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, 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 December 31, 1998 and June 30, 1999 -
Unaudited
Statements of Operations for the six and three month periods
ended June 30, 1998 and 1999 - Unaudited
Statements of Partners' Capital for the six months ended June
30, 1999 - Unaudited
Statements of Cash Flows for the six months ended June 30, 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 June 30, 1999
(Unaudited)
Assets
1998 1999
---- ----
Cash and cash equivalents $ 2,235,268 518,673
Investments in real estate:
Office building 5,782,761 5,782,761
Warehouse building 2,109,267 --
----------- -----------
7,892,028 5,782,761
Less accumulated depreciation (4,861,920) (4,040,011)
----------- -----------
3,030,108 1,742,750
Other assets, net 29,763 5,747
----------- -----------
$ 5,295,139 2,267,170
=========== ===========
Liabilities and Partners' Capital
Accounts payable 18,931 18,770
Other liabilities 101,449 84,533
Due to affiliates 3,491 3,832
----------- -----------
Total liabilities 123,871 107,135
Partners' capital:
49,041 limited partnership units issued
and outstanding 5,171,268 2,160,035
----------- -----------
$ 5,295,139 2,267,170
=========== ===========
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, 1998 and 1999
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
---------------- ----------------
1998 1999 1998 1999
---- ---- ---- ----
Revenues:
Rental income $ 236,986 125,416 107,337 62,707
Interest income 56,360 51,734 28,716 26,217
Sale of real estate -- 918,500 -- 918,500
Other income 370 -- 310 --
---------- ---------- ---------- ----------
Total revenues 293,716 1,095,650 136,363 1,007,424
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sale of real estate -- 902,663 -- 902,663
Impairment loss of real estate -- 280,000 -- --
Depreciation 206,301 204,327 103,151 101,177
Property operations:
Property management fees
to affiliate 2,370 1,254 1,074 626
Other 2,406 13,683 1,203 6,665
General and administrative:
To affiliates 17,026 17,594 8,868 8,506
Other 22,168 14,629 5,775 6,827
---------- ---------- ---------- ----------
Total costs and expenses 250,271 1,434,150 120,071 1,026,464
---------- ---------- ---------- ----------
Net income (loss) $ 43,445 (338,500) 16,292 (19,040)
========== ========== ========== ==========
Net income (loss) per weighted
average limited partnership
unit outstanding $ .88 (6.83) .33 (.38)
========== ========== ========== ==========
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, 1999
(Unaudited)
Limited General
Partners Partners Total
-------- -------- -----
Balance at December 31, 1998 $ 5,173,476 (2,208) 5,171,268
Limited partner distributions (2,672,733) -- (2,672,733)
Net loss (335,115) (3,385) (338,500)
----------- ----------- -----------
Balance at June 30, 1999 $ 2,165,628 (5,593) 2,160,035
=========== =========== ===========
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, 1998 and 1999
(Unaudited)
1998 1999
---- ----
Operating Activities:
Net income (loss) $ 43,445 (338,500)
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation 206,301 204,327
Impairment loss on real estate -- 280,000
Gain on sale of real estate, net -- (15,837)
Non-cash portion of rental income (16,914) (16,914)
Changes in operating assets and liabilities:
Decrease in accounts
payable, other
liabilities and due to affiliates (29,213) (3,123)
Decrease in other
assets, net 2,403 24,016
----------- -----------
Net cash provided by operating
activities 206,022 133,969
----------- -----------
Investing Activities:
Proceeds on sale of real estate, net -- 822,169
Redemption and sale of securities
available for sale 3,674,327 --
Purchase of securities
available for sale (4,015,049) --
----------- -----------
Net cash used in
investing activities (340,722) 822,169
----------- -----------
Financing Activities:
Limited partner distributions (122,603) (2,672,733)
----------- -----------
Net cash used by financing
activities (122,603) (2,672,733)
----------- -----------
Decrease in cash and
cash equivalents (257,303) (1,716,595)
Cash and cash equivalents at
beginning of period 519,678 2,235,268
----------- -----------
Cash and cash equivalents
at end of period $ 262,375 518,673
=========== ===========
See accompanying notes to unaudited financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Notes to Unaudited Financial Statements
June 30, 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. In June 1999, the Partnership sold the
property to an unaffiliated third party for approximately $918,500. Proceeds
received on the sale, net of selling cost were approximately $822,000 and a net
gain on the sale of real estate of approximately $16,000 was recognized during
the quarter ended June 30, 1999. During the quarter ended March 31, 1999, 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:
Six Months Ended Three Months Ended
June 30, June 30,
----------------- -----------------
1998 1999 1998 1999
---- ---- ---- ----
Rental income $502,182 516,805 254,844 241,392
