<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
----------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File No.
MARCH 31, 1995 0-17183
MURRAY INCOME PROPERTIES II, LTD.
(Exact Name of Registrant as Specified in its Charter)
Texas 75-2085586
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5550 LBJ Freeway, Suite 675, Dallas, Texas 75240
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (214) 991-9090
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE> 2
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Investment properties, at cost
Land $ 5,789,291 $ 5,789,291
Buildings and improvements 17,390,182 17,389,603
----------- -----------
23,179,473 23,178,894
Less accumulated depreciation 5,702,772 5,515,370
----------- -----------
Net investment properties 17,476,701 17,663,524
Investment in joint venture, at equity 1,590,064 1,602,538
Cash and cash equivalents 695,252 919,644
Certificates of deposit 889,000 888,000
Accounts and notes receivable, net of allowance
of $19,521 and $19,879 in 1995 and 1994,
respectively 499,305 432,684
Other assets, at cost, net of accumulated
amortization of $299,683 and $281,154 in
1995 and 1994, respectively 232,509 261,081
----------- -----------
$21,382,831 $21,767,471
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 15,520 $ 11,005
Accrued property taxes 67,861 268,290
Security deposits and other liabilities 95,611 95,778
Deferred income 64,066 62,976
----------- -----------
Total liabilities 243,058 438,049
----------- -----------
Partners' equity:
General Partners:
Capital contributions 1,000 1,000
Cumulative net earnings 497,190 487,641
Cumulative cash distributions ( 501,214) ( 491,982)
----------- -----------
( 3,024) ( 3,341)
----------- -----------
Limited Partners (314,687 interests):
Capital contributions, net of offering costs 27,029,395 27,029,395
Cumulative net earnings 8,882,660 8,620,268
Cumulative cash distributions (14,769,258) (14,316,900)
----------- -----------
21,142,797 21,332,763
----------- -----------
Total partners' equity 21,139,773 21,329,422
----------- -----------
$21,382,831 $21,767,471
=========== ===========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 3
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF EARNINGS
(UNAUDITED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1995 1994
---------- -----------
<S> <C> <C>
Income:
Rental $ 659,985 $648,595
Interest 22,364 15,343
Equity in earnings of joint venture 29,526 30,622
--------- --------
711,875 694,560
--------- --------
Expenses:
Depreciation 187,402 187,866
Property operating 164,665 168,337
General and administrative 88,225 91,474
Bad debts (recoveries), net ( 358) ( 1,100)
--------- --------
439,934 446,577
--------- --------
Net Earnings $ 271,941 $247,983
========= ========
Earnings per limited partnership interest $ .83 $ .76
========= ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
(UNAUDITED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
---------- ---------- -----------
<S> <C> <C> <C>
Three months ended March 31, 1994:
Balance at December 31, 1993 $ (4,944) $22,076,183 $22,071,239
Net earnings 9,079 238,904 247,983
Cash distributions (8,830) (432,694) (441,524)
---------- ----------- -----------
Balance at March 31, 1994 $ (4,695) $21,882,393 $21,877,698
========== =========== ===========
Three months ended March 31, 1995:
Balance at December 31, 1994 $ (3,341) $21,332,763 $21,329,422
Net earnings 9,549 262,392 271,941
Cash distributions (9,232) (452,358) (461,590)
---------- ----------- -----------
Balance at March 31, 1995 $ (3,024) $21,142,797 $21,139,773
========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 271,941 $ 247,983
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Bad debts (recoveries), net ( 358) ( 1,100)
Depreciation 187,402 187,866
Amortization of other assets 18,529 19,389
Amortization of deferred income ( 1,625) ( 1,625)
Change in assets and liabilities:
Accounts receivable ( 66,263) 6,043
Other assets 10,043 ( 2,331)
Accounts payable 4,515 12,174
Accrued property taxes, security deposits
and other liabilities and deferred income (197,881) (205,516)
---------- ---------
Net cash provided by operating activities 226,303 262,883
---------- ---------
Cash flows from investing activities:
Additions to investment properties ( 579) ( 6,653)
Purchases of certificates of deposit (100,000) (198,000)
Proceeds from redemptions of certificates of deposit 99,000 198,000
Distributions from joint venture, net 12,474 12,128
---------- ---------
Net cash provided by investing activities 10,895 5,475
---------- ---------
Cash flows from financing activities - cash distributions (461,590) (441,524)
---------- ---------
Net decrease in cash and cash equivalents (224,392) (173,166)
Cash and cash equivalents at beginning of period 919,644 864,451
---------- ---------
Cash and cash equivalents at end of period $ 695,252 $ 691,285
========== =========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
1. BASIS OF ACCOUNTING
Rental income is recognized as earned under the leases. Accordingly, the
Partnership accrues rental income for the full period of occupancy using the
straight line method over the related terms. At March 31, 1995 and December
31, 1994, $238,217 and $232,922, respectively, of accounts receivable related
to such accruals.
