<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended DECEMBER 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 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)
(972) 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I
Item 1. Business 1
Item 2. Properties 3
Item 3. Legal Proceedings 3
Item 4. Submission of Matters to a Vote of Security Holders 3
PART II
Item 5. Market for the Partnership's Limited Partnership
Interests and Related Security Holder Matters 4
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 21
PART III
Item 10. Directors and Executive Officers of the Partnership 22
Item 11. Executive Compensation 23
Item 12. Security Ownership of Certain Beneficial Owners
and Management 24
Item 13. Certain Relationships and Related Transactions 25
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 26
Signatures 32
Index to Exhibits 33
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS.
General. Murray Income Properties II, Ltd. (the "Partnership") was formed
December 23, 1985 under the Texas Uniform Limited Partnership Act to acquire
recently constructed income-producing shopping centers located in growth
markets. As of November, 1989, the Partnership became governed by the Texas
Revised Limited Partnership Act. The General Partners of the Partnership are
Murray Realty Investors IX, Inc., a Texas corporation, and Crozier Partners IX,
Ltd., a Texas limited partnership.
In September 1986, the Partnership acquired a 15% interest in Tower Place
Joint Venture, which owns Tower Place Festival Shopping Center ("Tower Place").
The remaining 85% interest in the joint venture is owned by Murray Income
Properties I, Ltd., a publicly-registered real estate limited partnership, the
general partners of which are affiliates of the General Partners. The
Partnership also acquired Paddock Place Shopping Center ("Paddock Place") on
December 17, 1986, Germantown Collection Shopping Center ("Germantown") on
February 9, 1988, and 1202 Industrial Place (an office/warehouse facility) on
February 26, 1988. All acquisitions were paid for in cash. For a more
detailed description of the joint venture interest and the properties acquired
by the Partnership, see "Item 2. Properties".
The Partnership is in competition for tenants for its properties with
other real estate limited partnerships as well as with individuals,
corporations, real estate investment trusts, pension funds and other entities
engaged in the ownership and operation of retail real estate. When evaluating
a particular location to lease, a tenant may consider many factors, including,
but not limited to, space availability, rental rates, lease terms, access,
parking, quality of construction, and quality of management. While the General
Partners believe that the Partnership's properties are generally competitive
with regard to these factors, there can be no assurance that, in the view of a
prospective tenant, other retail properties will not be more attractive.
Tower Place Festival Shopping Center. At December 31, 1997, Tower Place
was 100% leased. One tenant, General Cinema, leases 27.8% of the total
rentable space of the property and another, J&K Cafeterias, leases 10.6% of the
total rentable space. The General Cinema lease expires on September 30, 2006,
with the tenant having the option to extend the term of the lease for two
successive terms of five years each. The J&K Cafeteria lease expires on April
30, 2004, and the tenant has the option to renew for two periods of five years
each. At December 31, 1996, Tower Place was 100% leased.
Tower Place is subject to competition from similar types of properties in
the vicinity in which it is located. The following information on such
competitors has been obtained from sources believed reliable by the
Partnership. The accuracy of this information was not independently verified
by the Partnership.
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1997
- -------- ----------- -----------------
<S> <C> <C>
1 248,700 96%
2 40,800 97%
3 65,800 96%
</TABLE>
1
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Paddock Place Shopping Center. At December 31, 1997, Paddock Place was
100% leased. One tenant, Rafferty's, leases 11.6% of the total rentable space
of the property. J. Alexander's, a full service restaurant, is occupying the
space under a sub-lease. The Rafferty's lease expires on December 31, 2001 and
the tenant has an option to extend the term of the lease for two successive
periods of five years each. At December 31, 1996, Paddock Place was 100%
leased.
Paddock Place is subject to competition from similar types of properties
in the vicinity in which it is located. The following information on such
competitors has been obtained from sources believed reliable by the
Partnership. The accuracy of this information was not independently verified
by the Partnership.
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1997
- -------- ----------- -----------------
<S> <C> <C>
1 178,491 96%
2 108,000 95%
3 15,753 100%
</TABLE>
Germantown Collection Shopping Center. At December 31, 1997, Germantown
was 100% leased. One tenant, Chili's, leases 11% of the total rentable space.
