FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period
ended........................................................September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from....................to.................
Commission file number 0-16793
BASS REAL ESTATE FUND II
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(Exact name of partnership as specified in its charter)
North Carolina 56-1490907
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4000 Park Road Charlotte, North Carolina 28209
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(Address of principal executive office) (Zip Code)
Partnership's telephone number, including area code: (704) 523-9407
- ------------
Indicate by check mark whether the partnership (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
partnership was required to file such reports), and [2] has been subject to such
filing requirements for the past 90 days.
YES X NO
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<PAGE>
BASS REAL ESTATE FUND II
INDEX
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PAGE
NUMBER
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Balance Sheet
as of September 30, 1995
(Unaudited) 3
Condensed Statement of Income
Three months and nine months ended
September 30, 1995 and 1994
(Unaudited) 4
Statement of Partners' Equity 5
(Unaudited)
Condensed Statement of Cash Flows
Nine months ended September 30, 1995 and 1994
(Unaudited) 6
Notes to Condensed Financial
Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION 10
SIGNATURES 12
-2-
<PAGE>
BASS REAL ESTATE FUND II
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------------- -----------------
ASSETS (Unaudited)
-------
<S> <C> <C>
RENTAL PROPERTIES, at cost:
Land $930,002 $930,002
Buildings 8,393,797 8,393,797
Furnishings and fixtures 631,564 610,949
Accumulated depreciation (2,515,567) (2,274,180)
------------------- -----------------
7,439,796 7,660,568
CASH AND CASH INVESTMENTS 164,938 160,079
RESTRICTED ESCROW DEPOSITS 38,918 27,844
DEFERRED COSTS AND OTHER ASSETS, net 110,536 63,897
------------------- -----------------
Total assets $7,754,188 $7,912,388
=================== =================
LIABILITIES AND PARTNERS' EQUITY
-------------------------------------
MORTGAGE LOAN PAYABLE $6,066,775 $6,103,361
SECURITY DEPOSITS 38,880 23,277
ACCRUED LIABILITIES 62,567 17,897
------------------- -----------------
Total liabilities 6,168,222 6,144,535
------------------- -----------------
PARTNERS' EQUITY:
Limited partners' interest 1,569,974 1,750,042
General partners' interest 15,992 17,811
------------------- -----------------
Total partners' equity 1,585,966 1,767,853
------------------- -----------------
Total liabilities and partners' equity $7,754,188 $7,912,388
=================== =================
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-3-
<PAGE>
BASS REAL ESTATE FUND II
CONDENSED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months Nine months Three months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
1995 1995 1994 1994
---------------- --------------- --------------- ---------------
<S> <C> <C>
REVENUE:
Rental income $343,753 $1,010,260 $321,638 $942,080
Interest income 907 1,953 492 1,676
Other operating income 12,751 32,828 20,332 46,948
---------------- --------------- --------------- ---------------
357,411 1,045,041 342,462 990,704
---------------- --------------- --------------- ---------------
OPERATING EXPENSES:
Fees and expenses to affiliates 42,494 131,863 45,048 129,216
Property taxes and insurance 18,906 56,717 20,083 60,249
Utilities 21,089 59,028 18,916 55,856
Repairs and maintenance 33,007 99,432 35,008 98,926
Advertising 5,726 18,725 10,696 30,692
Depreciation and amortization 91,410 248,496 92,694 278,082
Other 2,339 4,699 2,146 7,403
---------------- --------------- --------------- ---------------
214,971 618,960 224,591 660,424
INTEREST EXPENSE 153,776 462,256 154,976 465,765
OTHER NONOPERATING EXPENSES 8,113 45,712 8,539 25,686
---------------- --------------- --------------- ---------------
Total expenses 376,860 1,126,928 388,106 1,151,875
---------------- --------------- --------------- ---------------
NET LOSS ($19,449) ($81,887) ($45,644) ($161,171)
================ =============== =============== ===============
NET LOSS ALLOCATED TO GENERAL PARTNERS ($194) ($819) ($456) ($1,612)
================ =============== =============== ===============
NET LOSS ALLOCATED TO LIMITED PARTNERS ($19,255) ($81,068) ($45,188) ($159,559)
================ =============== =============== ===============
NET LOSS PER LIMITED PARTNERSHIP UNIT, based
on number of units outstanding (9,938) ($1.94) ($8.16) ($4.55) ($16.06)
================ =============== =============== ===============
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-4-
