SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File Number
December 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
Documents Incorporated by Reference
Portions of the Prospectus of the Registrant, dated October 4, 1985, are
incorporated by reference into Part IV.
<PAGE>
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 factors identified in 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.
PART I
ITEM 1. BUSINESS
- ----------------
I.R.E. PENSION INVESTORS, LTD.-II, a limited partnership organized under the
laws of the State of Florida in 1985, is primarily engaged in the business of
operating and holding for investment, income producing real properties. The
Partnership did not utilize borrowings in connection with the purchase of its
properties. The Partnership commenced a public offering of its units of limited
partnership interest in October 1985. The required escrow relative to the
Partnership was reached and subscription funds were transferred to the
Partnership on December 26, 1985 ("Inception"). The Partnership closed the
offering in October 1987, having raised $12,373,750 in capital and issued 49,491
units of limited partnership interests at $250 per unit. Galleria Professional
Building and a minority interest in One West Nine Mile Joint Venture were
acquired during 1986 and the Federal Express Distribution Center was acquired
during 1987. In December 1991, the One West Nine Mile Joint Venture was sold and
in June 1999, the Federal Express Distribution Center was sold.
Uninvested cash of the Partnership is deposited in demand accounts with
commercial banks and may be invested temporarily in U.S. Treasury Bills,
certificates of deposit or other interest bearing accounts or investments.
Alan B. Levan and I.R.E. Pension Advisors II, Corp. are the general partners of
the Partnership. I.R.E. Pension Advisors II, Corp., as Managing General Partner,
manages and controls the Partnership's affairs and has general responsibility
and the ultimate authority in all matters affecting the Partnership's business.
Affiliates of the general partners of the Partnership also own and operate their
own improved real estate and may have investment objectives and policies similar
to those of the Partnership. The Partnership may be in competition with other
limited partnerships served by affiliates of the Managing General Partner or
other companies affiliated with the general partner.
On December 31, 1999, the Partnership had no employees. The balance of
information required in Item 1 is either inapplicable or not material to an
understanding of the Partnership's business.
ITEM 2. PROPERTIES
- ------------------
The property listed below is not utilized by the Partnership but is held for
investment. It is zoned for its current use.
Galleria Professional Office Building 60,965 square owned
Fort Lauderdale, FL feet leasable
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP INTEREST
AND RELATED SECURITY HOLDER MATTERS
- -----------------------------------------------------------------------------
a) There is no established public trading market for the Partnership's units
of limited partnership interest.
b) There are approximately 1,630 holders of units of limited partnership
interest as of February 28, 2000.
c) See Item 6. -Selected Financial Data regarding the Partnership's
distributions, incorporated herein by reference as if set forth herein.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
For the five years ended December 31, 1999.
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 588,142 595,779 611,804 476,576 1,236,389
=========== ========= ========= ========= ==========
Net income (loss) $ 93,716 (6,107) 123,200 (73,884) (408,444)
=========== ========= ========= ========= ==========
Net income (loss) per
weighted average
limited partnership
unit outstanding $ 1.88 (.12) 2.49 (1.49) (8.25)
=========== ========= ========= ========= ==========
Total assets $ 6,230,003 5,818,603 5,676,601 5,295,139 2,068,289
=========== ========= ========= ========= ==========
Partners' capital $ 5,932,102 5,612,362 5,490,357 5,171,268 1,967,487
=========== ========= ========= ========= ==========
Distributions per
weighted average
limited partnership
unit outstanding $ 5.00 5.00 5.00 5.00 57.00
=========== ========= ========= ========= ==========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF I.R.E. PENSION INVESTORS, LTD. - II
- -------------------------------------------------------------------------
A description of the Partnership's investment properties during 1999 follows:
* Galleria Professional Building ("Galleria") - A 61,000 square foot
office building located in Fort Lauderdale, Florida.
* Federal Express Distribution Center ("Federal Express") - A 38,000
square foot warehouse building located in Jacksonville, Florida. In
June 1999, the Partnership sold the property for approximately
$918,500.
