SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
September 30, 1997 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 [ ]
<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, 1996 and 1997
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------- -------------------
1996 1997 1996 1997
-------- ------- ------- -------
Revenues:
Rental income $377,580 381,366 125,860 129,646
Interest income 68,111 72,849 23,452 25,581
Other income 680 990 530 590
-------- -------- -------- --------
Total revenues 446,371 455,205 149,842 155,817
-------- -------- -------- --------
Costs and expenses:
Depreciation 309,451 309,451 103,150 103,150
Property operations:
Property management fees
to affiliate 3,776 3,814 1,259 1,297
Other 4,340 3,230 1,012 1,203
General and administrative:
To affiliates 24,613 23,104 8,393 8,440
Other 37,502 28,729 8,927 2,868
-------- -------- -------- --------
Total costs and expenses 379,682 368,328 122,741 116,958
-------- -------- -------- --------
Net income $ 66,689 86,877 27,101 38,859
======== ======== ======== ========
Net income per weighted
average limited partnership
unit outstanding $ 1.35 1.75 .55 .78
======== ======== ======== ========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Balance Sheets
December 31, 1996 and September 30, 1997
(Unaudited)
Assets
1996 1997
---- ----
Cash and cash equivalents $ 332,701 449,673
Securities available for sale 1,590,253 1,651,625
Investments in real estate:
Office building 5,782,761 5,782,761
Warehouse building 2,147,267 2,147,267
---------- ----------
7,930,028 7,930,028
Less accumulated depreciation (4,036,716) (4,346,167)
---------- ----------
3,893,312 3,583,861
Other assets, net 2,337 21,792
---------- ----------
$ 5,818,603 5,706,951
========== ==========
Liabilities and Partners' Capital
Accrued expenses 6,787 --
Accounts payable 27,424 22,331
Other liabilities 169,105 166,048
Due to affiliates 2,925 3,236
---------- ----------
Total liabilities 206,241 191,615
Partners' capital:
49,041 limited partnership units issued
and outstanding 5,612,362 5,515,336
---------- ----------
$ 5,818,603 5,706,951
========== ==========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Partners' Capital
For the nine months ended September 30, 1997
(Unaudited)
Limited General
Partners Partners Total
---------- -------- ---------
Balance at December 31, 1996 $5,615,063 (2,701) 5,612,362
Limited partner distributions (183,903) -- (183,903)
Net income 86,008 869 86,877
--------- ------ ---------
Balance at September 30, 1997 $5,517,168 (1,832) 5,515,336
========= ====== =========
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, 1996 and 1997
(Unaudited)
1996 1997
---- ----
Operating Activities:
Net income $ 66,689 86,877
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 (16,145) 10,745
Decrease (increase) in other
assets, net 2,977 (19,455)
---------- ----------
Net cash provided by operating
activities 337,601 362,247
---------- ----------
Investing Activities:
Redemption and sale of securities
available for sale 4,569,609 4,810,585
Purchase of securities
available for sale (4,870,137) (4,871,957)
---------- ----------
Net cash used in
investing activities (300,528) (61,372)
---------- ----------
Financing Activities:
Limited partner distributions (184,581) (183,903)
---------- ----------
Net cash used by financing
activities (184,581) (183,903)
---------- ----------
Increase (decrease) in cash and
cash equivalents (147,508) 116,972
Cash and cash equivalents at
beginning of period 470,925 332,701
---------- ----------
Cash and cash equivalents
at end of period $ 323,417 449,673
========== ==========
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, 1997
Note 1 - General
The accompanying financial statements have been prepared by the Partnership in
accordance with the accounting policies described in its 1996 Annual Report and
should be read in conjunction with the notes to financial statements which
appear in that report.
Note 2 - Real Estate
On December 15, 1987, the Partnership purchased the Federal Express Distribution
Center, 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 lease, as extended that expires May
31, 1998. Federal Express has expressed their intention to relocate to a larger
facility and, therefore, will not be renewing their lease. The Partnership has
begun the search for either a replacement tenant or a buyer for the property.
On December 31, 1986, the Partnership purchased the Galleria Professional
Building, a six story office building containing 60,965 square feet of net
leaseable area in Fort Lauderdale, Florida.
Following is summarized financial information with respect to operations at the
Galleria Professional Building office building.
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------- --------------------
1996 1997 1996 1997
-------- -------- -------- --------
Rental income $712,170 759,974 242,001 244,661
Other income 5,863 10,048 2,127 5,088
-------- -------- -------- --------
718,033 770,022 244,128 249,749
-------- -------- -------- --------
Property operating
expenses 433,653 422,582 150,021 146,998
Ground rent 28,269 28,026 9,423 9,342
-------- -------- -------- --------
461,922 450,608 159,444 156,340
-------- -------- -------- --------
Operating income $256,111 319,414 84,684 93,409
======== ======= ====== ======
Note 3 - Other Liabilities
Other liabilities at December 31, 1996 and September 30, 1997 consists primarily
of unearned rental income, which as stated in the 1996 Annual Report (note 1),
arises from leases with non-level payments being recognized ratably over the
term of the lease.