The Chili's lease expires on December 31, 2004, and the tenant has the option
to extend the term of the lease for three consecutive terms of five years each.
Another tenant, Sofa Connection, leases 16% of the total rentable space. This
lease expired on December 31, 1997. At December 31, 1996, Germantown was 95%
leased.
Germantown is subject to competition from similar types of properties in
the vicinity in which it is located. The following information on such
competitors has been obtained from sources believed reliable by the
Partnership. The accuracy of this information was not independently verified
by the Partnership.
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1997
- -------- ----------- -----------------
<S> <C> <C>
1 88,500 100%
2 84,000 90%
3 38,000 100%
</TABLE>
1202 Industrial Place. At December 31, 1997 and December 31, 1996, 1202
Industrial Place was 100% leased. The Pierce Family Partnership lease expires
on October 31, 2002 and the tenant has an option to renew the lease for one
additional term of five years. The Care Management Enterprises, Inc. lease
expires on November 30, 2000. Pierce Family Partnership leases 69% of the
total rentable space of the property and Care Management Enterprises, Inc.
leases 31% of the total rentable space.
1202 Industrial Place is subject to competition from similar types of
properties in the vicinity in which it is located. The following information
on such competitors has been obtained from sources believed reliable by the
Partnership. The accuracy of this information was not independently verified
by the Partnership.
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1997
- -------- ----------- -----------------
<S> <C> <C>
1 100,000 100%
2 80,000 100%
3 100,000 100%
</TABLE>
The Partnership is reimbursed for 47% of the costs of four employees by
Murray Income Properties I, Ltd., an affiliate of the Partnership.
For a definition of the terms used herein and elsewhere in this Form 10-K,
see "Glossary" incorporated by reference herein as contained in the Prospectus
dated February 20, 1986 filed as part
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of Amendment No. 1 to Registrant's Form S-11 Registration Statement (File No.
33-2394) attached hereto as Exhibit 99a.
ITEM 2. PROPERTIES.
The Partnership owns a 15% interest in Tower Place Joint Venture which owns the
property described below:
<TABLE>
<CAPTION>
Location Description of Property
- -------- -----------------------
<S> <C>
Pineville (Charlotte), Tower Place Festival Shopping Center
North Carolina A 114,562 square foot shopping center situated on
10.777 acres. At December 31, 1997, Tower Place was
100% leased at an average annual lease rate of
$13.69. Lease rates range from $8.00 to $16.50 per
square foot.
</TABLE>
The Partnership also owns the properties described below:
<TABLE>
<S> <C>
Nashville, Tennessee Paddock Place Shopping Center
A 68,629 square foot shopping center situated on
4.66 acres. At December 31, 1997, Paddock Place was
100% leased at an average annual lease rate of
$13.65. Lease rates range from $9.50 to $18.50 per
square foot.
Germantown (Memphis), Germantown Collection Shopping Center
Tennessee A 55,730 square foot shopping center situated on
11.4 acres. At December 31, 1997, Germantown was
100% leased at an average annual lease rate of
$15.48. Lease rates range from $13.00 to $19.79 per
square foot.
Grand Prairie, Texas 1202 Industrial Place
An office/warehouse facility containing 14,040
square feet of office space and 158,760 square feet
of warehouse space situated on 8.6 acres. At
December 31, 1997, 1202 Industrial Place was 100%
leased at an average annual lease rate of $2.53.
Lease rates range from $2.25 to $3.15 per square
foot.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings to which the General Partners or
the Partnership is a party or to which any of the Partnership's properties are
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the year covered by this report through the solicitation of proxies
or otherwise.
3
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PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND
RELATED SECURITY HOLDER MATTERS.
A public market for Interests does not exist and is not likely to develop.
Consequently, a Limited Partner may not be able to liquidate its investment in
the event of emergency or for any other reason, and Interests may not be
readily accepted as collateral for a loan. Further, the transfer of Interests
is subject to certain limitations. For a description of such limitations, see
Article XIII of the Agreement of Limited Partnership as contained in the
Prospectus dated February 20, 1986 filed as part of Amendment No. 1 to
Registrant's Form S-11 Registration Statement (File No. 33- 2394) attached
hereto as Exhibit 99b.