The Partnership was organized in September 1985 and is engaged in the business
of operating and holding for investment, income producing real properties. In
December 1986, the Partnership acquired Galleria and in December 1987, the
Partnership acquired Federal Express.
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. In June 1999, the property was sold for approximately
$918,500. Proceeds received, net of selling costs were approximately $811,000
and a net gain on the sale of real estate of approximately $8,000 was recognized
in 1999.
Rental income decreased for the years ended December 31, 1999 and 1998 as
compared to the prior years primarily due to the vacancy of the Federal Express
building, effective May 31, 1998.
Interest income decreased approximately $46,000 for the year ended December 31,
1999 as compared to the same period in 1998 primarily due to a decrease in
investable funds. Interest income increased for the year ended December 31, 1998
as compared to the comparable period in 1997 primarily due to increases in funds
available for investments and yields on those investments.
Depreciation expense decreased approximately $46,000 for the year ended December
31, 1999 as compared to the same period in 1998 due to the sale of Federal
Express in June 1999.
After an auction in April 1999, the Partnership entered into a contract to sell
the Federal Express property and based upon the proceeds anticipated to be
received, the Partnership reduced the carrying value of the property by
approximately $280,000. In 1998 the carrying value of Federal Express was
further reduced by approximately $38,000 to its estimated fair value in 1998. In
June 1999, the property was sold to an unaffiliated third party for
approximately $918,500.
Other property operations increased for the year ended December 31, 1998 as
compared to the comparable period in 1997 primarily due to increases in
insurance, real estate taxes and maintenance as a result of the vacancy at
Federal Express in May 1998.
Other general and administrative expenses decreased approximately $12,000 for
the year ended December 31, 1999 as compared to the same period in 1998
primarily due to a reduction in professional fees associated with the
elimination of the Federal Express appraisal and the 1997 appraisal fees paid in
1998 for Galleria and Federal Express. Other general and administrative expenses
increased for the year ended December 31, 1998 as compared to the same period in
1997 primarily due to the 1997 appraisal fees paid in 1998 for Galleria and
Federal Express.
When the Partnership acquired the Galleria Professional Building in 1986, it
executed a net lease with the seller, leasing the property back to the seller on
a totally net basis. The lease, which expires in 2016, requires a minimum annual
rental of $217,000 per annum plus 10% of the property income, as defined,
between $217,000 and $467,000 and 50% of the property income in excess of
$467,000. Based on operations of the property reflected in information provided
by the tenant, no percentage rent was paid in 1999. Commencing 2002, the
Partnership and the tenant have a buy/sell option for this property, which may
be exercised by either the Partnership or the tenant. In essence, this option
gives the tenant the right to purchase the property at its then fair market
value or allows the Partnership to terminate the tenant lease. As part of this
option, $6,000,000 plus the excess between approximately $100,000 per month and
actual rent paid during the lease term (less certain defined offsets) can
constitute the Partnership's offer to sell under the option. In such event, if
the tenant fails to purchase the property at such price, the lease would be
terminated and the Partnership would have no obligation to pay any part of the
offering price to the tenant.
At December 31, 1999, the Galleria Professional Building was 100% percent
occupied, with an average leasing rate of approximately $16.94 per square foot.
As indicated above, the lessee is responsible for any and all costs associated
with the property. Galleria Professional Building is located in Fort Lauderdale
Florida on the Middle River Waterway. There are several mid-rise office
buildings in the area. Galleria Mall, a large regional shopping center, is
located east of this property. Rental rates of the mid-rise office buildings in
close proximity to the Galleria Professional Building were similar to those
being charged by the Galleria Professional Building.
At December 31, 1999, the Partnership had approximately $484,000 of cash and
cash equivalents. The Partnership has annually been paying distributions of
$5.00 per limited partnership unit ($1.25 quarterly) since the fourth quarter of
1990. In addition, during 1999, the Partnership also paid a special distribution
of $52 per limited partnership unit.
