<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
--------------------
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended June 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 NO.
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)
(214) 991-9090
(Registrant's Telephone Number, including Area Code)
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>
June 30, December 31,
1995 1994
-------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Investment properties, at cost
Land $ 5,789,291 $ 5,789,291
Buildings and improvements 17,391,970 17,389,603
----------- -----------
23,181,261 23,178,894
Less accumulated depreciation 5,888,018 5,515,370
----------- -----------
Net investment properties 17,293,243 17,663,524
Investment in joint venture, at equity 1,573,296 1,602,538
Cash and cash equivalents 790,118 919,644
Certificates of deposit 890,000 888,000
Accounts and notes receivable, net of allowance
of $17,633 and $19,879 in 1995 and 1994,
respectively 454,016 432,684
Other assets, at cost, net of accumulated
amortization of $315,371 and $281,154 in
1995 and 1994, respectively 252,266 261,081
----------- -----------
$21,252,939 $21,767,471
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 17,063 $ 11,005
Accrued property taxes 135,721 268,290
Security deposits and other liabilities 95,285 95,778
Deferred income 59,131 62,976
----------- -----------
Total liabilities 307,200 438,049
----------- -----------
Partners' equity:
General Partners:
Capital contributions 1,000 1,000
Cumulative net earnings 506,616 487,641
Cumulative cash distributions ( 510,446) ( 491,982)
----------- -----------
( 2,830) ( 3,341)
----------- -----------
Limited Partners (314,687 interests):
Capital contributions, net of offering costs 27,029,395 27,029,395
Cumulative net earnings 9,140,791 8,620,268
Cumulative cash distributions (15,221,617) (14,316,900)
----------- -----------
20,948,569 21,332,763
----------- -----------
Total partners' equity 20,945,739 21,329,422
----------- -----------
$21,252,939 $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 Six Months Ended
June 30, June 30,
------------------------- --------------------------
1995 1994 1995 1994
-------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Income:
Rental $631,503 $631,847 $1,291,488 $1,280,442
Interest 24,428 16,502 46,792 31,845
Equity in earnings of joint
venture 28,232 26,045 57,758 56,667
-------- -------- ---------- ----------
684,163 674,394 1,396,038 1,368,954
-------- -------- ---------- ----------
Expenses:
Depreciation 185,246 187,200 372,648 375,066
Property operating 164,404 160,632 329,069 328,969
General and administrative 68,844 68,836 157,069 160,310
Bad debts (recoveries), net (1,888) (1,851) (2,246) (2,951)
-------- -------- ---------- ----------
416,606 414,817 856,540 861,394
-------- -------- ---------- ----------
Net Earnings $267,557 $259,577 $ 539,498 $ 507,560
======== ======== ========== ==========
Earnings per limited
partnership interest $ .82 $ .79 $ 1.65 $ 1.55
======== ======== ========== ==========
</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>
Six months ended June 30, 1994:
Balance at December 31, 1993 $( 4,944) $22,076,183 $22,071,239
Net earnings 18,382 489,178 507,560
Cash distributions (17,661) (865,389) (883,050)
-------- ----------- -----------
Balance at June 30, 1994 $( 4,223) $21,699,972 $21,695,749
======== =========== ===========
Six months ended June 30, 1995:
Balance at December 31, 1994 $( 3,341) $21,332,763 $21,329,422
Net earnings 18,975 520,523 539,498
Cash distributions (18,464) (904,717) (923,181)
-------- ----------- -----------
Balance at June 30, 1995 $( 2,830) $20,948,569 $20,945,739
======== =========== ===========
</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>
Six Months Ended
June 30,
----------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $539,498 $507,560
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Bad debts (recoveries), net ( 2,246) ( 2,951)
Depreciation 372,648 375,066
Amortization of other assets 34,217 39,367
Amortization of deferred income ( 3,249) ( 3,249)
Change in assets and liabilities:
Accounts receivable ( 19,086) ( 2,480)
Other assets ( 25,402) ( 36,620)
Accounts payable 6,058 5,463
Accrued property taxes, security deposits
and other liabilities and deferred income (133,658) (135,196)
-------- --------
Net cash provided by operating activities 768,780 746,960
-------- --------
Cash flows from investing activities:
Additions to investment properties ( 2,367) ( 6,653)
Purchases of certificates of deposit (299,000) (491,000)
Proceeds from redemptions of certificates of deposit 297,000 491,000
Distributions from joint venture, net 29,242 30,333
-------- --------
Net cash provided by investing activities 24,875 23,680
-------- --------
Cash flows from financing activities - cash distributions (923,181) (883,050)
-------- --------
Net decrease in cash and cash equivalents (129,526) (112,410)
Cash and cash equivalents at beginning of period 919,644 864,451
-------- --------
Cash and cash equivalents at end of period $790,118 $752,041
======== ========
</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 June 30, 1995 and December 31,
1994, $241,536 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
buildings 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 by 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 June 30,
1995 and for the three and six months ended June 30, 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 June 30, 1995, the Partnership had cash, cash equivalents and
certificates of deposit of $1,680,118, including $1,651,734 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 June 30, 1995 and December 31, 1994, $241,536 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 $19,086 (exclusive of bad debts and
recoveries) from December 31, 1994 to June 30, 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 June 30,
1995 and December 31, 1994, the Partnership had allowances of $17,633 and
$19,879, respectively, for uncollectible accounts receivable.