Other assets consist primarily of deferred leasing costs which are
amortized using the straight line method over the lives of the related leases.
Depreciation is provided over the estimated useful lives of the respective
assets using the straight line method. The estimated useful lives of the
building and improvements range from three to twenty-five years.
The Partnership periodically reevaluates the propriety of the carrying
amounts of investment properties to determine whether current events and
circumstances warrant an adjustment to such carrying amounts. Such evaluations
are performed utilizing annual appraisals performed by independent appraisers
as well as internally developed estimates of expected undiscounted future cash
flows. In the event the carrying value of an individual property exceeds
expected future undiscounted cash flows, the property is written down to the
most recently appraised value. Since inception of the Partnership, none of the
Partnership's properties have required write downs.
No provision for income taxes has been made as the liabilities for such
taxes are those of the individual Partners rather than the Partnership. The
Partnership files its tax return on the accrual basis used for Federal income
tax purposes.
Earnings per limited partnership interest are based upon the limited
partnership interests outstanding at period-end and net earnings allocated to
the Limited Partners in accordance with the terms of the Partnership Agreement,
as amended.
Certificates of deposit are held at commercial banks and are stated at
cost, which approximates market. For purposes of reporting cash flows, the
Partnership considers all certificates of deposit and highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
2. PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or losses
of the Partnership and cash distributions are generally allocated 98% to the
Limited Partners and 2% to the General Partners, except that all depreciation
shall be allocated to those Limited Partners subject to Federal income taxes.
Cash Distributions from the sale or refinancing of a property are allocated as
follows:
(a) First, all Cash Distributions from Sales or Refinancings shall be allocated
99% to the Limited Partners and 1% to the Non- corporate General Partner
until the Limited Partners have been returned their Original Invested
Capital from Cash Distributions from Sales or Refinancings, plus their
Preferred Return from either Cash Distributions from Operations or Cash
Distributions from Sales or Refinancings.
6
<PAGE> 7
- - --------------------------------------------------------------------------------
(b) Next, all Cash Distributions from Sales or Refinancings shall be allocated
99% to the General Partners and 1% to the Non- corporate General Partner in
an amount equal to any unpaid Cash Distributions from Operations
subordinated to the Limited Partners' 7% non-cumulative annual return.
Such 99% shall be allocated 62 1/2% to the Non-corporate General Partner
and 37 1/2% to the Corporate General Partner.
(c) Next, all Cash Distributions from Sales or Refinancings shall be allocated
1% to the Non-corporate General Partner and 99% to the Limited Partners and
the General Partners. Such 99% will be allocated 85% to the Limited
Partners and 15% to the General Partners. Such 15% shall be allocated 62
1/2% to the Non-corporate General Partner and 37 1/2% to the Corporate
General Partner.
3. INVESTMENT PROPERTY
The Partnership owns and operates Paddock Place Shopping Center in
Nashville, Tennessee, Germantown Collection Shopping Center located in
Germantown (Memphis), Tennessee and 1202 Industrial Place (an office/warehouse
facility) located in Grand Prairie, Texas.
4. INVESTMENT IN JOINT VENTURE
The Partnership owns a 15% interest in Tower Place Joint Venture, a joint
venture that owns and operates Tower Place Festival Shopping Center located in
Pineville (Charlotte), North Carolina. The Partnership accounts for the joint
venture using the equity method. The remaining 85% interest in the joint
venture is owned by Murray Income Properties I, Ltd. ("MIP I"), an affiliated
real estate limited partnership. The Tower Place Joint Venture Agreement
provides that the Partnership will share profits, losses, and cash
distributions according to the Partnership's 15% ownership interest in the
joint venture.
5. OTHER
Information furnished in this interim report reflects all adjustments
consisting of normal recurring adjustments which, in the opinion of management,
are necessary to reflect a fair presentation of the results for the periods
presented.
The financial information included in this interim report as of March 31,
1995 and for the three months ended March 31, 1995 and 1994 has been prepared
by management without audit by independent public accountants who do not
express an opinion thereon. The Partnership's annual report contains audited
financial statements. The notes to the financial statements in the
Partnership's 1994 annual report are an integral part of the financial
statements presented herein.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
As of March 31, 1995, the Partnership had cash, cash equivalents and
certificates of deposit of $1,584,252 including $1,564,932 invested in
certificates of deposit and other money market instruments. Such amounts
represents cash generated from operations and working capital reserves.