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 did not experience any problems associated with year 2000
issues.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
ITEM 8. INDEX TO FINANCIAL STATEMENTS
- -------------------------------------
Independent Auditors' Report
Financial Statements:
Balance Sheets - December 31, 1998 and 1999
Statements of Operations - For each of the Years in the Three Year Period
ended December 31, 1999
Statements of Partners' Capital - For each of the Years in the Three Year
Period ended December 31, 1999
Statements of Cash Flows - For each of the Years in the Three Year Period
ended December 31, 1999
Notes to Financial Statements
ITEM 14. FINANCIAL STATEMENT SCHEDULES
- --------------------------------------
III. Properties and Accumulated Depreciation - December 31, 1999.
All other schedules are omitted as the required information is either not
applicable or is presented in the financial statements and related notes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Partners
I.R.E. Pension Investors, Ltd. - II:
We have audited the financial statements of I.R.E. Pension Investors, Ltd. - II
(a Florida Limited Partnership), as listed in the accompanying index. In
connection with our audits of the financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
financial statements and financial statement schedule are the responsibility of
I.R.E. Pension Investors, Ltd. - II's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of I.R.E. Pension Investors, Ltd.
- - II, at December 31, 1999 and 1998, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1999, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG LLP
Fort Lauderdale, Florida
March 20, 2000
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Balance Sheets
December 31, 1998 and 1999
Assets
------
1998 1999
---- ----
Cash and cash equivalents $ 2,235,268 484,362
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) (4,201,927)
----------- ----------
3,030,108 1,580,834
Other assets, net 29,763 3,093
----------- ----------
$ 5,295,139 2,068,289
=========== ==========
Liabilities and Partners' Capital
---------------------------------
Accounts payable 18,931 28,420
Other liabilities 101,449 67,619
Due to affiliates 3,491 4,763
----------- ----------
Total liabilities 123,871 100,802
Partners' capital:
49,041 limited partnership units issued
and outstanding 5,171,268 1,967,487
----------- ----------
$ 5,295,139 2,068,289
=========== ==========
See accompanying notes to financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Operations
For each of the Years in the Three Year Period ended December 31, 1999
1997 1998 1999
---- ---- ----
Revenues:
Rental income $511,018 362,398 250,830
Interest income 99,493 113,558 67,059
Sale of real estate -- -- 918,500
Other income 1,293 620 --
-------- -------- ----------
Total revenues 611,804 476,576 1,236,389
-------- -------- ----------
Costs and expenses:
Cost of sale -- -- 910,669
Depreciation 412,602 412,602 366,243
Impairment loss on real estate -- 38,000 280,000
Property operations:
Property management fees to affiliate 5,110 3,624 2,509
Other 4,432 17,640 16,885
General and administrative:
To affiliates 30,544 32,490 34,649
Other 35,916 46,104 33,878
-------- -------- ----------
Total costs and expenses 488,604 550,460 1,644,833
-------- -------- ----------
Net income (loss) $123,200 (73,884) (408,444)
======== ======== ==========
Net income (loss) per weighted average
limited partnership unit outstanding $ 2.49 (1.49) (8.25)
======== ======== ==========
See accompanying notes to financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Partners' Capital
For each of the Years in the Three Year Period ended December 31, 1999
Limited General
Partners Partners Total
-------- -------- -----
Balance at December 31, 1996 $ 5,615,063 (2,701) 5,612,362
Limited partner distributions (245,205) -- (245,205)
Net income 121,968 1,232 123,200
----------- ------ ----------
Balance at December 31, 1997 5,491,826 (1,469) 5,490,357
Limited partner distributions (245,205) -- (245,205)
Net loss (73,145) (739) (73,884)
----------- ------ ----------
Balance at December 31, 1998 5,173,476 (2,208) 5,171,268
Limited partner distributions (2,795,337) -- (2,795,337)
Net loss (404,360) (4,084) (408,444)
----------- ------ ----------
Balance at December 31, 1999 $ 1,973,779 (6,292) 1,967,487
=========== ====== ==========
See accompanying notes to financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Statements of Cash Flows
For each of the Years in the Three Year Period Ended December 31, 1999
1997 1998 1999
---- ---- ----
Operating Activities:
Net income (loss) $ 123,200 (73,884) (408,444)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 412,602 412,602 366,243
Impairment loss on real estate -- 38,000 280,000
Non-cash portion of rental income (33,828) (33,828) (33,828)
Gain on sale of real estate, net -- -- (7,831)
Changes in operating assets and
