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, 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
- ------------------------------------------------------------------------------
(Exact name of partnership as specified in its charter)
North Carolina 56-1490907
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4000 Park Road Charlotte, North Carolina 28209
- --------------------------------------------------------------------------
(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, 1997
(Unaudited) 3
Condensed Statement of Income
Three months and nine months ended
September 30, 1997 and 1996
(Unaudited) 4
Statement of Partners' Equity 5
(Unaudited)
Condensed Statement of Cash Flows
Nine months ended September 30, 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
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<PAGE>
BASS REAL ESTATE FUND II
---------------------------------------------------------------
CONDENSED BALANCE SHEET
---------------------------------------------------------------
September 30, December 31,
1997 1996
------------- ---------
ASSETS (Unaudited)
-------
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 (3,108,325) (2,886,799)
----------- -----------
6,837,754 7,048,580
CASH AND CASH INVESTMENTS 447,499 384,539
RESTRICTED ESCROW DEPOSITS 25,217 22,152
DEFERRED COSTS AND OTHER ASSETS, net 108,386 79,831
----------- -----------
Total assets $ 7,418,856 $ 7,535,102
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
------------------------------
MORTGAGE LOAN PAYABLE $ 5,954,539 $ 5,999,300
SECURITY DEPOSITS 18,280 19,405
ACCRUED LIABILITIES 62,366 17,208
----------- -----------
Total liabilities 6,035,185 6,035,913
----------- -----------
PARTNERS' EQUITY:
Limited partners' interest 1,369,702 1,484,065
General partners' interest 13,969 15,124
----------- -----------
Total partners' equity 1,383,671 1,499,189
----------- -----------
Total liabilities and partners' equity $ 7,418,856 $ 7,535,102
=========== ===========
The accompanying notes are an integral
part of the financial statements.
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<PAGE>
BASS REAL ESTATE FUND II
-------------------------------------------------------------------------
CONDENSED STATEMENT OF INCOME
-------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine months Nine months Three months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
1997 1997 1996 1996
---------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
REVENUE:
Rental income $362,052 $1,076,641 $370,051 $1,091,240
Interest income 4,914 13,894 3,538 7,949
Other operating income 9,754 34,584 15,256 42,534
---------- ------------- ---------- ----------
376,720 1,125,119 388,845 1,141,723
---------- ------------- ---------- -----------
OPERATING EXPENSES:
Fees and expenses to affiliates 44,013 141,500 43,647 130,806
Property taxes and insurance 19,989 59,967 19,731 59,193
Utilities 25,269 67,194 22,179 63,744
Repairs and maintenance 33,739 90,131 32,115 94,098
Advertising 16,238 30,615 5,145 16,318
Depreciation and amortization 76,212 228,636 89,370 269,460
Other (6,853) (2,748) 664 4,113
---------- ------------- ---------- ----------
208,607 615,295 212,851 637,732
INTEREST EXPENSE 150,983 454,082 152,450 458,375
OTHER NONOPERATING EXPENSES 27,503 71,260 8,573 39,314
---------- ------------- ---------- ----------
Total expenses 387,093 1,140,637 373,874 1,135,421
---------- ------------- ---------- ----------
NET INCOME (LOSS) ($10,373) ($15,518) $14,971 $6,302
========== ============= ========== ==========
NET INCOME (LOSS) ALLOCATED TO GENERAL PARTNERS ($104) ($155) $150 $63
========== ============= ========== =========
NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS ($10,269) ($15,363) $14,821 $6,239
========== ============= ========== =========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT,
based on number of units outstanding (9,938) ($1.03) ($1.55) $1.49 $0.63
========== ============= ========== ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
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<PAGE>
BASS REAL ESTATE FUND II
---------------------------------------------------
STATEMENT OF PARTNERS' EQUITY
---------------------------------------------------
(Unaudited)
Limited General
Partners Partners Total
---------------- ----------- --------------
Balance, January 1, 1997 $ 1,484,065 $ 15,124 $ 1,499,189
Distribution to partners (99,000) (1,000) (100,000)
Net loss (15,363) (155) (15,518)
----------- ----------- -----------
Balance, September 30, 1997 $ 1,369,702 $ 13,969 $ 1,383,671
=========== =========== ===========
Limited General
Partners Partners Total
----------- ----------- -----------
Balance, January 1, 1996 $ 1,548,420 $ 15,774 $ 1,564,194
Distribution to partners (99,000) (1,000) (100,000)
Net income 6,239 63 6,302
----------- ----------- -----------
Balance, September 30, 1996 $ 1,455,659 $ 14,837 $ 1,470,496
=========== =========== ===========
The accompanying notes are an integral
part of the financial statements.