As of December 31, 1997, there were 2,242 record holders, owning an
aggregate of 314,687 Interests.
The Partnership made its initial Cash Distribution from Operations
following the quarter ended November 30, 1986, the first complete quarter
subsequent to the acceptance of subscriptions for the minimum number of
Interests offered, and has continued to make distributions after each
subsequent quarter. See "Item 6. Selected Financial Data" for the cash
distributions per Interest during the years ended December 31, 1993 through
December 31, 1997. The Partnership intends to continue making Cash
Distributions from Operations on a quarterly basis.
The Partnership Agreement provides that under certain circumstances, the
General Partners may, in their sole discretion and upon the request of a
Limited Partner, repurchase the Interests held by such Limited Partner. Murray
Realty Investors IX, Inc. is obligated to set aside 25% of its share of Cash
Distributions from Operations and Crozier Partners IX, Ltd. is obligated to set
aside 25% of its 5% share of Cash Distributions from Operations that is
subordinated to the prior receipt by the Limited Partners of a non-cumulative
7% annual return from Cash Distributions from Operations for this purpose. Any
such repurchase shall be subject to the availability of funds set aside and the
other terms and conditions set forth in the Partnership Agreement. For
information on such terms and conditions, see Section 10.17 of the Agreement of
Limited Partnership as contained in amendment number nine to the Agreement of
Limited Partnership contained in the Proxy Statement dated October 11, 1989
attached hereto as Exhibit 99c. As of December 31, 1997, no funds were
available for this purpose.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income $ 2,927,389 $2,947,806 $ 2,794,261 $2,743,911 $2,638,865
Net Earnings 1,108,782 1,160,228 1,121,097 1,064,413 861,425
Earnings per Limited
Partnership Interest * 3.40 3.56 3.44 3.26 2.63
Distributions per Limited
Partnership Interest * 5.94 6.00 6.00 5.63 5.00
Total Assets at
Year End $19,396,894 $20,161,224 $20,934,041 $21,767,471 $22,519,206
</TABLE>
* Based on limited partnership interests outstanding at year-end and net
earnings or distributions allocated to the Limited Partners.
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing in Item 8 of this report.
4
<PAGE> 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Liquidity and Capital Resources
As of December 31, 1997, the Partnership had cash, cash equivalents and
certificates of deposit of $1,786,256, which included $1,761,748 invested in
certificates of deposit and other money market instruments. Such amounts
represent cash generated from operations and working capital reserves. The
decrease in cash and cash equivalents from December 31, 1996 to December 31,
1997 is primarily due to a decrease in the net cash flow generated from the
operations of the Partnership's properties.
Rental income from leases is accrued using the straight line method over
the related lease terms. At December 31, 1997 and December 31, 1996, there
were $185,338 and $211,854, respectively, of accounts receivable related to
such accruals. Accounts receivable also consist of tenant receivables,
receivables for rents collected (but not yet remitted to the Partnership by the
property management companies managing the properties), and interest receivable
on short-term investments. The increase in accounts receivable of $22,371
(exclusive of bad debts and recoveries) from December 31, 1996 to December 31,
1997 is primarily due to increases in tenant receivables for rent collected
(but not yet remitted by the property management companies) at each of the
properties.
Other assets consist primarily of deferred leasing costs. The increase in
other assets of $74,868 is primarily due to an increase (exclusive of
amortization) in leasing commissions.
During the year ended December 31, 1997, the Partnership made Cash
Distributions from Operations totaling $1,906,582. Subsequent to December 31,
1997, the Partnership made a Cash Distribution from Operations of $481,664,
which related to the three months ended December 31, 1997. 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.