liabilities:
Increase (decrease) in accrued
expenses, accounts payable,
other liabilities and due
to affiliates 13,831 (28,545) 10,759
Decrease (increase) in other
assets, net (169) (27,257) 26,670
----------- ----------- ----------
Net cash provided by operating
activities 515,636 287,088 233,569
Investing Activities:
Proceeds on sale of real estate, net -- -- 810,862
Redemption and sale of securities
available for sale 6,451,355 11,714,710 --
Purchase of securities
available for sale (6,534,809) (10,041,003) --
----------- ----------- ----------
Net cash provided by (used in)
investing activities (83,454) 1,673,707 810,862
----------- ----------- ----------
Financing Activities:
Limited partner distributions (245,205) (245,205) (2,795,337)
----------- ----------- ----------
Net cash used by financing
activities (245,205) (245,205) (2,795,337)
----------- ----------- ----------
Increase (decrease) in cash and
cash equivalents 186,977 1,715,590 (1,750,906)
Cash and cash equivalents at
beginning of year 332,701 519,678 2,235,268
----------- ----------- ----------
Cash and cash equivalents
at end of year $ 519,678 2,235,268 484,362
=========== =========== ==========
See accompanying notes to financial statements.
<PAGE>
I.R.E. Pension Investors, Ltd.-II
(A Florida Limited Partnership)
Notes to Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------
General
- -------
I.R.E. Pension Investors, Ltd. - II (the "Partnership") was organized on
September 30, 1985 in accordance with the provisions of the Florida Uniform
Limited Partnership Act to invest in, hold and manage income producing real
estate. A sufficient amount of capital was raised to allow funds to be released
from escrow to the Partnership on December 26, 1985. The Partnership closed its
offering of limited partnership units in October 1987 after having raised
$12,373,750.
The Managing General Partner has complete authority in the management and
control of the Partnership. I.R.E. Pension Advisors II, Corp. is the Managing
General Partner and Alan B. Levan is the individual General Partner of the
Partnership. The General Partners may serve in the same capacity for other
entities having similar investment objectives. Should any conflicts of interest
arise among these entities, the management of the managing general partners
will, at their sole discretion, resolve such conflicts.
Basis of Financial Statement Presentation
- -----------------------------------------
The financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP"). In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the statements of
financial condition and income and expenses for the periods presented. Actual
results could differ significantly from those estimates. A material estimate
that is susceptible to significant change in the next year relates to the
determination of the impairment loss on real estate.
Compensation or Reimbursements to General Partners and Affiliates
- -----------------------------------------------------------------
The General Partners and/or their affiliates are entitled to receive
compensation or reimbursements only as specified by the Partnership Agreement.
The determination of amount and timing of payment is subject to certain
limitations and to cash distribution preferences of limited partners. Following
is a brief description of such compensation and the services to be rendered:
Property Management Fee:
- ------------------------
Due for services in connection with the continuing professional property
management of the Partnership properties.
Partnership Management Fee:
- ---------------------------
Due for services rendered in evaluating and selecting properties for the
Partnership, reviewing cash requirements including the determination of the
amount and timing of distributions, if any, making decisions as to the
nature and terms of the acquisition and disposition of such properties,
selecting, retaining and supervising consultants, contractors, architects,
engineers, lenders, borrowers, agents and others and otherwise generally
managing the day-to-day operations of the Partnership.
Subordinated Real Estate Commissions:
- -------------------------------------
Related to sales of Partnership properties.
Interest in Cash from Sales or Financing:
- -----------------------------------------
Due also for services as listed under "Partnership Management Fee".
Interest in Net Income and Net Loss as Determined for Federal Income Tax
Purposes:
- ------------------------------------------------------------------------
1% of net losses and the greater of (a) 1% of net income or (b) an amount
of such net income which is in proportion to the percentage of cash
distributed to the General Partners as a Partnership Management Fee or for
their Interest in Cash From Sales or Financing.
Cash and cash equivalents
- -------------------------
Cash equivalents include liquid investments with a maturity of three months or
less.