<PAGE>
BASS REAL ESTATE FUND II
STATEMENT OF PARTNERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
---------------- ---------------- --------------
<S> <C> <C> <C>
Balance, January 1, 1995 $1,750,042 $17,811 $1,767,853
Distribution to partners (99,000) (1,000) ($100,000)
Net loss (81,068) (819) (81,887)
---------------- ---------------- --------------
Balance, September 30, 1995 $1,569,974 $15,992 $1,585,966
================ ================ ==============
Limited General
Partners Partners Total
---------------- ---------------- --------------
Balance, January 1, 1994 $2,025,651 $20,595 $2,046,246
Distribution to partners (49,500) (500) ($50,000)
Net loss (159,559) (1,612) (161,171)
---------------- ---------------- --------------
Balance, September 30, 1994 $1,816,592 $18,483 $1,835,075
================ ================ ==============
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-5-
<PAGE>
BASS REAL ESTATE FUND II
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
September 30, September 30,
1995 1994
------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($81,887) ($161,171)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities-
Depreciation and amortization 248,496 278,082
Change in assets and liabilities:
Increase (decrease) in accrued and other liabilities 44,670 (8,904)
Increase in escrows and other assets, net (49,219) (67,351)
------------------- ------------------
Net cash provided by operating activities 162,060 40,656
------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to rental properties (20,615) (27,361)
------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage loan payable to bank (36,586) (36,601)
Distribution to partners (100,000) (50,000)
------------------- ------------------
Net cash used in financing activities (136,586) (86,601)
------------------- ------------------
NET INCREASE (DECREASE) IN CASH AND
CASH INVESTMENTS 4,859 (73,306)
CASH AND CASH INVESTMENTS, beginning of year 160,079 205,711
------------------- ------------------
CASH AND CASH INVESTMENTS, September 30 $164,938 $132,405
=================== ==================
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-6-
<PAGE>
BASS REAL ESTATE FUND II
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION
Bass Real Estate Fund II (the Partnership) was organized to engage in the
acquisition, development, operation, holding and disposition of income-producing
residential and commercial properties. Limited partnership interests were sold
at $500 per unit (9,938 units) for a total of $4,969,000.
Under the terms of the partnership agreement, net income (loss) and cash
distributions from operations are to be allocated 99% to the limited partners
and 1% to the general partners. Upon the sale or liquidation of the partnership
property, the partnership agreement specifies certain allocations of net
proceeds and taxable gain or loss from the transaction.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership records are maintained on the accrual basis of accounting
in accordance with generally accepted accounting principles.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the Partnership's financial position as
of September 30, 1995, results of operations for the three months and nine
months ended September 30, 1995 and 1994, and cash flow for the nine months
ended September 30, 1995 and 1994.
3. RENTAL PROPERTIES
The rental property consists of a residential apartment complex named
Sabal Point I. The complex, which was constructed by an affiliate of the general
partners, is composed of 202 rental units. The units were available for lease
beginning June 1988. The 23.75 acres of land in Mecklenburg County, North
Carolina, where the apartment complex is located were purchased in December 1986
for $930,002 (including closing costs).
Affiliates of the general partners own two adjacent residential apartment
complexes, Sabal Point II and Sabal Point III. The three complexes merged their
management and leasing operations in 1990 and are sharing expenses related to
grounds, maintenance, leasing, management and other related costs. The managing
general partner believes that the allocation of expenses to each partnership has
been made on a reasonable basis.
The mortgage loan payable is a 10-year note due April 1, 1999, with
principal and interest at 10 1/8% payable monthly based upon a 30-year
amortization period. The Sabal Point I complex is pledged as collateral for this
mortgage.
4. GENERAL PARTNERS AND RELATED PARTY TRANSACTIONS
The general partners are Marion F. Bass (The Individual General Partner)
and Marion Bass Real Estate Group, Inc., (The Managing General Partner). The
rental properties are managed by Marion Bass Properties, Inc., which is wholly
owned by Marion F. Bass.
