a long-term ground lease for two
parcels of land which encompass the building site and parking areas. The lease
commenced in 1955 and expires in 2054. Ground rent is approximately $13,000
annually. Every 20 years the ground rent is adjusted to be equal to five percent
of the then current appraised value of the ground. The Partnership also
purchased the rights to the parking agreement with the Galleria Mall. The
agreement requires rental payments and common area maintenance charges which
currently aggregate approximately $25,000 annually. The parking agreement and
ground lease have concurrent terms.
Simultaneous with the acquisition of the property, the Partnership executed a
net lease with the seller, leasing the Property back to the Seller on a totally
net basis. The terms of the lease require a minimum annual rental of $217,000
per annum plus 10% of the property income, as defined, between $217,000 and
$467,000 and 50% of the property income in excess of $467,000. In accordance
with generally accepted accounting principles, the rental income will be
recognized ratably over the term of the lease. The ratable minimum rent through
2001 (the date of the buy/sell option discussed below) after the modification of
the lease on September 1990 is $250,824 per year and such amount is recognized
annually for financial statement purposes. The seller, as lessee, is responsible
for any and all costs associated with the property, including but not limited to
operating expenses, insurance, taxes, the ground lease and parking agreement
payments.
Commencing 2002, the Partnership and the tenant have a buy/sell option for this
property, which may be exercised by either the Partnership or the tenant. In
essence, this option gives the tenant the right to purchase the property at its
then fair market value or allows the Partnership to terminate the tenant lease.
As part of this option, $6,000,000 plus the excess between approximately
$100,000 per month and actual rent paid during the lease term (less certain
defined offsets) can constitute the Partnership's offer under the option. In
such event, if the tenant fails to purchase the property at such price, the
lease would be terminated and the Partnership would have no obligation to pay
any part of the offering price to the tenant.
At December 31, 1996, the Galleria Professional Building was 100% percent
occupied, with an average leasing rate of approximately $15.85 per square foot.
As indicated above, the lessee is responsible for any and all costs associated
with the property. Galleria Professional Building is located in Fort Lauderdale
Florida on the Middle River Waterway. There are several mid-rise office
buildings in the area. Galleria Mall, a large regional shopping center, is
located east of this property. Rental rates of the mid-rise office buildings in
close proximity to the Galleria Professional Building were similar to those
being charged by the Galleria Professional Building.
During the fourth quarter of 1994, the carrying value of Galleria was reduced
approximately $686,000 to its estimated fair value, based upon the existing
lease terms as indicated above and an independent appraisal performed on the
property.
Following is summarized financial information with respect to operations at the
Galleria office building. The following information is unaudited because the
Partnership has no contractual right to require the lessee of the property to
provide audited information.
Years ended
December 31,
------------
1995 1996
---- ----
(Unaudited)
-----------
Rental income 927,387 968,191
Other income 10,354 7,405
-------- --------
937,741 975,596
Property operating expenses 550,597 579,803
Ground rent 37,697 37,692
-------- --------
588,294 617,495
-------- --------
Operating income 349,447 358,101
======== ========
Federal Express Distribution Center
On December 15, 1987, the Partnership purchased, from an unaffiliated seller, a
one story 37,500 square foot office/warehouse building in Jacksonville, Florida.
The building was designed for and is occupied solely by Federal Express
Corporation pursuant to a ten year lease which commenced June 8, 1987 and
expires June 30, 1997. Federal Express has expressed their intention to relocate
to a larger facility and has requested an extension of their lease through March
1998. It is anticipated that the extension will be granted, however, no formal
agreement has yet been reached. The Partnership has begun the search for either
a replacement tenant or a buyer for the property. The lease requires minimum
annual rental payments as follows:
Term Amount
---- ------
Through June 1992 $216,660
July 1992 to June 1995 $238,320
July 1995 to June 1997 $252,612
The lease further requires the tenant to pay all expenses associated with the
property including repairs and maintenance, real estate taxes, insurance and
utilities.