Rental income from leases is accrued using the straight line method over
the related lease terms. At March 31, 1995 and December 31, 1994, there were
$238,217 and $232,922, respectively, of accounts receivable related to such
accruals. Accounts receivable also consist of tenant receivables, receivables
for rent collected (but not yet remitted by the property management companies
managing the properties), and interest receivable on short-term investments.
The increase in accounts receivable of $66,263 (exclusive of bad debts and
recoveries) from December 31, 1994 to March 31, 1995 is primarily due to
increases in receivables for rent collected (but not yet remitted by the
property management companies) at Germantown and Paddock Place. As of March
31, 1995 and December 31, 1994, the Partnership had allowances of $19,521 and
$19,879, respectively, for uncollectible accounts receivable.
The decrease in accrued property taxes of $200,429 from December 31, 1994
to March 31, 1995 is primarily due to payments of 1994 property taxes for the
Partnership's properties.
During the three months ended March 31, 1995, the Partnership made Cash
Distributions from Operations of $461,590 related to the three-month period
ended December 31, 1994. Subsequent to March 31, 1995, the Partnership made
Cash Distributions from Operations of $461,590 (which was reduced by $1,187
related to 1994 North Carolina state income taxes paid on behalf of the
partners in connection with the operation of Tower Place Joint Venture)
relating to the three months ended March 31, 1995. The funds distributed were
derived from the net cash flow generated from operations of the Partnership's
properties and from interest earned, net of administrative expenses, on funds
invested in short-term money market instruments and certificates of deposit.
Future liquidity is currently expected to result from cash generated from
the operations of the Partnership's properties (which could be affected
negatively in the event of weakened occupancies and/or rental rates), interest
earned on funds invested in short- term money market instruments and
certificates of deposit, and ultimately through the sale of the Partnership's
properties.
Results of Operations
Rental income increased $11,390 for the three months ended March 31, 1995
as compared to the same period in 1994. The following information details the
rental income generated, bad debt expense incurred, and average occupancy for
the periods shown for the Partnership's properties.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1995 1994
---------- ---------
<S> <C> <C>
PADDOCK PLACE SHOPPING CENTER
- - -----------------------------
Rental income $ 283,266 $ 285,503
Bad debt expense (recovery) $ ( 358) $ (1,100)
Average occupancy 97% 95%
GERMANTOWN COLLECTION SHOPPING CENTER
- - -------------------------------------
Rental income $ 264,794 $ 267,406
Bad debt expense $ -0- $ -0-
Average occupancy 100% 100%
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C> <C>
1202 INDUSTRIAL PLACE OFFICE/WAREHOUSE
- - --------------------------------------
Rental income $ 111,925 $ 95,686
Bad debt expense -0- -0-
Average occupancy 100% 100%
</TABLE>
Rental income at Paddock Place decreased $2,237 for the three months ended
March 31, 1995 as compared to the same period in 1994 primarily due to a
decrease in tenant reimbursement of real estate taxes.
Occupancy at the Paddock Place Shopping Center in Nashville, Tennessee
averaged 97% during the quarter, a three percent decrease from the previous
quarter. On December 31, 1994, a tenant who occupied 1,871 square feet vacated
its space upon expiration of its lease. In March, 1995, one tenant who
occupies 5,222 square feet renewed its lease for one year. Minor repairs were
completed during the quarter on the roof and on the parking lot lights. As of
March 31, Paddock Place was 97% occupied.
Rental income at Germantown decreased $2,612 for the three months ended
March 31, 1995 as compared to the same period in 1994 due to a decrease in
tenant reimbursements for common area maintenance costs and real estate taxes.
Occupancy at the Germantown Collection in Germantown (Memphis), Tennessee
averaged 100% for the first quarter, unchanged from the previous quarter. One
tenant who occupies 1,052 square feet renewed its lease for three years. A
children's clothing store who occupied 3,208 square feet assigned its lease to
a golf shop. This new tenant began paying rent immediately so there was no
interruption of income to the Partnership. As of March 31, the Germantown
Collection was 100% occupied.
Rental income at 1202 Industrial Place increased $16,239 for the three
months ended March 31, 1995 as compared to the same period in 1994 primarily
due to an increase in tenant reimbursement for common area maintenance costs
and real estate taxes.
Occupancy at 1202 Industrial Place in Grand Prairie (Dallas), Texas
remained 100% during the quarter.