Under the terms of the partnership agreement, the general partners or their
affiliates charged certain fees and expenses during the nine-month period ending
September 30, 1995 as follows:
7
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BASS REAL ESTATE FUND II
Management fee of 5% of gross revenues $51,767
Reimbursed maintenance salaries and benefits 41,169
Reimbursed property manager salaries and benefits 38,927
$131,863
The general partners and certain of their affiliates also perform, without
cost to the Partnership, day-to-day investment, management and administrative
functions of the Partnership.
The general partners are entitled to receive 1% of all items of partnership
income, gain, loss, deduction, credit and net cash flow from operations.
Therefore, during the first quarter of 1995 the General Partners received a cash
distribution of $1,000 that represented excess cash reserves and net cash flow
from operations for the period January 1, 1994 through December 31, 1994.
8
<PAGE>
BASS REAL ESTATE FUND II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At September 30, 1995, partners' equity was $1,585,966 or 20% of total
assets and cash and cash reserves amounted to $164,938. The Partnership had
accrued liabilities of $62,567 that consisted of 1995 property taxes of $47,889,
management fees due to an affiliate of $6,151 and trade accounts payable of
$8,527.
Net cash provided by operating activities totaled $162,060 for the nine
months ended September 30, 1995. This is compared to net cash provided by
operating activities of $40,656 for the corresponding period in 1994. The
Partnership had a 10 1/8% mortgage note in the amount of $6,066,775 outstanding
at September 30, 1995. Principal payments of $36,586 were made during the nine
month period ended September 30, 1995 on the amortizing mortgage note.
The 1995 operating plan and budget projects net cash flow from partnership
activities (exclusive of changes in assets and liabilities and distribution to
partners) of $96,000. The budget assumes that the Partnership will achieve
occupancy rates equivalent to 95%. For the nine months ended September 30, 1995,
actual average economic occupancy was 96% and actual net cash flow from
partnership activities (exclusive of changes in assets and liabilities and
distribution to partners) was $109,408. Rents have been increased 5% over rates
charged in 1994 to offset any normal increase in operating expenses. Capital
expenditures of $59,240 are budgeted and include selected carpet and vinyl
replacements. This also included scheduled exterior painting of $22,800 planned
in 1995. As of September 30, 1995, capital expenditures and additions to rental
property of $47,250 had been completed which included exterior painting for an
actual cost of $21,034. On the basis of these estimates and year-to-date
results, the Partnership believes that the cash flow from operations will be
sufficient to meet cash requirements, rebuild cash reserves and provide
distributions to partners. Funds totaling $100,000 provided by cash reserves and
1994 operational net cash flow were distributed to partners in January 1995. The
next available distribution to partners is scheduled for the first quarter of
1996 and the amount is dependent upon 1995 operating results.
Results of Operations
The following discussion relates to the Partnership's operation of Sabal
Point for the three months and nine months ended September 30, 1995 and 1994.
Results of operations for the three months ended September 30, 1995 reflect
an average economic occupancy of 95% compared to 95% for the corresponding
period in 1994. A second quarter comparison of 1995 and 1994 reflects higher
rental income of $22,115 during 1995 due to rents being increased 5% to 8% over
rates charged in 1994. Other operating income was lower by $7,581 during the
third quarter of 1995 due to leasing fewer corporate units (furnished apartment
units with all available utilities). Overall, total income for the third quarter
ended September 30, 1995 was $14,949 higher than the corresponding period in
1994.
Operating expenses were $214,971 for the three months ended September 30,
1995, compared to $224,591 for the corresponding period in 1994 which reflects a
variance of $9,620. Fees and expenses to affiliates that consist of a management
fee of 5% of gross revenues and the reimbursement of complex employee salaries
and benefits were lower by $2,554. Repairs and maintenance were $2,001 lower due
to reduced turnkey costs (costs associated with leasing rental units). Utilities
were higher by $2,173 due to higher water usage by residents. Since Sabal Point
is leasing fewer corporate units in 1995 compared to 1994, the corporate rental
furniture for several units was returned to the lessor thus reducing the cost of
advertising by $4,970.