The decrease in accrued property taxes of $132,569 from December 31, 1994
to June 30, 1995 is primarily due to payments of 1994 property taxes for the
Partnership's properties.
During the three months ended June 30, 1995, the Partnership made Cash
Distributions from Operations of $461,591, (which was reduced by $1,187 related
to North Carolina state income taxes paid on behalf of the partners in
connection with the operations of Tower Place Joint Venture) related to the
three-month period ended March 31, 1995. Subsequent to June 30, 1995, the
Partnership made Cash Distributions from Operations of $461,591, relating to
the three months ended June 30, 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 effective 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.
8
<PAGE> 9
RESULTS OF OPERATIONS
Rental income increased $11,046 for the six months ended June 30, 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 Six Months Ended
June 30, June 30,
------------------------- -------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Paddock Place Shopping Center
Rental income $253,722 $265,494 $536,988 $550,997
Bad debt expense (recovery) $ (1,888) $ (1,851) $ (2,246) $ (2,951)
Average occupancy 95% 99% 96% 97%
Germantown Collection Shopping Center
Rental income $255,965 $245,620 $520,759 $513,026
Bad debt expense $ -0- $ -0- $ -0- $ -0-
Average occupancy 100% 100% 100% 100%
1202 Industrial Place
Rental income $121,816 $120,733 $233,741 $216,419
Bad debt expense -0- -0- -0- -0-
Average occupancy 100% 100% 100% 100%
</TABLE>
Rental income at Paddock Place decreased $14,009 for the six months ended
June 30, 1995 as compared to the same period in 1994 primarily due to a
decrease in tenant reimbursement of real estate taxes.
Occupancy at Paddock Place Shopping Center in Nashville, Tennessee averaged
95% during the second quarter, a two percent decrease from the previous
quarter. One tenant who occupied 1,935 square feet vacated its space upon
expiration of its lease. One tenant who occupies 5,222 square feet renewed its
lease for one year and another tenant who occupies 1,354 square feet renewed
its lease for three years. Minor repairs to the roof and to the parking lot
lights were completed in June. As of June 30, Paddock Place was 94% occupied.
Rental income at Germantown increased $7,733 for the six months ended June
30, 1995 as compared to the same period in 1994 due to an increase in
percentage rents received from two tenants.
Occupancy at the Germantown Collection in Germantown (Memphis), Tennessee
averaged 100% for the second quarter, unchanged from the previous quarter. In
June some of the property's landscaping was replaced and upgraded. Minor roof
repairs were completed in April. As of June 30, the Germantown Collection was
100% occupied.
Rental income at 1202 Industrial Place increased $17,322 for the six months
ended June 30, 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 second quarter, unchanged from the previous quarter.
9
<PAGE> 10
"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 $37,262 for the six months ended June 30, 1995 as compared to
the same period in 1994 primarily due to a 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 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 Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Tower Place Shopping Center
Rental income $399,494 $381,111 $813,074 $775,812
Bad debt expense (recovery) $ (1,514) $ 1,045 $ (2,137) $ 5,389
Average occupancy 96% 93% 96% 91%
</TABLE>
The Partnership's share of income from the joint venture increased $1,091
for the six months ended June 30, 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 96% during the second quarter, a one percent increase over the
previous quarter. In April a tenant who occupied 1,604 square feet vacated its
space upon expiration of its lease. This space was subsequently leased to a
new tenant who took occupancy in May. Two new leases totalling 3,700 square
feet were signed and these tenants took occupancy in April. Two tenants who
occupy a total of 2,450 square feet renewed their leases for three years and
one tenant who occupies 3,220 square feet renewed its lease for five years. As
of June 30, Tower Place Festival was 97% occupied.
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 remained flat
for the six months ended June 30, 1995 as compared to the same period in 1994.
Higher repair and maintenance costs were offset by lower landscaping costs,
legal costs and real estate taxes. Property operating expenses at Germantown
increased with increases in repair and maintenance costs related to painting
the parking lot light standards and minor roof repairs being offset by reduced
landscaping costs. Property operating expenses at Paddock Place increased with
increases in repair and maintenance costs related to minor roof repairs and
higher utility costs being offset by lower property management fees and real
estate taxes. Property operating expenses at 1202 Industrial Place decreased
primarily due to lower repair and maintenance costs and real estate taxes.
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 $3,241 for the six months ended
June 30, 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:
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K filed during the quarter ended June 30, 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
Date: August 9, 1995 By: /s/ Mitchell Armstrong
-----------------------------------
Mitchell Armstrong
President
Chief Financial Officer
12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MURRAY
INCOME PROPERTIES II, LTD. BALANCE SHEET AND STATEMENT OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 790,118
<SECURITIES> 890,000
<RECEIVABLES> 471,649
<ALLOWANCES> 17,633
<INVENTORY> 0
<CURRENT-ASSETS> 2,134,134
<PP&E> 23,181,261
<DEPRECIATION> 5,888,018
<TOTAL-ASSETS> 21,252,939
<CURRENT-LIABILITIES> 152,784
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 20,945,739
<TOTAL-LIABILITY-AND-EQUITY> 21,252,939
<SALES> 0
<TOTAL-REVENUES> 684,163
<CGS> 0
<TOTAL-COSTS> 349,650
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (1,888)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 267,557
<INCOME-TAX> 0
<INCOME-CONTINUING> 267,557
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 267,557
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</TABLE>