During 1996, the carrying value of Federal Express was reduced by approximately
$100,000 to its estimated fair value.
Leases
The aggregate sum of the minimum lease rental payments to be received for the
Galleria Professional Building and the Federal Express Distribution Center over
the five succeeding years is approximately as follows:
Year ending December 31,
------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
$ 343,000 217,000 217,000 217,000 217,000
======= ======= ======= ======= =======
The above table does not consider exercise of renewal options by existing
tenants or renewal of leases expiring during above periods and does not assume
any extension on the Federal Express lease past June 30, 1997.
(3) COMPENSATION TO GENERAL PARTNERS AND AFFILIATES
During the year ending December 31, 1994, 1995 and 1996 compensation to general
partners and affiliates were as follows:
1994 1995 1996
---- ---- ----
Reimbursement for administrative
and accounting services $ 39,989 32,113 32,878
Property management fees 4,891 4,963 5,034
------ ------ ------
Total $ 44,880 37,076 37,912
====== ====== ======
(4) RECONCILIATION OF NET INCOME AND PARTNERS' CAPITAL
The following reconciliation provides details of the nature and amount of
differences between net income (loss) and partners' capital per the accompanying
financial statements and the Partnership tax return.
1994 1995 1996
---- ---- ----
Net income (loss):
Amount reported for financial statement
purposes $ (656,016) 93,716 (6,107)
Difference in financial statement/tax
depreciation expense 202,719 202,719 202,719
Difference between accrual basis of
accounting used for financial
statements and the method used for
income tax purposes (29,472) (31,444) (71,365)
Adjustment due to fair value
considerations in the carrying
value of real estate for financial
statement purposes 686,000 - 100,000
-------- ----------- -------
Amount reported for income tax purposes $ 203,231 264,991 225,247
======== ======= =======
1994 1995 1996
---- ---- ----
Partners' capital:
Amount reported for financial statement
purposes $ 6,084,946 5,932,102 5,612,362
Difference in financial statement/tax
depreciation expense 1,585,720 1,788,439 1,991,158
Difference between accrual basis of
accounting used for financial
statements and the method used for
income tax purposes 278,351 246,907 175,542
Difference due to fair value
considerations in the carrying value
of real estate for financial statement
and income tax purposes 686,000 686,000 786,000
Cost of raising capital, deducted from
partners' capital for financial
statements and included in other
assets for income tax purposes 1,501,488 1,501,488 1,501,488
---------- ---------- ----------
Amount reported for income tax purposes $ 10,136,505 10,154,936 10,066,550
========== ========== ==========
(5) OTHER LIABILITIES
Other liabilities at December 31, 1995 and 1996 consists primarily of unearned
rental income, which, as stated in the Summary of Significant Accounting
Policies (note 1), arises from leases with non-level payments being recognized
ratably over the term of the lease.
(6) 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.
This matter has been in the Courts since 1988 and in October 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 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.