Although two of the Partnership's three shopping centers experienced a
decline in average occupancy during 1997 compared to 1996, overall market
conditions have remained healthy in the cities in which the Partnership owns
retail properties. The average annual rental rate achieved in 1997 increased
at all three shopping centers compared to the previous year. There has been
almost no new retail development in the submarkets in which Germantown and
Paddock Place are located. This is due primarily to restricted zoning and a
lack of available land in these areas. As in many markets across the country,
there has been a proliferation of grocery anchored shopping centers in Memphis
and Nashville. To date this new development is in areas which are not in close
proximity to the Partnership's properties. As older shopping centers are
refurbished or other types of properties are converted to retail use, the
Partnership's shopping centers could potentially face new competition in the
future. Charlotte has also remained a healthy retail market, with occupancy
rates stable in the face of supermarket driven development. This development
is expected to continue with the construction of a 65 mile loop around the
city, spurring residential development in the suburbs which in turn provides
the impetus for the development of new shopping centers. This new development
could eventually have a negative impact on rental rates and occupancy at Tower
Place. All three of these cities have seen a slowdown in the construction of
power centers with several large anchors, which is primarily due to the
financial weakness among some big box discount retailers. The Dallas-Fort
Worth industrial market has remained healthy through 1997, although it has
added space faster than it has been absorbed. Published reports projected that
approximately 22 million square feet would be added to the Dallas-Fort Worth
industrial market in 1997 compared to 13 million in 1996. This is in a total
market of approximately 400 million
5
<PAGE> 8
square feet. This new development could eventually have a negative impact on
occupancy and rental rates.
Results of Operations
Rental income decreased $25,682 (1%) for the year ended December 31, 1997
as compared to the year ended December 31, 1996. Rental income increased
$136,010 (5%) for the year ended December 31, 1996 as compared to the year
ended December 31, 1995. The following information details the rental income
generated, bad debt expense incurred, and average occupancy for the years ended
December 31, 1997, 1996, and 1995.
<TABLE>
For the years ended
December 31,
--------------------------------------------------------
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
Paddock Place Shopping Center
Rental income $1,166,486 $1,180,740 $1,059,154
Bad debt expense (recovery) $ (7,200) $ (4,549) $ (5,845)
Average occupancy 94% 97% 95%
Germantown Collection Shopping Center
Rental income $1,008,103 $1,052,117 $1,044,327
Bad debt expense $ 686 $ -0- $ -0-
Average occupancy 94% 99% 100%
1202 Industrial Place
Rental income $515,921 $ 483,335 $ 476,701
Bad debt expense $ -0- $ -0- $ -0-
Average occupancy 100% 100% 100%
</TABLE>
Paddock Place Shopping Center in Nashville, Tennessee had an increase in
base rents due to higher rental rates and also had increases in percentage rent
received from J. Alexander's Restaurant and tenant reimbursements for common
area maintenance costs for the year ended December 31, 1997. However, the 1996
same period income included a one time $40,000 fee as consideration for the
termination of the Waldenbooks lease. The increase in rent income components
described above in the amount of $25,746 less the one time fee of $40,000
received in 1996 resulted in a net decrease of $14,254 (1%) for the period
ended December 31, 1997 as compared to the same period in 1996. Rental income
at Paddock Place increased $121,586 (11%) for the year ended December 31, 1996
as compared to the year ended December 31, 1995, primarily due to an increase
in rental rates, an increase in percentage rent received from J. Alexander's
Restaurant and the receipt of a $40,000 fee as consideration for the
termination of the Waldenbooks' lease.
Paddock Place averaged 94% occupancy for the year ended December 31, 1997,
a three percent decrease from the previous year. Three new leases totalling
8,011 square feet were signed during the year. Two of these tenants, totalling
3,946 square feet, took occupancy in 1997 and one tenant took occupancy of
4,065 square feet in 1998. Three tenants who occupy 7,070 square feet renewed
their leases for five years. One tenant who occupies 1,304 square feet renewed
its lease for thee years. One tenant who occupied 3,708 square feet reduced
the size of its space to 1,870 square feet. The remaining 1,838 square feet
was leased by an existing tenant who occupied 5,222 square feet. This new
lease, totalling 7,060 square feet, was also extended an additional two years
and will now expire on August 31, 2001. As of December 31, 1997, Paddock Place
was 94% occupied.
Rental income at Germantown Collection in Germantown (Memphis), Tennessee
decreased $44,014 (4%) for the year ended December 31, 1997 due to a decrease
in occupancy and a decrease in percentage rent received from Chili's
Restaurant, offset by an increase in tenant reimbursements for common area
maintenance costs. Rental income at Germantown increased $7,790 (1%) for the
year
6
<PAGE> 9
ended December 31, 1996 as compared to the year ended December 31, 1995 due to
an increase in rental rates and an increase in tenant reimbursements for common
area maintenance costs.