Properties
- ----------
The properties are assets to be held and used and are stated at cost in the
accompanying statements of financial condition. The office building is
depreciated using the straight-line method over an estimated useful life of 20
years. The distribution center was sold in June 1999 and was depreciated using
the straight-line method over an estimated useful life of 20 years.
Long-lived assets to be held and used by the Partnership are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. In performing the review
for recoverability, the Partnership estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized and the
property's cost basis is reduced. Measurement of an impairment loss for
long-lived assets that the Partnership expects to hold and use is based on the
fair value of the asset.
Income Taxes
- ------------
The payment of income taxes is the obligation of the individual partners;
therefore, there is no provision for income taxes in the accompanying financial
statements. The Partnership's tax returns have not been examined by Federal or
state taxing authorities.
Net income or loss reported for income tax purposes involves, among other
things, various determinations relating to properties purchased. Although
management of the Partnership believes that such determinations are appropriate,
there can be no assurance that the Internal Revenue Service will not contest the
Partnership's tax treatment of various items or, if contested, such treatment
will be sustained by the Courts. Further, there is a possibility that the
Treasury will amend existing regulations or promulgate new regulations, and such
action may be retroactive. Accordingly, the tax status of the Partnership and
the availability of prior and future income tax benefits to limited partners may
be adversely affected.
Rental Income
- -------------
Rental income is recognized under the operating method whereby aggregate rentals
are reported as income over the life of the lease and the costs and expenses are
charged against such revenue. Rental income, from leases with non-level
payments, is recognized ratably over the term of the lease.
(2) PROPERTIES
- --------------
Following is a brief description of the property investments made by the
Partnership.
Galleria Professional Building
- ------------------------------
On December 31, 1986, the Partnership purchased a six story office building
containing 60,965 square feet of net leasable area in Fort Lauderdale, Florida.
The Partnership owns a leasehold interest in a long-term ground lease for two
parcels of land which encompass the building site and parking areas. The lease
commenced in 1955 and expires in 2054. Ground rent is approximately $13,000
annually. Every 20 years the ground rent is adjusted to be equal to five percent
of the then current appraised value of the land. The Partnership also purchased
the rights to the parking agreement with the Galleria Mall. The agreement
requires rental payments and common area maintenance charges which currently
aggregate approximately $25,000 annually. The parking agreement and ground lease
have concurrent terms.
Simultaneous with the acquisition of the property, the Partnership executed a
net lease with the seller, leasing the Property back to the Seller on a totally
net basis. The terms of the lease, which expires in 2016, require a minimum
annual rental of $217,000 per annum plus 10% of the property income, as defined,
between $217,000 and $467,000 and 50% of the property income in excess of
$467,000. In accordance with generally accepted accounting principles, the
rental income will be recognized ratably over the term of the lease. The ratable
minimum rent through 2001 (the date of the buy/sell option discussed below)
after the modification of the lease in September 1990 is $250,824 per year and
such amount is recognized annually for financial statement purposes. The seller,
as lessee, is responsible for any and all costs associated with the property,
including but not limited to operating expenses, insurance, taxes, the ground
lease and parking agreement payments.
Commencing 2002, the Partnership and the tenant have a buy/sell option for this
property, which may be exercised by either the Partnership or the tenant. In
essence, this option gives the tenant the right to purchase the property at its
then fair market value or allows the Partnership to terminate the tenant lease.
As part of this option, $6,000,000 plus the excess between approximately
$100,000 per month and actual rent paid during the lease term (less certain
defined offsets) can constitute the Partnership's offer to sell under the
option. In such event, if the tenant fails to purchase the property at such
price, the lease would be terminated and the Partnership would have no
obligation to pay any part of the offering price to the tenant.
At December 31, 1999, the Galleria Professional Building was 100% percent
occupied, with an average leasing rate of approximately $16.94 per square foot.
As indicated above, the lessee is responsible for any and all costs associated
with the property. Galleria Professional Building is located in Fort Lauderdale
Florida on the Middle River Waterway. There are several mid-rise office
buildings in the area. Galleria Mall, a large regional shopping center, is
located east of this property. Rental rates of the mid-rise office buildings in
close proximity to the Galleria Professional Building were similar to those
being charged by the Galleria Professional Building.