<PAGE>
SCHEDULE III
I.R.E. Pension Investors, Ltd.-II
Properties and Accumulated Depreciation
December 31, 1996
Galleria Federal Express
Professional Distribution
Office Bldg. Center
Ft. Lauderdale Jacksonville
Florida Florida Total
Acquisition Date 12/86 12/87
Encumbrances $ - - -
========= ========= =========
Initial Costs:
Land $ - 470,981 470,981
Building and
Improvements 6,285,472 1,771,786 8,057,258
--------- --------- ---------
6,285,472 2,242,767 8,528,239
--------- --------- ---------
Improvements:
Costs capitalized
subsequent to
acquisition:
Land - 945 945
Building and
Improvements 183,289 3,555 186,844
--------- --------- ---------
183,289 4,500 187,789
--------- --------- ---------
Allowance to state real
estate at fair
value (686,000) (100,000) (786,000)
--------- --------- ---------
(686,000) (100,000) (786,000)
--------- --------- ---------
Gross Amount:
Land - 471,926 471,926
Building and
Improvements 5,782,761 1,675,341 7,458,102
--------- --------- ---------
Total 5,782,761 2,147,267 7,930,028
========= ========= =========
Accumulated
Depreciation $ 3,230,428 806,288 4,036,716
========= =========== =========
Life on which
depreciation
is computed 20 years 20 years
<PAGE>
SCHEDULE III Continued
I.R.E. Pension Investors, Ltd.-II
Reconciliation of Cost and Accumulated
Depreciation For each of the Years in the Three Year
Period ended December 31, 1996
1994 1995 1996
-------- ------ ------
Cost:
Balance at beginning of period $ 8,716,028 8,030,028 8,030,028
Allowance to state real
estate at fair
value (686,000) - (100,000)
--------- ---------- ----------
Balance at end of period $ 8,030,028 8,030,028 7,930,028
========= ========= =========
Accumulated Depreciation:
Balance at beginning of period $ 2,798,910 3,211,512 3,624,114
Additions:
Depreciation 412,602 412,602 412,602
--------- ---------- ----------
Balance at end of period $ 3,211,512 3,624,114 4,036,716
========= ========= ==========
The aggregate basis for Federal income tax purposes (not reduced by accumulated
depreciation) of the above properties was approximately $8,716,000 at December
31, 1996.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Registrant has no directors or officers.
a) Directors.
Listed below are the directors of I.R.E. Pension Advisors II, Corp.,
Managing General Partner of Registrant, all of whom are to serve until the
election and qualification of their respective successors unless sooner
removed from office:
NAME AGE POSITIONS HELD
---- --- --------------
Alan B. Levan 52 Director since 1985
Earl Pertnoy 70 Director since 1985
Carl E. B. McKenry, Jr. 67 Director since 1985
b) Executive Officers.
Listed below are the executive officers of I.R.E. Pension Advisors II,
Corp., all of whom are to serve until they resign or are replaced by the
Board of Directors:
NAME AGE POSITIONS HELD
---- --- --------------
Alan B. Levan 52 President since 1985
Glen R. Gilbert 52 Senior Vice President
since 1985; Chief
Financial Officer since
1987; Secretary since 1988
c) Certain Significant Employees.
Not applicable.
d) Family Relationships.
Not applicable.
e) Business Experience.
ALAN B. LEVAN formed the I.R.E. Group in 1972. Since 1978, he has been the
Chairman of the Board, President, and Chief Executive Officer of BFC
Financial Corporation (or its predecessor companies), a financial services
and savings bank holding company. He is also Chairman of the Board and
President of I.R.E. Realty Advisors, Inc., I.R.E. Properties, Inc., I.R.E.
Realty Advisory Group, Inc., U.S. Capital Securities, Inc., and Florida
Partners Corporation. Mr. Levan is also Chairman of the Board and Chief
Executive Officer of BankAtlantic Bancorp, Inc. Mr. Levan is also an
individual general partner and an officer and a director of the corporate
general partner of Registrant and of various entities which were the
corporate general partners of public limited partnerships which have now
been liquidated, all of which are affiliated with BFC Financial
Corporation.
GLEN R. GILBERT has been Senior Vice President of BFC Financial Corporation
since 1984, Chief Financial Officer since 1987 and Secretary since 1988.
Mr. Gilbert has been a certified public accountant since 1970. Mr. Gilbert
serves as an officer of Florida Partners Corporation and of the corporate
general of Registrant and of various entities which were the corporate
general partners of public limited partnerships which have now been
liquidated, all of which are affiliated with BFC Financial Corporation.
EARL PERTNOY has been for more than the past five years a real estate
investor and developer. He has been a director of BFC Financial Corporation
and its predecessor companies since 1978. He is a director of the corporate
general partner of Registrant and of various entities which were the
corporate general partners of public limited partnerships which have now
been liquidated, all of which are affiliated with BFC Financial
Corporation.