Occupancy at Germantown averaged 94% for the year ended December 31, 1997,
a five percent decrease from the previous year. The primary reason for the
decline in average occupancy was that a tenant who occupied 2,691 square feet
vacated its space during the fourth quarter of 1996 and the space remained
vacant throughout 1997. This space was leased in December and the tenant took
occupancy in February, 1998. One new lease for 642 square feet was signed and
the tenant took occupancy in February, 1997. One tenant who occupied 8,678
square feet vacated its space when its lease expired on December 31, 1997. A
new tenant who signed a lease in January, 1997 for 3,208 square feet also
leased 1,510 square feet of the 8,678 that was vacated at year-end. This
tenant will take occupancy of the additional 1,510 square feet during the first
quarter of 1998. Two tenants who occupy 5,580 square feet renewed their leases
for three years and five tenants who occupy 11,413 square feet renewed their
leases for five years. As of December 31, 1997, Germantown was 94% occupied.
Rental income at 1202 Industrial Place in Grand Prairie (Dallas), Texas
increased $32,586 (7%) for the year ended December 31, 1997 as compared to the
year ended December 31, 1996 primarily due to higher rental rates and an
increase in tenant reimbursements for common area maintenance costs and real
estate taxes. Rental income at 1202 Industrial Place increased $6,634 (1%) for
the year ended December 31, 1996 as compared to the year ended December 31,
1995 primarily due to an increase in tenant reimbursements for insurance costs.
Occupancy at 1202 Industrial Place averaged 100% for the year ended
December 31, 1997, unchanged from the previous year. As of December 31, 1997,
1202 Industrial Place was 100% occupied.
"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 Festival Shopping Center in Pineville (Charlotte), N.C. increased $36,633
(2%) for the year ended December 31, 1997 as compared to the year ended
December 31, 1996 primarily due to an increase in occupancy, an increase in
rental rates and an increase in tenant reimbursements for common area
maintenance costs, offset by a decrease in percentage rent received. Tower
Places's total operating expenses increased, with increases in parking lot
maintenance costs, leasing and promotion costs and property management fees
being offset by decreases in utilities and landscaping costs. Rental income at
Tower Place increased $118,175 (7%) for the year ended December 31, 1996 as
compared to the year ended December 31, 1995 primarily due to an increase in
rental rates along with an increase in percentage rent received from J&K
Cafeterias and an increase in tenant reimbursements for common area maintenance
costs, offset by lower tenant reimbursements for real estate taxes and
insurance costs. Tower Place's total operating expenses increased, with
increases in repair and maintenance costs, property management fees, and
landscaping costs offset by decreases in leasing and promotion costs, insurance
and real estate taxes. The following information details the rental income
generated, bad debt expense incurred, and average occupancy for the years ended
December 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
For the years ended
December 31,
---------------------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Tower Place Festival Shopping Center
Rental income $1,772,710 $1,736,077 $1,617,902
Bad debt expense (recovery) $ 2,997 $ (4,305) $ (5,521)
Average occupancy 98% 97% 96%
</TABLE>
The Partnership's share of income from the joint venture increased $3,334
(3%) for the year ended December 31, 1997 as compared to the year ended
December 31, 1996 for the reasons stated above. The Partnership's share of
income from the joint venture increased $16,840 (15%) for the year ended
December 31, 1996 as compared to the year ended December 31, 1995 for the
reasons stated above.
7
<PAGE> 10
Tower Place averaged 98% occupancy for the year ended December 31, 1997, a
one percent increase over the previous year. Two tenants who occupied 3,360
square feet vacated their space upon expiration of their leases. Both of these
spaces were subsequently leased to new tenants who took occupancy during 1997.
