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, 1999 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
Index to Financial Statements
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of March 31, 1999 and December 31, 1998 - Unaudited
Statements of Operations for the three months ended March 31, 1998 and
1999 - Unaudited
Statements of Partners' Capital for the three months ended March 31,
1999 - Unaudited
Statements of Cash Flows for the three months ended March 31, 1998 and
1999 - 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, 1998 and March 31, 1999
(Unaudited)
Assets
1998 1999
---- ----
Cash and cash equivalents $ 2,235,268 2,226,190
Investments in real estate:
Office building 5,782,761 5,782,761
Warehouse building 2,109,267 1,829,267
----------- -----------
7,892,028 7,612,028
Less accumulated depreciation (4,861,920) (4,965,070)
----------- -----------
3,030,108 2,646,958
Other assets, net 29,763 37,051
----------- -----------
$ 5,295,139 4,910,199
=========== ===========
Liabilities and Partners' Capital
Accounts payable 18,931 23,182
Other liabilities 101,449 92,990
Due to affiliates 3,491 3,520
----------- -----------
Total liabilities 123,871 119,692
Partners' capital:
49,041 limited partnership units issued
and outstanding 5,171,268 4,790,507
----------- -----------
$ 5,295,139 4,910,199
=========== ===========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Operations
For the three months ended March 31, 1998 and 1999
(Unaudited)
Three Months Ended
March 31,
---------
1998 1999
---- ----
Revenues:
Rental income $129,649 62,709
Interest income 27,644 25,517
Other income 60 --
-------- --------
Total revenues 157,353 88,226
-------- --------
Costs and expenses:
Depreciation 103,150 103,150
Impairment loss on real estate -- 280,000
Property operations:
Property management fees to affiliate 1,296 628
Other 1,203 7,018
General and administrative:
To affiliates 8,158 9,088
Other 16,393 7,802
-------- --------
Total costs and expenses 130,200 407,686
-------- --------
Net income (loss) $ 27,153 (319,460)
======== ========
Net income (loss) per weighted average
limited partnership unit outstanding $ .55 (6.45)
======== ========
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, 1999
(Unaudited)
Limited General
Partners Partners Total
-------- -------- -----
Balance at December 31, 1998 $ 5,173,476 (2,208) 5,171,268
Limited partner distributions (61,301) -- (61,301)
Net loss (316,265) (3,195) (319,460)
----------- ----------- -----------
Balance at March 31, 1999 $ 4,795,910 (5,403) 4,790,507
=========== =========== ===========
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, 1998 and 1999
(Unaudited)
1998 1999
---- ----
Operating Activities:
Net income (loss) $ 27,153 (319,460)
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 103,150 103,150
Impairment loss on real estate -- 280,000
Non-cash portion of rental income (8,457) (8,457)
Changes in operating assets and liabilities:
Increase (decrease) in accounts
payable, other
liabilities and due to affiliates (3,639) 4,278
Increase in other
assets, net (16,880) (7,288)
----------- -----------
Net cash provided by operating
activities 101,327 52,223
----------- -----------
Investing Activities:
Redemption and sale of securities
available for sale 1,673,707 --
Purchase of securities
available for sale (2,014,244) --
----------- -----------
Net cash used in
investing activities (340,537) --
----------- -----------
Financing Activities:
Limited partner distributions (61,301) (61,301)
----------- -----------
Net cash used by financing
activities (61,301) (61,301)
----------- -----------
Decrease in cash and
cash equivalents (300,511) (9,078)
Cash and cash equivalents at
beginning of period 519,678 2,235,268
----------- -----------
Cash and cash equivalents
at end of period $ 219,167 2,226,190
=========== ===========
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, 1999
Note 1 - General
The accompanying financial statements have been prepared by the Partnership in
accordance with the accounting policies described in its 1998 Annual Report and
should be read in conjunction with the notes to financial statements which
appear in that report. Certain prior year balances have been reclassified to
conform with the 1999 presentation.
Note 2 - Real Estate
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 was occupied solely by Federal Express
Corporation pursuant to a lease which expired May 31, 1998. Federal Express
vacated the property on that date and the Partnership is not currently receiving
rent on this property. In April 1999, the Partnership entered into a contract to
sell the property for approximately $918,500. Based upon the proceeds
anticipated to be received, the Partnership reduced the carrying value of the
property by approximately $280,000.