Following is summarized financial information with respect to operations at the
Galleria office building. The following information is unaudited because the
Partnership has no contractual right to require the lessee of the property to
provide audited information.
Years ended December 31,
------------------------
1997 1998 1999
---- ---- ----
(Unaudited)
Rental income $1,028,522 1,000,104 1,048,292
Other income 7,766 11,630 7,543
---------- --------- ---------
1,036,288 1,011,734 1,055,835
---------- --------- ---------
Property operating expenses 667,712 696,798 700,068
Ground rent 37,368 37,365 37,368
---------- --------- ---------
705,080 734,163 737,436
---------- --------- ---------
Operating income $ 331,208 277,571 318,399
========== ========= =========
Federal Express Distribution Center
- -----------------------------------
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. During 1998, the carrying value of this
property was reduced by approximately $38,000 to its estimated fair value. 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
further reduced the carrying value of the property by approximately $280,000. 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 $811,000 and a net gain on the sale of real estate of
approximately $8,000 was recognized in 1999.
Leases
- ------
The aggregate sum of the minimum lease rental payments to be received for the
Galleria Professional Building over the five succeeding years is approximately
as follows:
Year ending December 31,
------------------------
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
$ 217,000 217,000 217,000 217,000 217,000
=========== ======= ======= ======= =======
(3) COMPENSATION OR REIMBURSEMENTS TO GENERAL PARTNERS AND AFFILIATES
- ----------------------------------------------------------------------
During the year ended December 31, 1997, 1998 and 1999 compensation to general
partners and affiliates was as follows:
1997 1998 1999
---- ---- ----
Reimbursement for administrative
and accounting services $30,544 32,490 34,649
Property management fees (a) 5,110 3,624 2,509
------- ------ ------
Total $35,654 36,114 37,158
======= ====== ======
(a) Property management fees are computed as 1% of rental income.
(4) RECONCILIATION OF NET INCOME AND PARTNERS' CAPITAL
- -------------------------------------------------------
The following reconciliation provides details of the nature and amount of
differences between net income (loss) and partners' capital per the accompanying
financial statements and the Partnership tax return.
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net income (loss):
Amount reported for financial statement
purposes $ 123,200 (73,884) (408,444)
Difference in financial statement/tax
depreciation expense 202,722 202,722 179,897
Difference between accrual basis of
accounting used for financial
statements and the method used for
income tax purposes (18,178) (55,900) (958,630)
Adjustment due to fair value
considerations in the carrying
value of real estate for financial
statement purposes -- 38,000 280,000
------------ ---------- ----------
Amount reported for income tax purposes $ 307,744 110,938 (907,177)
============ ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Partners' capital:
Amount reported for financial statement
purposes $ 5,490,357 5,171,268 1,967,487
Difference in financial statement/tax
depreciation expense 2,193,880 2,396,602 2,576,499
Difference between accrual basis of
accounting used for financial
statements and the method used for
income tax purposes 157,364 101,464 (857,166)
Difference due to fair value
considerations in the carrying value
of real estate for financial statement
and income tax purposes 786,000 824,000 1,104,000
Cost of raising capital, deducted from
partners' capital for financial
statements and included in other
assets for income tax purposes 1,501,488 1,501,488 1,501,488
------------ ---------- ----------
Amount reported for income tax purposes $ 10,129,089 9,994,822 6,292,308
============ ========== ==========
</TABLE>
(5) OTHER LIABILITIES
- ---------------------
Other liabilities at December 31, 1998 and 1999 consisted primarily of unearned
rental income, which, as stated in the Summary of Significant Accounting
Policies (note 1), arises from leases with non-level payments being recognized
ratably over the term of the lease.
<PAGE>
SCHEDULE III
------------
I.R.E. Pension Investors, Ltd. - II
Property and Accumulated Depreciation
December 31, 1999
Galleria Professional
Office Bldg.