Four tenants totalling 5,864 square feet vacated their spaces prior to the
expiration of their leases. One of these tenants, who had occupied 1,600
square feet, continued to pay rent under the lease. This space was
subsequently subleased to a new tenant and this lease expires on April 30,
1998. The other three spaces which were vacated have all been re-leased with
two of the new tenants taking occupancy in 1997 and one during the first
quarter of 1998. Two tenants who occupy 3,000 square feet renewed their leases
for five years and three tenants who occupy 5,180 square feet renewed their
leases for three years. As of December 31, 1997, Tower Place was 98% 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 increased
$16,362 (2%) for the year ended December 31, 1997 as compared to the year ended
December 31, 1996. The increase is due to higher real estate taxes and leasing
and promotion costs. Property operating expenses at Germantown decreased
$5,949 (2%) with decreases in parking lot repairs and maintenance and
landscaping costs being offset by increases in leasing and promotion costs and
utility costs. Property operating expenses at Paddock Place increased $4,322
(2%) with increases in real estate taxes and parking lot repair and maintenance
costs being offset by decreases in utilities and snow removal costs. Property
operating expenses at 1202 Industrial Place increased $17,989 (11%) primarily
due to increases in parking lot repair and maintenance costs and real estate
taxes offset by decreases in insurance costs and general building repair and
maintenance costs.
Total property operating expenses increased $75,745 (11%) for the year
ended December 31, 1996 as compared to the year ended December 31, 1995. The
increase is due to higher repair and maintenance costs, utilities costs, snow
removal costs, landscaping costs, property management fees, insurance costs,
and real estate taxes. Property operating expenses at Germantown increased
$19,409 (7%) primarily because of increases in parking lot repair and
maintenance costs, landscaping costs and utilities. Property operating
expenses at Paddock Place increased $20,827 (8%) primarily because of increases
in utilities, snow removal costs and property management fees. Property
operating expenses at 1202 Industrial Place increased $35,509 (27%) primarily
because of increases in utilities, parking lot repair and maintenance costs,
insurance 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 increased $26,364 (8%) for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 primarily due
to increases in telephone, salaries and benefits, seminars and education costs,
travel costs and legal and accounting fees.
General and administrative expenses increased $45,622 (17%) for the year
ended December 31, 1996 as compared to the year ended December 31, 1995. The
Partnership became subject to electronic filing requirements with the
Securities and Exchange Commission during the year ended December 31, 1995.
Costs associated with filing the 1995 Form 10-K and quarterly Form 10-Q's for
1996 caused the Partnership's compliance costs to increase. Also, legal costs
increased because of due diligence performed on and negotiations held with
limited partners who wanted to acquire the Partnership's investor list in order
to solicit the partners to purchase their interests. The Partnership also
incurred additional printing and postage costs to respond to all limited
partners regarding these solicitations.
The effect of inflation on the results of operations for the years ended
December 31, 1997, 1996 and 1995 was not significant.
8
<PAGE> 11
Over the past several years the real estate markets have gotten stronger
and the properties' performance has improved. This improvement has resulted in
an increase in the number of potential buyers as well as the number of parties
interested in purchasing limited partnership units on the secondary market.
Some of these groups have solicited the Partnership's limited partners directly
with offers to buy their units. Barring any unforseen circumstances, the
General Partners believe that the markets will continue to improve. Also,
management will continue to pursue a strategy of carefully selecting tenants,
achieving the highest rents possible, and maintaining the properties in first
class condition. This strategy should result in the properties being well
positioned when the decision to sell is made. Management is constantly
analyzing market conditions, comparable sales, and economic trends in order to
evaluate their impact on the value of the Partnership's properties, and intends
to sell the portfolio at the time when such a sale will maximize the
properties' values and otherwise be in the best interest of the Limited
Partners.