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:
Three Months Ended
March 31,
---------
1998 1999
---- ----
Rental income $260,790 261,961
Other income 3,658 903
-------- --------
264,448 262,864
-------- --------
Property operating expenses 160,111 179,576
Ground rent 9,342 9,342
-------- --------
169,453 188,918
-------- --------
Operating income $ 94,995 73,946
======== ========
Note 3 - Other Liabilities
Other liabilities at December 31, 1998 and March 31, 1999 consisted 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, 1998 and 1999, compensation to general
partners and affiliates was as follows:
Three Months Ended
March 31,
---------
1998 1999
---- ----
Reimbursement for administrative
and accounting services $8,158 9,088
Property management fees (a) 1,296 628
------ ------
Total 9,454 9,716
====== ======
(a) Property management fees are computed as 1% of rental income.
Note 5 - Management Representation
In the opinion of management, the accompanying financial statements contain such
adjustments as are necessary to present fairly the Partnership's unaudited
consolidated statements of financial condition at March 31, 1999 and December
31, 1998, the unaudited consolidated statements of operations for the three
months ended March 31, 1999 and 1998, the unaudited consolidated statements of
stockholders' equity for the three months ended March 31, 1999 and the unaudited
consolidated statements of cash flows for the three months ended March 31, 1999
and 1998. Such adjustments consisted only of normal recurring items. The
unaudited consolidated financial statements and related notes are presented as
permitted by Form 10-Q and should be read in conjunction with the notes to
consolidated financial statements appearing in the Partnership's Annual Report
on Form 10K for the year ended December 31, 1998.
<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, 1999
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 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. In April 1999, the
Partnership entered into a contract to sell the property for
approximately $918,500.
* 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. After an auction in April 1999, the Partnership entered
into a contract to sell the property for approximately $918,500. Based upon the
proceeds anticipated to be received, the Partnership reduced the carrying value
of the property by approximately $280,000.
Rental income decreased approximately $67,000 for the three months ended March
31, 1999 as compared to the 1998 period primarily due to the vacancy of the
Federal Express building, effective May 31, 1998.
Other property operations cost and expenses increased approximately $6,000 for
the three months ended March 31, 1999 as compared to the comparable period in
1998 primarily due to increases in insurance, real estate taxes and maintenance
as a result of the vacancy at Federal Express.
Other general and administrative expenses decreased for the three months ended
March 31, 1999 as compared to the same period in 1998 primarily due to the
appraisal fees paid in 1998 associated with appraisals on the Galleria and
Federal Express properties.
At March 31, 1999, the Partnership had approximately $2.2 million of cash and
cash equivalents. Included in cash and cash equivalents is approximately $2.0
million in commercial paper. The Partnership has annually been paying
distributions of $5.00 per $1,000 of original capital ($1.25 quarterly) 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. Due to the uncertainties involving
the real estate market, management cannot reasonably determine the Partnership's
long term liquidity position. However, management believes the Partnership
currently has sufficient liquidity for operations and to meet its obligations
and commitments for the foreseeable future.
The Partnership's computer system is composed of seven personal computers
running on a Windows NT network. The Partnership's primary in-house computer
applications consist of general ledger, accounts payable, property management,
spreadsheet and database applications. The personal computers have been checked
and found to be year 2000 compliant. The vendor of the general ledger, accounts
payable and property management packages have indicated that their software is
also year 2000 compliant. The spreadsheet and database applications utilized are
the most recent versions available from Microsoft. Accordingly, the Partnership
does not expect to expend material amounts to remediate any year 2000 problems.
Should any of the Partnership's systems fail, the Partnership believes it would
be able to process its data and monitor its accounts through manual systems or
other alternative means. Additionally, based on discussions with the lessee of
the Galleria property the Partnership does not anticipate that it will have any
material expenditure associated with year 2000 issues with respect to real
estate owned by the Partnership.
Part II - Other Information
March 31, 1999
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, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
I.R.E. PENSION INVESTORS, LTD.-II
Registrant
By: I.R.E. Pension Advisors II, Corp.
Managing General Partner of Registrant
Date: May 14, 1999 By: /s/ Alan B. Levan
------------------------
Alan B. Levan, President
Date: May 14, 1999 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, 1999 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,226,190
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,612,028
<DEPRECIATION> (4,965,070)
<TOTAL-ASSETS> 4,910,199
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,790,507
<TOTAL-LIABILITY-AND-EQUITY> 4,910,199
<SALES> 0
<TOTAL-REVENUES> 88,226
<CGS> 0
<TOTAL-COSTS> 407,686
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (319,460)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (319,460)
<EPS-PRIMARY> (6.45)
<EPS-DILUTED> (6.45)
</TABLE>