Other income 4,757 4,781 3,878 1,099
-------- -------- -------- --------
506,939 521,586 258,722 242,491
-------- -------- -------- --------
Property operating expenses 336,613 342,044 162,468 176,502
Ground rent 18,684 18,684 9,342 9,342
-------- -------- -------- --------
355,297 360,728 171,810 185,844
-------- -------- -------- --------
Operating income $151,642 160,858 86,912 56,647
======== ======== ======== ========
Note 3 - Other Liabilities
Other liabilities at December 31, 1998 and June 30, 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 six and three month periods ended June 30, 1998 and 1999,
compensation to general partners and affiliates was as follows:
Six Months Ended Three Months Ended
June 30, June 30,
-------------- --------------
1998 1999 1998 1999
---- ---- ---- ----
Reimbursement for administrative
and accounting services $17,026 17,594 8,868 8,506
Property management fees (a) 2,370 1,254 1,074 626
------- ------- ------- -------
Total 19,396 18,848 9,942 9,132
======= ======= ======= =======
(a) Property management fees are computed as 1% of rental income.
Note 5 - Distribution
On June 30, 1999, utilizing the proceeds from the sale of the office/warehouse
building in Jacksonville, Florida and a portion of the Partnership's cash
reserves, the Partnership paid a special distribution of approximately $2.6
million or $208 per $1,000 of original capital.
Note 6 - 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 June 30, 1999 and December 31,
1998, the unaudited consolidated statements of operations for the six and three
month periods ended June 30, 1999 and 1998, the unaudited consolidated
statements of partners' capital for the six months ended June 30, 1999 and the
unaudited consolidated statements of cash flows for the six months ended June
30, 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
June 30, 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 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:
o Federal Express Distribution Center - A 38,000 square foot warehouse
building located in Jacksonville, Florida. In June 1999, the Partnership
sold the property for approximately $918,500.
o 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. Based upon the proceeds anticipated to be
received, the Partnership reduced the carrying value of the property by
approximately $280,000. In June 1999, the property was sold for approximately
$918,500. Proceeds received, net of selling cost were approximately $822,000 and
a net gain on the sale of real estate of approximately $16,000 was recognized
during the quarter ended June 30, 1999.
Rental income decreased approximately $112,000 and $45,000 for the six and three
month periods ended June 30, 1999 as compared to the 1998 periods primarily due
to the vacancy of the Federal Express building, effective May 31, 1998.
Interest income decreased approximately $5,000 and $2,000 for the six and three
month periods ended June 30, 1999 as compared to the same periods in 1998
primarily due decreases in investable funds and yields on those investments.
Depreciation expense decreased approximately $2,000 for the six and three month
periods ended June 30, 1999 as compared to the same periods in 1998 due to the
sale of Federal Express in June 1999.
Other property operations cost and expenses increased approximately $11,000 and
$5,000 for the six and three month periods ended June 30, 1999 as compared to
the comparable periods 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 approximately $8,000 for the
six months ended June 30, 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 June 30, 1999, the Partnership had approximately $519,000 of cash and cash
equivalents. 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.
In June 1999, the Partnership paid a special distribution of approximately $2.6
million or $208 per $1,000 of original capital.
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 is currently trying
to sell the Galleria Professional Building after which the Partnership would be
liquidated.
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
June 30, 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 June
30, 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: August 3, 1999 By: /s/ Alan B. Levan
------------------------------------------
Alan B. Levan, President
Date: August 3, 1999 By: /s/ Glen R. Gilbert
------------------------------------------
Glen R. Gilbert, Executive Vice President,
Chief Accounting Officer and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE
30, 1999 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 518,673
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,782,761
<DEPRECIATION> (4,040,011)
<TOTAL-ASSETS> 2,267,170
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,160,035
<TOTAL-LIABILITY-AND-EQUITY> 2,267,170
<SALES> 0
<TOTAL-REVENUES> 1,095,650
<CGS> 0
<TOTAL-COSTS> 1,434,150
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (338,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (338,500)
<EPS-BASIC> (6.83)
<EPS-DILUTED> (6.83)
</TABLE>