CARL E. B. McKENRY, JR. is the Director of the Small Business Institute at
the University of Miami in Coral Gables, Florida. He has been associated in
various capacities with the University since 1955. He has been a director
of BFC Financial Corporation since 1981 and is a director of the corporate
general partner of Registrant and of various entities which were the
corporate general partners of public limited partnerships which have now
been liquidated, all of which are affiliated with BFC Financial
Corporation.
f) Certain Legal Proceedings.
None.
ITEM 11. EXECUTIVE COMPENSATION
a) Cash Compensation.
The Registrant has no officers or directors.
The Registrant did not pay salaries or expenses of the officers and
directors of the general partner of the Registrant in 1996, except for
travel and other expenses directly related to activities of the
Registrant.
b) Compensation Pursuant to Plans.
Registrant has no annuity, pension or retirement plan for any director,
officer or employee.
c) Other Compensation.
Not applicable.
d) Compensation of Directors.
Registrant has no directors.
e) Termination of Employment and Change of Control Arrangement.
Not applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
a) No person owns 5% or more of Registrant's voting securities.
b) Registrant has no officers or directors. The following information is
provided with respect to units owned by directors and officers of the
managing general partner.
(3)
Amount and
(2) Nature of (4)
(1) Name And Address Of Beneficial Percent
Title Of Class Beneficial Owner Ownership Of Class
-------------- ---------------- --------- --------
(i)
Units of Limited Alan B. Levan 20 Direct 0%(approx)
Partnership 1750 E. Sunrise Blvd.
Interest Fort Lauderdale, FL 33304
All other directors and
officers of the Managing
General Partner as a
group 0 Direct .0%
--------- ---
TOTAL 20 Direct .0%(approx)
========= ===
- ----------
(i) Alan B. Levan is a general partner of Registrant and is President
and Director of the Managing General Partner.
c) Registrant knows of no contract or other arrangement that could result in a
change in control of registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
a) & b) During the year ending December 31, 1996, the following entities
received the fees and payments indicated for services rendered with respect
to the Registrant:
NAME AND
RELATIONSHIP TO REGISTRANT TRANSACTION AMOUNT
BFC Financial Corporation Reimbursement for
or subsidiaries, administrative and
Affiliates of the General accounting services $ 32,878
Partners
Property management fees $ 5,034
c) Indebtedness of Management.
None.
d) Transactions with Promoters.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A-1. See Item 8. Financial Statements and Supplementary Data.
A-2. See Item 8. Financial Statements and Supplementary Data.
A-3. Exhibits:
Exhibit 3 Articles of incorporation and by-laws. Limited Partnership
Agreement set forth as Exhibit A to the Prospectus of the
Partnership dated October 4, 1985, as filed with the Commission
pursuant to Rule 424(c), is hereby incorporated herein by
reference.
Exhibit 27 Financial data schedule - Included as Exhibit 27.
B. REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
No annual report or proxy material for the year 1996 has been sent to the
Partners of the Partnership. An annual report will be sent to the Partners
subsequent to this filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
I.R.E. PENSION INVESTORS, LTD. - II
Registrant
By: I.R.E. Pension Advisors-II, Corp.,
Managing General Partner
By: /S/ Alan B. Levan
Alan B. Levan, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Managing General
Partner on behalf of the Registrant and in the capacities and on the dates
indicated.
/S/ Alan B. Levan March 21, 1997
- -------------------------------------------------------
Alan B. Levan, Director and Principal Executive Officer
/S/ Earl Pertnoy March 21, 1997
- -------------------------------------------------------
Earl Pertnoy, Director
/S/ Carl E.B. McKenry, Jr. March 21, 1997
- -------------------------------------------------------
Carl E. B. McKenry Jr., Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DECEMBER 31, 1996 FORM 10-K 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> year
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<CASH> 332,701
<SECURITIES> 1,590,253
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,930,028
<DEPRECIATION> 4,036,716
<TOTAL-ASSETS> 5,818,603
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,612,362
<TOTAL-LIABILITY-AND-EQUITY> 5,818,603
<SALES> 0
<TOTAL-REVENUES> 595,779
<CGS> 0
<TOTAL-COSTS> 601,886
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,107)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,107)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
