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
March 31, 1998 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 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 three months ended March 31, 1997 and 1998
(Unaudited)
Three Months Ended
March 31,
---------
1997 1998
---- ----
Revenues:
Rental income $125,860 129,649
Interest income 23,126 27,644
Other income 310 60
-------- --------
Total revenues 149,296 157,353
-------- --------
Costs and expenses:
Depreciation 103,150 103,150
Property operations:
Property management fees to affiliate 1,259 1,296
Other 1,012 1,203
General and administrative:
To affiliates 8,056 8,158
Other 19,365 16,393
-------- --------
Total costs and expenses 132,842 130,200
-------- --------
Net income $ 16,454 27,153
======== ========
Net income per weighted average
limited partnership unit outstanding $ .33 .55
======== ========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Balance Sheets
December 31, 1997 and March 31, 1998
(Unaudited)
Assets
1997 1998
---- ----
Cash and cash equivalents $ 519,678 219,167
Securities available for sale 1,673,707 2,014244
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 (4,449,318) (4,552,468)
----------- -----------
3,480,710 3,377,560
Other assets, net 2,506 19,386
----------- -----------
$ 5,676,601 5,630,357
=========== ===========
Liabilities and Partners' Capital
Accounts payable 25,382 22,420
Other liabilities 157,589 149,134
Due to affiliates 3,273 2,594
----------- -----------
Total liabilities 186,244 174,148
Partners' capital:
49,041 limited partnership units issued
and outstanding 5,490,357 5,456,209
----------- -----------
$ 5,676,601 5,630,357
=========== ===========
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 three months ended March 31, 1998
(Unaudited)
Limited General
Partners Partners Total
-------- -------- -----
Balance at December 31, 1997 $ 5,491,826 (1,469) 5,490,357
Limited partner distributions (61,301) -- (61,301)
Net income 26,881 272 27,153
----------- ----------- -----------
Balance at March 31, 1998 $ 5,457,406 (1,197) 5,456,209
=========== =========== ===========
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 ended March 31, 1997 and 1998
(Unaudited)
1997 1998
---- ----
Operating Activities:
Net income $ 16,454 27,153
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:
Decrease in accounts
payable, other
liabilities and due to affiliates (21,723) (3,639)
Decrease (increase) in other
assets, net 1,212 (16,880)
----------- -----------
Net cash provided by operating
activities 90,636 101,327
----------- -----------
Investing Activities:
Redemption and sale of securities
available for sale 1,590,253 1,673,707
Purchase of securities
available for sale (1,610,077) (2,014,244)
----------- -----------
Net cash used in
investing activities (19,824) (340,537)
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Financing Activities:
Limited partner distributions (61,301) (61,301)
----------- -----------
Net cash used by financing
activities (61,301) (61,301)
----------- -----------
Increase (decrease) in cash and
cash equivalents 9,511 (300,511)
Cash and cash equivalents at
beginning of period 332,701 519,678
----------- -----------
Cash and cash equivalents
at end of period $ 342,212 219,167
=========== ===========
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, 1998
Note 1 - General
The accompanying financial statements have been prepared by the Partnership in
accordance with the accounting policies described in its 1997 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.
Three Months Ended
March 31,
1997 1998
---- ----
Rental income $264,277 260,790
Other income 2,654 3,658
-------- --------
266,931 264,448
-------- --------
Property operating expenses 134,942 160,111
Ground rent 9,342 9,342
-------- --------
144,284 169,453
-------- --------
Operating income $122,647 94,995
======== ========
Note 3 - Other Liabilities
Other liabilities at December 31, 1997 and March 31, 1998 consists primarily of
unearned rental income which arises from leases with non-level payments being
recognized ratably over the term of the lease.
Note 4 - Compensation or Reimbursements to General Partners and Affiliates
During the three months ended March 31, 1997 and 1998, compensation to general
partners and affiliates was as follows:
Three Months Ended
March 31,
---------
1997 1998
---- ----
Reimbursement for administrative
and accounting services $8,056 8,158
Property management fees (a) 1,259 1,296
------ ------
Total 9,315 9,454
====== ======
(a) Property management fees are computed as 1% of rental income.
Note 5 - Securities Available for Sale
Securities held by the Partnership 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, 1997, the
Partnership held one treasury bill that matured in February 1998, the cost of
which approximated fair value. At March 31, 1998, the partnership held one
treasury bill and commercial paper that matures in May 1998, 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
March 31, 1998
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 matters (both as a general matter and in particular in the
areas where the Partnership owns real estate), competitive and other factors
affecting the Partnership's operations, markets, property values and other
factors including factors associated with the continued ownership and operation
of real estate and the leasing or sale of the Federal Express Distribution
Center 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 three months ended March
31, 1998 as compared to the 1997 period as a result of a rental increase at
Federal Express, effective July 1997.
Interest income increased approximately $5,000 for three months ended March 31,
1998 as compared to the comparable period in 1997 primarily due to an increase
in investable funds.
Other general and administrative expenses decreased approximately $3,000 for the
three months ended March 31, 1998 as compared to the 1997 period primarily due
to a decrease in legal fees.
The Federal Express Distribution Center lease extension 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.
At March 31, 1998, the Partnership had approximately $219,000 of cash and cash
equivalents and approximately $2.0 million in treasury bills and commercial
paper 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
March 31, 1998
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 March 31,
1998.
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 8, 1998 By: /s/ Alan B. Levan
-------------------
Alan B. Levan, President
Date: May 8, 1998 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 MARCH
31, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 219,167
<SECURITIES> 2,014,244
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,930,028
<DEPRECIATION> 4,552,468
<TOTAL-ASSETS> 5,630,357
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,456,209
<TOTAL-LIABILITY-AND-EQUITY> 5,630,357
<SALES> 0
<TOTAL-REVENUES> 157,353
<CGS> 0
<TOTAL-COSTS> 130,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 27,153
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,153
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