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<PAGE>
BASS REAL ESTATE FUND II
---------------------------------------------------------------
CONDENSED STATEMENT OF CASH FLOWS
---------------------------------------------------------------
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
1997 1996
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 15,518) $ 6,302
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities-
Depreciation and amortization 228,636 269,460
Change in assets and liabilities:
Increase in accrued and other liabilities 45,158 48,249
Increase in escrows and other assets, net (39,855) (68,733)
--------- ---------
Net cash provided by operating activities 218,421 255,278
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to rental properties (10,700) (16,388)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners (100,000) (100,000)
Payments on mortgage loan payable to bank (44,761) (40,467)
--------- ---------
Net cash used in financing activities (144,761) (140,467)
--------- ---------
NET INCREASE IN CASH AND CASH INVESTMENTS 62,960 98,423
CASH AND CASH INVESTMENTS, beginning of year 384,539 223,210
--------- ---------
CASH AND CASH INVESTMENTS, September 30 $ 447,499 $ 321,633
========= =========
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 September 30, 1997, results of operations for the three months and nine
months ended September 30, 1997 and 1996, and cash flow for the nine months
ended September 30, 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 nine-month period ending
September 30, 1997 as follows:
7
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Management fee of 5% of gross revenues $ 54,733
Reimbursed maintenance salaries and benefits 42,062
Reimbursed property manager salaries and benefits 44,705
$141,500
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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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
At September 30, 1997, partners' equity was $1,383,671 or 18% of total
assets and cash and cash reserves amounted to $447,499. The Partnership had
accrued liabilities of $62,366 that consisted of 1997 property taxes of $49,923,
management fees due to an affiliate of $5,795, trade accounts payable of $5,850
and tenant prepaid rent of $798.
Net cash provided by operating activities totaled $218,421 for the nine
months ended September 30, 1997. This is compared to net cash provided by
operating activities of $255,278 for the corresponding period in 1996. The
Partnership had a 10 1/8% mortgage note in the amount of $5,954,539 outstanding
at September 30, 1997. Principal payments of $44,761 were made during the nine
month period ended September 30, 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 nine months ended September 30, 1997,
actual average economic occupancy was 92% and actual net cash flow from
partnership activities (exclusive of changes in assets and liabilities and
distribution to partners) was $157,657. 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 September 30, 1997, actual
nonrecurring replacement expenses and additions to rental property totaled
$57,450. 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 and nine months ended September 30, 1997 and 1996.
Results of operations for the three months ended September 30, 1997 reflect
an average economic occupancy of 93% compared to 98% for the corresponding
period in 1996. Due to the lower average occupancy, the partnership recognized
lower rental income of $7,999 in comparing the third quarters of 1997 and 1996.
Overall, total income for the third quarter ended September 30, 1997 was $12,125
lower than the corresponding period in 1996.
Operating expenses were $208,607 for the three months ended September 30,
1997, compared to $212,851 for the corresponding period in 1996 which reflects a
variance of $4,244. 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 $366. Property taxes and insurance were higher by
$258 due to normal rate increases. Utilities were higher by $3,090 due to
increases in utility rates and resident usage. Advertising was higher by $11,093
due to concessions offered to new residents and marketing efforts to increase
the average occupancy. Other operating expenses reflected a net reduction of
$7,517 due to the collection of prior period income that had been written off as
bad debt.
After interest expense of $150,983 and other nonoperating expenses
(partnership expenses and nonrecurring replacement costs) of $27,503,
partnership operations recognized a net loss of $10,373 for the
9
<PAGE>
three months ended September 30, 1997. This is compared to a net income of
$14,971 for the corresponding period in 1996.
Overall the Partnership recognized a net decrease in total revenues of
$16,604 (due to average economic occupancy decreasing 6%) and a net decrease in
total operating expenses of $22,437 (due mainly to the variance between
depreciation and amortization) for the nine months ended September 30, 1997
compared to the corresponding period in 1996. After interest expense of $454,082
and other nonoperating expenses of $71,260 (partnership expenses and
nonrecurring replacement costs) the Partnership had a net loss of $15,518 for
the nine months ended September 30, 1997. This is compared to a net income of
$6,302 for the corresponding period in 1996.
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.
10
<PAGE>
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>
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: October 31, 1997
----------------
By: Robert J. Brietz, Executive Vice President
------------------------------------------
Date: October 31, 1997
----------------
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 447,499
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,217
<PP&E> 9,946,079
<DEPRECIATION> 3,108,325
<TOTAL-ASSETS> 7,418,856
<CURRENT-LIABILITIES> 80,646
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,383,671
<TOTAL-LIABILITY-AND-EQUITY> 7,418,856
<SALES> 1,076,641
<TOTAL-REVENUES> 1,125,119
<CGS> 0
<TOTAL-COSTS> 615,295
<OTHER-EXPENSES> 71,260
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 454,082
<INCOME-PRETAX> (15,518)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,518)
<EPS-PRIMARY> (1.55)
<EPS-DILUTED> (1.55)
</TABLE>