Ft. Lauderdale
Florida
--------------------
Acquisition Date 12/86
Encumbrances $ -
===========
Initial Costs:
Building and Improvements $ 6,285,472
---------
6,285,472
Improvements:
Costs capitalized
subsequent to acquisition:
Building and Improvements $ 183,289
---------
183,289
Allowance to state real estate
at fair value $ (686,000)
--------
(686,000)
Gross Amount:
Building and Improvements $ 5,782,761
---------
Total $ 5,782,761
=========
Accumulated Depreciation $ 4,201,927
==========
Life on which
depreciation is computed 20 years
<PAGE>
SCHEDULE III (Continued)
------------------------
I.R.E. Pension Investors, Ltd. - II
Reconciliation of Cost and Accumulated Depreciation
For each of the Years in the Three Year Period ended December 31, 1999
1997 1998 1999
---- ---- ----
Cost:
Balance at beginning of period $7,930,028 7,930,028 7,892,028
Deletions:
Sale of real estate -- -- (1,829,267)
Impairment loss on
real estate -- (38,000) (280,000)
---------- ---------- ----------
Balance at end of period $7,930,028 7,892,028 5,782,761
========== ========== ==========
Accumulated Depreciation:
Balance at beginning of period $4,036,716 4,449,318 4,861,920
Additions:
Depreciation 412,602 412,602 366,243
Deletions:
Sale of real estate -- -- (1,026,236)
---------- ---------- ----------
Balance at end of period $4,449,318 4,861,920 4,201,927
========== ========== ==========
The aggregate basis for Federal income tax purposes (not reduced by accumulated
depreciation) of the above properties was approximately $6,468,761 at December
31, 1999.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
- -------------------------------------------------------------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
- -------------------------------------------------------------
The Partnership has no directors or officers.
a) Directors.
----------
Listed below are the directors of I.R.E. Pension Advisors II, Corp.,
Managing General Partner of the Partnership, all of whom are to serve until
the election and qualification of their respective successors unless sooner
removed from office:
NAME AGE POSITIONS HELD
---------------------- --- --------------------
Alan B. Levan 55 Director since 1985
Earl Pertnoy 73 Director since 1985
Carl E. B. McKenry, Jr 70 Director since 1985
b) Executive Officers.
-------------------
Listed below are the executive officers of I.R.E. Pension Advisors II,
Corp., all of whom are to serve until they resign or are replaced by the
Board of Directors:
NAME AGE POSITIONS HELD
--------------- -- ---------------------------------------
Alan B. Levan 55 President since 1985
Glen R. Gilbert 55 Executive Vice President since July
1997, Senior Vice President from 1985
to July 1997; Chief Financial Officer
since 1987; Secretary since 1988
c) Certain Significant Employees.
------------------------------
Not applicable.
d) Family Relationships.
---------------------
Not applicable.
e) Business Experience.
--------------------
ALAN B. LEVAN formed the I.R.E. Group in 1972. Since 1978, he has been the
Chairman of the Board, President, and Chief Executive Officer of BFC
Financial Corporation (or its predecessor companies), a financial services
and unitary savings bank holding company. He is also Chairman of the Board
and President of I.R.E. Realty Advisors, Inc., I.R.E. Properties, Inc.,
I.R.E. Realty Advisory Group, Inc., U.S. Capital Securities, Inc., and
Florida Partners Corporation. Mr. Levan is also Chairman of the Board and
Chief Executive Officer of BankAtlantic Bancorp, Inc. Mr. Levan is also an
individual general partner and an officer and a director of the corporate
general partner of the Partnership.
GLEN R. GILBERT has been Executive Vice President of BFC Financial
Corporation since July 1997, Chief Financial Officer since 1987 and
Secretary since 1988. From 1985 through July 1997 he served in the position
of Senior Vice President of BFC Financial Corporation. Mr. Gilbert has been
a certified public accountant since 1970. Mr. Gilbert serves as an officer
of Florida Partners Corporation and of the corporate general partner of the
Partnership.
EARL PERTNOY has been for more than the past five years a real estate
investor and developer. He has been a director of BFC Financial Corporation
and its predecessor companies since 1978. He is a director of the corporate
general partner of the Partnership.
