<PAGE>
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....................................March 31, 1997
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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BASS REAL ESTATE FUND II
INDEX
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<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Balance Sheet
as of March 31, 1997
(Unaudited) 3
Condensed Statement of Income
Three months ended
March 31, 1997 and 1996
(Unaudited) 4
Statement of Partners' Equity 5
(Unaudited)
Condensed Statement of Cash Flows
Three months ended March 31, 1997 and 1996
(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
</TABLE>
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BASS REAL ESTATE FUND II
- ---------------------------------------------------------------
CONDENSED BALANCE SHEET
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<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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ASSETS (Unaudited)
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<S> <C> <C>
RENTAL PROPERTIES, at cost:
Land $930,002 $930,002
Buildings 8,404,497 8,393,797
Furnishings and fixtures 611,580 611,580
Accumulated depreciation (2,909,221) (2,886,799)
------------------- -----------------
7,036,858 7,048,580
CASH AND CASH INVESTMENTS 449,104 384,539
RESTRICTED ESCROW DEPOSITS 22,838 22,152
DEFERRED COSTS AND OTHER ASSETS, net 76,890 79,831
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Total assets $7,585,690 $7,535,102
=================== =================
LIABILITIES AND PARTNERS' EQUITY
-------------------------------------
MORTGAGE LOAN PAYABLE $5,984,754 $5,999,300
SECURITY DEPOSITS 19,955 19,405
ACCRUED LIABILITIES 29,017 17,208
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Total liabilities 6,033,726 6,035,913
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PARTNERS' EQUITY:
Limited partners' interest 1,536,312 1,484,065
General partners' interest 15,652 15,124
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Total partners' equity 1,551,964 1,499,189
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Total liabilities and partners' equity $7,585,690 $7,535,102
=================== =================
</TABLE>
The accompanying notes are an integral part of
the financial statements.
-3-
<PAGE>
BASS REAL ESTATE FUND II
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CONDENSED STATEMENT OF INCOME
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(Unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
1997 1996
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<S> <C> <C>
REVENUE:
Rental income $359,890 $358,928
Interest income 4,451 1,746
Other operating income 10,121 11,572
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374,462 372,246
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OPERATING EXPENSES:
Fees and expenses to affiliates 52,830 43,169
Property taxes and insurance 19,989 19,731
Utilities 21,653 22,124
Repairs and maintenance 25,642 28,111
Advertising 6,930 5,345
Depreciation and amortization 24,792 90,720
Other 1,285 87
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153,121 209,287
INTEREST EXPENSE 151,735 153,130
OTHER NONOPERATING EXPENSES 16,831 15,475
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Total expenses 321,687 377,892
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NET INCOME (LOSS) $52,775 ($5,646)
=============== ===============
NET INCOME (LOSS) ALLOCATED TO GENERAL PARTNERS $528 ($56)
=============== ===============
NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS $52,247 ($5,590)
=============== ===============
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT,
based on number of units outstanding (9,938) $5.266 ($0.56)
=============== ===============
</TABLE>
The accompanying notes are an integral part
of the financial statements.
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BASS REAL ESTATE FUND II
- ---------------------------------------------------
STATEMENT OF PARTNERS' EQUITY
- ---------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Balance, January 1, 1997 $1,484,065 $15,124 $1,499,189
Net income 52,247 528 52,775
---------------- ---------------- --------------
Balance, March 31, 1997 $1,536,312 $15,652 $1,551,964
================ ================ ==============
Limited General
Partners Partners Total
---------------- ---------------- --------------
Balance, January 1, 1996 $1,548,420 $15,774 $1,564,194
Net loss (5,590) (56) (5,646)
---------------- ---------------- --------------
Balance, March 31, 1996 $1,542,830 $15,718 $1,558,548
================ ================ ==============
</TABLE>
The accompanying notes are an integral part of
the financial statements.
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BASS REAL ESTATE FUND II
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CONDENSED STATEMENT OF CASH FLOWS
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(Unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $52,775 ($5,646)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization 24,792 90,720
Change in assets and liabilities:
Increase in accrued and other liabilities 11,809 14,111
(Increase) decrease in escrows and other assets, net 435 (15,174)
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Net cash provided by operating activities 89,811 84,011
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to rental properties (10,700) (1,596)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage loan payable to bank (14,546) (13,150)
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NET INCREASE IN CASH AND CASH INVESTMENTS 64,565 69,265
CASH AND CASH INVESTMENTS, beginning of year 384,539 223,210
------------------- ------------------
CASH AND CASH INVESTMENTS, March 31 $449,104 $292,475
=================== ==================
</TABLE>
The accompanying notes are an integral part of
the financial statements.
