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
June 30, 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
Index to Financial Statements
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of June 30, 1997 and December 31, 1998 -
Unaudited
Statements of Operations for the six and three months ended June
30, 1997 and 1998 - Unaudited
Statements of Partners' Capital for the six months ended June 30,
1998 - Unaudited
Statements of Cash Flows for the six months ended June 30, 1997
and 1998 - Unaudited
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Balance Sheets
December 31, 1997 and June 30, 1998
(Unaudited)
Assets
1997 1998
---- ----
Cash and cash equivalents $ 519,678 262,375
Securities available for sale 1,673,707 2,014,429
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) (4,655,619)
--------- ---------
3,480,710 3,274,409
Other assets, net 2,506 103
--------- ---------
$ 5,676,601 5,551,316
========= =========
Liabilities and Partners' Capital
Accounts payable 25,382 19,431
Other liabilities 157,589 118,361
Due to affiliates 3,273 2,325
--------- ---------
Total liabilities 186,244 140,117
Partners' capital:
49,041 limited partnership units issued
and outstanding 5,490,357 5,411,199
--------- ---------
$ 5,676,601 5,551,316
========= =========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Operations
For the six and three month periods ended June 30, 1997 and 1998
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
1997 1998 1997 1998
---- ---- ---- ----
Revenues:
Rental income $251,720 236,986 125,860 107,337
Interest income 47,268 56,360 24,142 28,716
Other income 400 370 90 310
-------- -------- -------- --------
Total revenues 299,388 293,716 150,092 136,363
-------- -------- -------- --------
Costs and expenses:
Depreciation 206,301 206,301 103,151 103,151
Property operations:
Property management fees to
affiliate 2,517 2,370 1,258 1,074
Other 2,027 2,406 1,015 1,203
General and administrative:
To affiliates 14,664 17,026 6,608 8,868
Other 25,861 22,168 6,496 5,775
-------- -------- -------- --------
Total costs and expenses 251,370 250,271 118,528 120,071
-------- -------- -------- --------
Net income $ 48,018 43,445 31,564 16,292
======== ======== ======== ========
Net income per weighted
average limited partnership
unit outstanding $ .97 .88 .64 .33
======== ======== ======== ========
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 six months ended June 30, 1998
(Unaudited)
Limited General
Partners Partners Total
----------- ----------- -----------
Balance at December 31, 1997 $ 5,491,826 (1,469) 5,490,357
Limited partner distributions (122,603) -- (122,603)
Net income 43,011 434 43,445
----------- ----------- -----------
Balance at June 30, 1998 $ 5,412,234 (1,035) 5,411,199
=========== =========== ===========
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 six months ended June 30, 1997 and 1998
(Unaudited)
1997 1998
---- ----
Operating Activities:
Net income $ 48,018 43,445
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 206,301 206,301
Non-cash portion of rental income (16,914) (16,914)
Changes in operating assets and liabilities:
Increase (decrease) in accounts
payable, other liabilities
and due to affiliates 7,000 (29,213)
Decrease (increase) in other
assets, net (15,846) 2,403
----------- -----------
Net cash provided by operating
activities 228,559 206,022
----------- -----------
Investing Activities:
Redemption and sale of securities
available for sale 3,190,189 3,674,327
Purchase of securities
available for sale (3,230,639) (4,015,049)
----------- -----------
Net cash used in
investing activities (40,450) (340,722)
----------- -----------
Financing Activities:
Limited partner distributions (122,603) (122,603)
----------- -----------
Net cash used by financing
activities (122,603) (122,603)
----------- -----------
Increase (decrease) in cash and
cash equivalents 65,506 (257,303)
Cash and cash equivalents at
beginning of period 332,701 519,678
----------- -----------
Cash and cash equivalents
at end of period $ 398,207 262,375
=========== ===========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Notes to Unaudited Financial Statements
June 30, 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 was occupied solely by
Federal Express Corporation pursuant to a lease that expired May 31, 1998.
Federal Express vacated the property on that date and the Partnership is not
currently receiving rent on this property. 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:
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
1997 1998 1997 1998
---- ---- ---- ----
Rental income $515,313 502,182 251,036 241,392
Other income 4,960 4,757 2,306 1,099
-------- -------- -------- --------
520,273 506,939 253,342 242,491
-------- -------- -------- --------
Property operating expenses 275,584 336,613 140,642 176,502
Ground rent 18,684 18,684 9,342 9,342
-------- -------- -------- --------
294,268 355,297 149,984 185,844
-------- -------- -------- --------
Operating income $226,005 151,642 103,358 56,647
======== ======== ======== ========
Note 3 - Other Liabilities
Other liabilities at December 31, 1997 and June 30, 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 six and three months ended June 30, 1997 and 1998, compensation to
general partners and affiliates was as follows:
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
1997 1998 1997 1998
---- ---- ---- ----
Reimbursement for administrative
and accounting services $14,664 17,026 6,608 8,868
Property management fees (a) 2,517 2,370 1,258 1,074
------- ------- ------- -------
Total 17,181 19,396 7,866 9,942
======= ======= ======= =======
(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 a treasury bill that matured in February 1998, the cost of
which approximated fair value. At June 30, 1998, the partnership held a treasury
bill and commercial paper that mature in August 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
June 30, 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 is net leased to a tenant. The Federal
Express Distribution Center was occupied solely by Federal Express Corporation
pursuant to a lease that expired May 31, 1998. Federal Express vacated the
property on that date and the Partnership is not currently receiving rent on
this property. The Partnership has begun the search for either a replacement
tenant or a buyer for the property.
Rental income decreased approximately $15,000 and $19,000 for the six and three
month periods ended June 30, 1998 as compared to the 1997 periods primarily due
to the vacancy of the Federal Express building, effective May 31, 1998. This
decrease was partially offset with an increase in rent in July 1997 at Federal
Express.
Interest income increased approximately $9,000 and $5,000 for six and three
month periods ended June 30, 1998 as compared to the comparable periods in 1997
primarily due to an increase in investable funds.
Other general and administrative expenses decreased approximately $4,000 for the
six months ended June 30, 1998 as compared to the 1997 period primarily due to a
decrease in legal fees.
At June 30, 1998, the Partnership had approximately $262,000 of cash and cash
equivalents and approximately $2.0 million in a treasury bill and commercial
paper included in securities available for sale. The Partnership has been paying
distributions of $5.00 per $1,000 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
June 30, 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 June 30, 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: August 12, 1998 By: /s/ Alan B. Levan
-------------------
Alan B. Levan, President
Date: August 12, 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 JUNE 30,
1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 262,375
<SECURITIES> 2,014,429
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,930,028
<DEPRECIATION> (4,655,619)
<TOTAL-ASSETS> 5,551,316
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,411,199
<TOTAL-LIABILITY-AND-EQUITY> 5,551,316
<SALES> 0
<TOTAL-REVENUES> 293,716
<CGS> 0
<TOTAL-COSTS> 250,271
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 43,445
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,445
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
</TABLE>