"Equity in earnings of joint venture" represents the Partnership's 15%
interest in the earnings of Tower Place Joint Venture. Rental income at Tower
Place increased $18,879 for the three months ended March 31, 1995 as compared
to the same period in 1994 primarily due to an increase in occupancy offset by
lower tenant reimbursements for common area maintenance costs and real estate
taxes. The increase in rental income was offset by an $18,830 decrease in
termination fee income received in the prior year from a former tenant as
consideration for the Partnership releasing the tenant from its future lease
obligations. Tower Place's total operating expenses increased with increases
in repair and maintenance costs, property management fees and utility costs
being offset by lower leasing and promotion expenses and legal fees. The
following information details the rental income generated, bad debt expense
incurred, and average occupancy for the periods shown for Tower Place Shopping
Center.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1995 1994
--------- ---------
<S> <C> <C>
TOWER PLACE SHOPPING CENTER
- - ---------------------------
Rental income $ 413,580 $ 394,701
Bad debt expense (recovery) $ (623) $ 4,344
Average occupancy 95% 88%
</TABLE>
9
<PAGE> 10
The Partnership's share of income from the joint venture decreased $1,096
for the quarter ended March 31, 1995 as compared to the same period in 1994 for
the reasons stated above.
Occupancy at Tower Place Festival in Pineville (Charlotte), North Carolina
averaged 95% during the quarter, unchanged from the previous quarter. In
December, 1994, one tenant who occupied 1,260 square feet vacated its space
upon expiration of its lease. Also, in December a new tenant took occupancy of
2,100 square feet. During the first quarter, three new leases totalling 5,340
square feet were signed and these tenants will take occupancy during the second
quarter. Two existing tenants totalling 3,011 square feet renewed their leases
for three years. Minor parking lot repairs were completed in March. As of
March 31, Tower Place was 94% occupied and 98% leased.
Depreciation is provided over the estimated useful lives of the respective
assets using the straight line method. The estimated useful lives of the
building and improvements range from three to twenty-five years.
Property operating expenses consist primarily of utility costs, repair and
maintenance costs, leasing and promotion costs, real estate taxes, insurance,
and property management fees. Total property operating expenses decreased
$3,672 for the three months ended March 31, 1995 as compared to the same period
in 1994. The decrease was due to lower utilities, real estate taxes and
property management fees. These decreases were offset by higher repair and
maintenance costs. Property operating expenses at Germantown decreased, with
decreases in utilities, landscaping services and real estate taxes being offset
by increases in repair and maintenance costs. Property operating expenses at
Paddock Place increased, with increases in amortization of leasing costs and in
landscaping and security services being offset by decreases in repair and
maintenance costs and property management fees. Property operating expenses at
1202 Industrial Place decreased, with decreases in repair and maintenance
costs, real estate taxes and insurance costs.
General and administrative expenses incurred are related to legal and
accounting costs, rent, investor services costs, salaries and benefits and
various other costs required for the administration of the Partnership.
General and administrative expenses decreased $3,249 for the three months ended
March 31, 1995 as compared to the same period in 1994 primarily as a result of
lower amortization of organization costs.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
None
(b) Reports on Form 8-K filed during the three months ended
March 31, 1995:
None
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Murray Income Properties II, Ltd.
By: Murray Realty Investors IX, Inc.
A General Partner
Dated: May 10, 1995 By: /s/ Mitchell Armstrong
--------------------------------
Mitchell Armstrong
President
Chief Financial Officer
12
<PAGE> 13
EXHIBIT INDEX
Exhibit 27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) MURRAY
INCOME PROPERTIES II, LTD. BALANCE SHEET AND STATEMENT OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q FOR THE QUARTER
ENDED MARCH 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 695,252
<SECURITIES> 889,000
<RECEIVABLES> 518,826
<ALLOWANCES> 19,521
<INVENTORY> 0
<CURRENT-ASSETS> 2,083,557
<PP&E> 23,179,473
<DEPRECIATION> 5,702,772
<TOTAL-ASSETS> 21,382,831
<CURRENT-LIABILITIES> 83,381
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 21,139,773
<TOTAL-LIABILITY-AND-EQUITY> 21,382,831
<SALES> 0
<TOTAL-REVENUES> 711,875
<CGS> 0
<TOTAL-COSTS> 352,067
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (358)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 271,941
<INCOME-TAX> 0
<INCOME-CONTINUING> 271,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 271,941
<EPS-PRIMARY> .83
<EPS-DILUTED> .83
</TABLE>