CARL E. B. McKENRY, JR. is the Director of the Small Business Institute at
the University of Miami in Coral Gables, Florida. He has been associated in
various capacities with the University since 1955. He has been a director
of BFC Financial Corporation since 1981 and is a director of the corporate
general partner of the Partnership.
f) Certain Legal Proceedings.
--------------------------
None.
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------
a) Cash Compensation.
------------------
The Partnership has no officers or directors.
The Partnership did not pay salaries or expenses of the officers and
directors of the general partner of the Partnership in 1999, except for
travel and other expenses directly related to activities of the
Partnership.
b) Compensation Pursuant to Plans.
-------------------------------
The Partnership has no annuity, pension or retirement plan for any
director, officer or employee.
c) Other Compensation.
-------------------
Not applicable.
d) Compensation of Directors.
--------------------------
The Partnership has no directors.
e) Termination of Employment and Change of Control Arrangement.
------------------------------------------------------------
Not applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
a) No person owns 5% or more of the Partnership's voting securities.
b) The Partnership has no officers or directors. The following information is
provided with respect to units owned by directors and officers of the
managing general partner.
(3)
Amount and
(2) Nature of (4)
(1) Name And Address Of Beneficial Percent
Title Of Class Beneficial Owner Ownership Of Class
-------------- ---------------- ---------- --------
(i)
Units of Limited Alan B. Levan 20 Direct 0% (approx.)
Partnership 1750 E. Sunrise Blvd.
Interest Fort Lauderdale, FL 33304
All other directors and
officers of the Managing
General Partner as a
group 0 Direct .0%
--------- ---
TOTAL 20 Direct .0% (approx.)
========= ===
(i) Alan B. Levan is a general partner of the Partnership and is President
and Director of the Managing General Partner.
c) The Partnership knows of no contract or other arrangement that could result
in a change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
a) & b) During the year ending December 31, 1999, the following entities
received the fees and payments indicated for services rendered with
respect to the Partnership:
NAME AND
RELATIONSHIP TO THE PARTNERSHIP TRANSACTION AMOUNT
------------------------------- ----------- ------
BFC Financial Corporation Reimbursement for
or subsidiaries, administrative and
Affiliates of the General accounting services $ 34,649
Partners
Property management fees $ 2,509
c) Indebtedness of Management.
---------------------------
None.
d) Transactions with Promoters.
----------------------------
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------------------------------------------------------------------------
A-1. See Item 8. Financial Statements and Supplementary Data.
A-2. See Item 8. Financial Statements and Supplementary Data.
A-3. Exhibits:
Exhibit 3 Articles of incorporation and by-laws. Limited Partnership
Agreement set forth as Exhibit A to the Prospectus of the
Partnership dated October 4, 1985, as filed with the
Commission pursuant to Rule 424(c), is hereby incorporated
herein by reference.
Exhibit 27 inancial data schedule - Included as Exhibit 27.
B. REPORTS ON FORM 8-K
-------------------
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
No annual report or proxy material for the year 1999 has been sent to the
Partners of the Partnership. An annual report will be sent to the Partners
subsequent to this filing.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has 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
By: /S/ Alan B. Levan
-----------------
Alan B. Levan, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Managing General
Partner on behalf of the Partnership and in the capacities and on the dates
indicated.
/S/ Alan B. Levan March 21, 2000
- -------------------------------------------------------
Alan B. Levan, Director and Principal Executive Officer
/S/ Earl Pertnoy March 21, 2000
- -------------------------------------------------------
Earl Pertnoy, Director
/S/ Carl E.B. McKenry, Jr. March 21, 2000
- -------------------------------------------------------
Carl E. B. McKenry Jr., Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1999 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 484,362
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,782,761
<DEPRECIATION> (4,201,927)
<TOTAL-ASSETS> 2,068,289
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,967,487
<TOTAL-LIABILITY-AND-EQUITY> 2,068,289
<SALES> 0
<TOTAL-REVENUES> 1,236,389
<CGS> 0
<TOTAL-COSTS> 1,644,833
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (408,444)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (408,444)
<EPS-BASIC> (8.25)
<EPS-DILUTED> (8.25)
</TABLE>