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<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 March 31, 1997, results of operations for the three months ended March 31,
1997 and 1996, and cash flow for the three months ended March 31, 1997 and 1996.
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 property is 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 three-month period
ending March 31, 1997 as follows:
7
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BASS REAL ESTATE FUND II
Management fee of 5% of gross revenues $18,368
Reimbursed maintenance salaries and benefits 17,334
Reimbursed property manager salaries and benefits 17,128
$52,830
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 second quarter of 1997 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, 1996 through December 31, 1996.
8
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BASS REAL ESTATE FUND II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At March 31, 1997, partners' equity was $1,551,964 or 20% of total assets
and cash and cash reserves amounted to $449,104. The Partnership had accrued
liabilities of $29,017 that consisted of 1997 property taxes of $16,641,
management fees due to an affiliate of $5,935, trade accounts payable of $5,000
and tenant prepaid rent of $1,441.
Net cash provided by operating activities totaled $89,811 for the three
months ended March 31, 1997. This is compared to net cash provided by operating
activities of $84,011 for the corresponding period in 1996. The Partnership had
a 10 1/8% mortgage note in the amount of $5,984,754 outstanding at March 31,
1997. Principal payments of $14,546 were made during the three month period
ended March 31, 1997 on the amortizing mortgage note.
The 1997 operating plan and budget projects cash flow from partnership
activities (exclusive of changes in assets and liabilities and distribution to
partners) of $290,000. The budget assumes that the Partnership will achieve
occupancy rates equivalent to 95%. For the three months ended March 31, 1997,
actual average economic occupancy was 93% and actual net cash flow from
partnership activities (exclusive of changes in assets and liabilities and
distribution to partners) was $52,321. Rents have been increased 3% over rates
charged in 1996 to offset any normal increase in operating expense. Capital
expenditures of $49,000 are budgeted and include carpet and vinyl replacements
and various repairs to the exterior buildings. As of March 31, 1997, actual
nonrecurring replacement expenses and additions to rental property totaled
$21,175. 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, build cash reserves and provide distributions to
partners. Funds totaling $100,000 provided by cash reserves and 1996 operational
net cash flow were distributed to partners in May 1997. The next available
distribution to partners is scheduled for the first quarter of 1998 and the
amount is dependent upon 1997 operating results.
Results of Operations
The following discussion relates to the Partnership's operation of Sabal
Point for the three months ended March 31, 1997 and 1996.
Results of operations for the three months ended March 31, 1997 reflect an
average economic occupancy of 93% compared to 97% for the corresponding period
in 1996. Despite the lower average occupancy, the partnership recognized higher
rental income of $962 in comparing the first quarters of 1997 and 1996. This
increase was due to the rents being increased 3% over rates charged in 1996.
Other operating income decreased $1,451. Overall, total income for the first
quarter ended March 31, 1997 was $2,216 higher than the corresponding period in
1996.
Operating expenses were $153,121 for the three months ended March 31, 1997,
compared to $209,287 for the corresponding period in 1996 which reflects a
variance of $56,166. 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 higher by $9,661. This increase reflects the addition
of two employees on site. Depreciation and amortization decreased $65,928 due to
an adjustment made in 1996.
After interest expense of $151,735 and other nonoperating expenses
(partnership expenses and nonrecurring replacement costs) of $16,831,
partnership operations recognized a net income of $52,775 for the three months
ended March 31, 1997. This is compared to a net loss of $5,646 for the
corresponding period in 1996.
9
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BASS REAL ESTATE FUND II
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 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
10
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BASS REAL ESTATE FUND II
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
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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: May 1, 1997
By: Robert J. Brietz, Executive Vice President
Date: May 1, 1997
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ARTICLE 5 FOR BASS REAL ESTATE FUND II FOR THREE MONTHS ENDED MARCH 31,
1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 449,104
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 471,942
<PP&E> 9,946,079
<DEPRECIATION> 2,909,221
<TOTAL-ASSETS> 7,585,690
<CURRENT-LIABILITIES> 48,972
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,551,964
<TOTAL-LIABILITY-AND-EQUITY> 7,585,690
<SALES> 359,890
<TOTAL-REVENUES> 374,462
<CGS> 0
<TOTAL-COSTS> 153,121
<OTHER-EXPENSES> 16,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,735
<INCOME-PRETAX> 52,775
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,775
<EPS-PRIMARY> 5.26
<EPS-DILUTED> 5.26
</TABLE>