Note 4 - Compensation to General Partners and Affiliates
During the nine and three month periods ended September 30, 1996 and 1997,
compensation to general partners and affiliates was as follows:
Nine Months Ended Three Months Ended
September 30, September 30,
------------------ -----------------
1996 1997 1996 1997
------ ------ ----- -----
Reimbursement for administrative
and accounting services 24,613 23,104 8,393 8,440
Property management fees 3,776 3,814 1,259 1,297
------ ------ ----- -----
Total 28,389 26,918 9,652 9,737
====== ====== ===== =====
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, 1996, the Partnership
held one Treasury bill that matured in February 1997, the cost of which
approximated fair value. At September 30, 1997, the Partnership held one
Treasury bill that matures in November 1997, the cost of which 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, 1997
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 Partnership's expectations
and are subject to a number of risks and uncertainties, including but not
limited to, economic, competitive and other factors affecting the Partnership's
operations, markets, property values and other factors discussed elsewhere in
this report and the documents filed by the Partnership with the Securities and
Exchange Commission. Many of these factors are beyond the Partnership's control.
Actual results could differ materially from these forward-looking statements. In
light of these risks and uncertainties, there is no assurance that the results
discussed in such forward-looking statements contained in this report will, in
fact, occur. The Partnership does not undertake any obligation to publicly
release the results of any revisions to these forward-looking statements to
reflect future events or circumstances.
A description of the Partnership's investment properties follows:
* Federal Express Distribution Center - A 38,000 square foot warehouse
building located in Jacksonville, Florida.
* Galleria Professional Building - A 61,000 square foot office building
located in Fort Lauderdale, Florida.
The Galleria Professional Building and the Federal Express Distribution Center
are net leased to their tenants.
Rental income increased approximately $4,000 for the nine and three month
periods ended September 30, 1997 as compared to the 1996 periods as a result of
a rental increase at Federal Express, effective July 1997.
Interest income increased approximately $5,000 and $2,000 for the nine and three
month periods ended September 30, 1997 as compared to the comparable periods in
1996 primarily due to an increase in investable funds.
Other general and administrative expenses decreased approximately $9,000 and
$6,000 for the nine and three month periods ended September 30, 1997 as compared
to the 1996 periods primarily due to a decrease in legal fees associated with
the preparation of a sale contract on the Federal Express Distribution Center in
1996 which was subsequently cancelled and interest accrued in 1996 on the
rescission of partnership units. During the nine month period ended September
30, 1997 as compared to the same period in 1996, this decrease was offset in
part by an increase in professional fees associated with the appraisal of the
Federal Express Distribution Center in 1997.
The original lease on the Federal Express Distribution Center expired on June
30, 1997. Federal Express had expressed their intention to relocate to a larger
facility and had requested an extension of their lease through May 1998. The
extension was granted and the Partnership has begun the search for either a
replacement tenant or a buyer for the property.
At September 30, 1997, the Partnership had approximately $450,000 of cash and
cash equivalents and approximately $1.7 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.
The Partnership's long term prospects will be primarily affected by future net
income at the Galleria Professional Building and finding a replacement tenant
for or the sale of the Federal Express Distribution Center. Due to the
uncertainties involving the real estate market and the status of the Federal
Express Distribution Center, management cannot reasonably determine the
Partnership's long term liquidity position. However, management believes the
Partnership has sufficient liquidity for operations and to meet its obligations
and commitments over the next few years.
<PAGE>
I.R.E. Pension Investors, Ltd. -II
(A Florida Limited Partnership)
Part II - Other Information
September 30 1997
Item 1 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,
1997.
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 4, 1997 By: /s/ Alan B. Levan
-------------------
Alan B. Levan, President
Date: November 4, 1997 By: /s/ Glen R. Gilbert
---------------------
Glen R. Gilbert, Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 449,673
<SECURITIES> 1,651,625
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,930,028
<DEPRECIATION> 4,346,167
<TOTAL-ASSETS> 5,706,951
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,515,336
<TOTAL-LIABILITY-AND-EQUITY> 5,706,951
<SALES> 0
<TOTAL-REVENUES> 455,205
<CGS> 0
<TOTAL-COSTS> 368,328
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 86,877
<INCOME-TAX> 0
<INCOME-CONTINUING> 86,877
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,877
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 1.75
</TABLE>