9
<PAGE>
BASS REAL ESTATE FUND II
After interest expense of $153,776 and other nonoperating expenses
(partnership expenses and nonrecurring replacement costs) of $8,113, partnership
operations recognized a net loss of $19,449 for the three months ended September
30, 1995. This is compared to a net loss of $45,644 for the corresponding period
in 1994.
Overall the Partnership recognized a net increase in total revenues of
$54,337 (due to rents being increased 5% to 8% over rates charged in 1994) and a
net decrease in total operating expenses of $41,464 (of which $29,586 reflected
a decrease in depreciation and amortization) for the nine months ended September
30, 1995 compared to the corresponding period in 1994. After interest expense of
$462,256 and other operating expenses of $45,712 (partnership expenses and
nonrecurring replacement costs; this category was $20,026 higher in 1995 due
mainly to painting the exterior of the property) the Partnership had a net loss
of $81,887 for the nine months ended September 30, 1995. This is compared to a
net loss of $161,171 for the corresponding period in 1994.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(a) Copy of Certificate of Limited Partnership dated as of
November 13, 1985, filed as Exhibit 3(a) to the Partnership's
Form 10-K Annual Report for the fiscal year ended December 31,
1987, filed with the Securities and Exchange Commission, which
is incorporated herein by reference.
3(b) Copy of Amended and Restated Limited Partnership Agreement
dated as of July 10, 1986, filed as Exhibit 3(b) to the
Partnership's Form 10-K Annual Report for the fiscal year
ended December 31, 1987, filed with the Securities and
Exchange Commission, which is incorporated herein by
reference.
3(c) Copy of Amended and Restated Certificate of Limited
Partnership, dated as of July 10, 1986, filed as Exhibit 3(c)
to the Partnership's Form 10-K Annual Report for the fiscal
year ended December 31, 1987, filed with the Securities and
Exchange Commission, which is incorporated herein by
reference.
3(d) Copy of Second Amended and Restated Certificate of Limited
Partnership, dated as of July 31, 1986, files as Exhibit 3(d)
to the Partnership's Form 10-K Annual Report for the
10
<PAGE>
BASS REAL ESTATE FUND II
fiscal year ended December 31, 1987, filed with the
Securities and Exchange Commission, which is incorporated
herein by reference.
3(e) Copy of Third Amended and Restated Certificate of Limited
Partnership, dated as of August 29, 1986, filed as Exhibit
3(e) to the Partnership's Form 10-K Annual Report for the
fiscal year ended December 31, 1987, filed with the Securities
and Exchange Commission, which is incorporated herein by
reference.
3(f)Copy of Fourth Amended and Restated Certificate of Limited
Partnership, date as of September 30, 1986, filed as Exhibit
3(f) to the Partnership's Form 10-K Annual Report for the
fiscal year ended December 31, 1987, filed with the Securities
and Exchange Commission, which is incorporated herein by
reference.
3(g)Copy of Certificate of Domestic Limited Partnership, dated as
of October 31, 1986, filed as Exhibit 3(g) to the
Partnership's Form 10-K Annual Report for the fiscal year
ended December 31, 1987, filed with the Securities and
Exchange Commission, which is incorporated herein by
reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
the quarter covered by this report.
11
<PAGE>
BASS REAL ESTATE FUND II
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Partnership has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BASS REAL ESTATE FUND II
By: Marion Bass Real Estate Group, Inc. as Managing General Partner
By: Marion F. Bass, President
Date: November 13, 1995
By: Robert J. Brietz, Executive Vice President
Date: November 13, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 for 3rd Quarter 10-Q for Bass Real Estate Fund II.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 164,938
<SECURITIES> 0
<RECEIVABLES> 2,358
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 116,783
<PP&E> 9,955,363
<DEPRECIATION> 2,515,567
<TOTAL-ASSETS> 7,754,188
<CURRENT-LIABILITIES> 101,447
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,585,966
<TOTAL-LIABILITY-AND-EQUITY> 7,754,188
<SALES> 1,010,260
<TOTAL-REVENUES> 1,045,041
<CGS> 0
<TOTAL-COSTS> 370,464
<OTHER-EXPENSES> 294,208
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 462,256
<INCOME-PRETAX> (81,887)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81,887)
<EPS-PRIMARY> (8.16)
<EPS-DILUTED> (8.16)
</TABLE>