9
<PAGE> 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements are filed as a part of this report:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Independent Auditors' Report 11
Balance Sheets - December 31, 1997 and 1996 12
Statements of Earnings - Years ended December 31, 1997, 1996, and 1995 13
Statements of Changes in Partners' Equity - Years ended 14
December 31, 1997, 1996, and 1995
Statements of Cash Flows - Years ended December 31, 1997, 1996, and 1995 15
Notes to Financial Statements 16-20
</TABLE>
10
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
The Partners
Murray Income Properties II, Ltd.:
We have audited the accompanying balance sheets of Murray Income Properties II,
Ltd. (a limited partnership) as of December 31, 1997 and 1996, and the related
statements of earnings, changes in partners' equity and cash flows for each of
the years in the three-year period ended December 31, 1997. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Murray Income Properties II,
Ltd. as of December 31, 1997 and 1996, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
February 27, 1998
11
<PAGE> 14
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Investment properties, at cost (note 3):
Land $ 5,789,291 $ 5,789,291
Buildings and improvements 17,495,190 17,463,605
----------- -----------
23,284,481 23,252,896
Less accumulated depreciation 7,716,316 6,991,905
----------- -----------
Net investment properties 15,568,165 16,260,991
Investment in joint venture,
at equity (note 4) 1,391,212 1,468,518
Cash and cash equivalents 890,256 922,330
Certificates of deposit 896,000 895,000
Accounts and notes receivable,
net of allowance of $1,447 and $9,485
in 1997 and 1996, respectively (note 1) 407,801 378,916
Other assets, at cost, net of accumulated
amortization of $480,477 and $413,600 in
1997 and 1996, respectively 243,460 235,469
----------- -----------
$19,396,894 $20,161,224
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 6,401 $ 5,536
Accrued property taxes 291,570 271,692
Security deposits and other liabilities 108,423 90,843
Deferred income (note 3) 30,827 35,680
----------- -----------
Total liabilities 437,221 403,751
----------- -----------
Partners' equity:
General Partners:
Capital contributions 1,000 1,000
Cumulative net earnings 603,815 565,715
Cumulative cash distributions (607,180) (569,048)
----------- -----------
(2,365) (2,333)
----------- -----------
Limited Partners (314,687 Interests):
Capital contributions, net of offering costs 27,029,395 27,029,395
Cumulative net earnings 11,894,201 10,823,519
Cumulative cash distributions (19,961,558) (18,093,108)
----------- -----------
18,962,038 19,759,806
----------- -----------
Total partners' equity 18,959,673 19,757,473
----------- -----------
$19,396,894 $20,161,224
=========== ===========
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 15
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years Ended
December 31
------------------------------------------------
1997 1996 1995
---------- --------- ----------
<S> <C> <C> <C>
Income:
Rental (notes 3 and 7) $2,690,510 $2,716,192 $2,580,182
Interest 101,485 99,554 98,859
Equity in earnings of joint
venture (note 4) 135,394 132,060 115,220
---------- ---------- ----------
2,927,389 2,947,806 2,794,261
---------- ---------- ----------
Expenses:
Depreciation 724,411 734,143 742,392
Property operating (note 5) 752,939 736,577 660,832
General and administrative 347,771 321,407 275,785
Bad debts (recoveries), net (6,514) (4,549) (5,845)
---------- ---------- ----------
1,818,607 1,787,578 1,673,164
---------- ---------- ----------
Net earnings $1,108,782 $1,160,228 $1,121,097
========== ========== ==========
Earnings per limited partnership
interest $3.40 $ 3.56 $ 3.44
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 16
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
---------- ----------- -----------
<S> <C> <C> <C>
Year ended December 31, 1995:
Balance at December 31, 1994 $ (3,341) $21,332,763 $21,329,422
Net earnings 38,740 1,082,357 1,121,097
Cash distributions ($6.00 per limited
partnership interest) (38,533) (1,888,105) (1,926,638)
---------- ----------- -----------
Balance at December 31, 1995 $ (3,134) $20,527,015 $20,523,881
---------- ----------- -----------
Year ended December 31, 1996:
Net earnings 39,334 1,120,894 1,160,228
Cash distributions ($6.00 per limited
partnership interest) (38,533) (1,888,103) (1,926,636)
---------- ----------- -----------
Balance at December 31, 1996 $ (2,333) $19,759,806 $19,757,473
---------- ----------- -----------
Year ended December 31, 1997:
Net earnings 38,100 1,070,682 1,108,782
Cash distributions ($5.94 per limited
partnership interest) (38,132) (1,868,450) (1,906,582)
---------- ----------- -----------
Balance at December 31, 1997 $ 2,365) $18,962,038 $18,959,673
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 17
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended
December 31
---------------------------------------------
1997 1996 1995
---------- ---------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $1,108,782 $1,160,228 $1,121,097
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Bad debts (recoveries), net (6,514) (4,549) (5,845)
Depreciation 724,411 734,143 742,392
Equity in earnings of joint venture (135,394) (132,060) (115,220)
Amortization of other assets 66,877 66,893 65,553
Amortization of deferred income (6,498) (6,498) (6,498)
Change in assets and liabilities:
Accounts and notes receivable (22,371) 64,790 (628)
Other assets (74,868) (83,571) (23,263)
Accounts payable 865 (3,272) (2,197)
Accrued property taxes, security deposits
and other liabilities and deferred income 39,103 3,361 (19,194)
---------- ---------- ----------
Net cash provided by operating activities 1,694,393 1,799,465 1,756,197
---------- ---------- ----------
Cash flows from investing activities:
Additions to investment properties (31,585) (70,895) (3,107)
Purchases of certificates of deposit (996,000) (895,000) (796,000)
Proceeds from redemptions of certificates of deposit 995,000 895,000 789,000
Distributions from joint venture 212,700 198,750 182,550
---------- ---------- ----------
Net cash provided by investing activities 180,115 127,855 172,443
---------- ---------- ----------
Cash flows from financing activities - cash distributions (1,906,582) (1,926,636) (1,926,638)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (32,074) 684 2,002
Cash and cash equivalents at beginning of year 922,330 921,646 919,644
---------- ---------- ----------
Cash and cash equivalents at end of year $ 890,256 $ 922,330 $ 921,646
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 18
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1997
1. ORGANIZATION AND BASIS OF ACCOUNTING
The Partnership was formed December 23, 1985 by filing a Certificate and
Agreement of Limited Partnership with the Secretary of State of the State of
Texas. The Partnership Agreement authorized the issuance of up to 500,000
limited partnership interests at a price of $100 each, of which 314,687 limited
partnership interests were issued. Proceeds from the sale of limited
partnership interests, net of related selling commissions, dealer-manager fees
and other offering costs, are recorded as contributed capital.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
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 December 31, 1997 and 1996,
there were $185,338 and $211,854, 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 and cash distributions per limited partnership interest are based
upon the limited partnership interests outstanding at year-end and the net
earnings and cash distributions allocated to the Limited Partners in accordance
with the terms of the Partnership Agreement, as amended.
16
<PAGE> 19
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
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.
The following information relates to estimated fair values of the
Partnership's financial instruments as of December 31, 1997 and 1996. For cash
and cash equivalents, certificates of deposit, accounts and notes receivable,
accounts payable, accrued property taxes payable, and security deposits, the
carrying amounts approximate fair value because of the short maturity of these
instruments.
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.
(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.
17
<PAGE> 20
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT PROPERTIES
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.
Operating leases with tenants range in terms from thirty-three months to
fifteen years. Fixed minimum future rentals under existing leases at December
31, 1997 are as follows:
Years ending December 31:
<TABLE>
<S> <C>
1998 $ 1,942,211
1999 1,746,400
2000 1,518,759
2001 1,052,230
2002 772,287
Thereafter 260,866
-----------
$ 7,292,753
===========
</TABLE>
Rental income includes $543,118, $507,503, and $475,490 in 1997, 1996,
and 1995, respectively, related to reimbursements from tenants for common area
maintenance costs, real estate taxes and insurance costs.
During 1990, the Partnership reached a settlement with a tenant which
provided for the receipt of $245,000 in settlement of all past due rent and a
modification of future rental obligations. In connection with this settlement,
$25,993 and $32,491 at December 31, 1997 and 1996, respectively, is classified
as deferred income and recognized on a straight line basis over the remaining
term of the lease.
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.
18
<PAGE> 21
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Summarized financial information for the joint venture is as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Total assets, principally investment property $ 9,473,766 $ 10,021,353
============ ============
Total liabilities 199,023 231,235
Venturers' capital 9,274,743 9,790,118
------------ ------------
$ 9,473,766 $ 10,021,353
============ ============
</TABLE>
<TABLE>
<CAPTION>
Years ended
December 31
----------------------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Income $ 1,797,162 $ 1,761,565 $ 1,643,520
Expenses 894,538 881,164 875,385
----------- ----------- -----------
Net earnings $ 902,624 $ 880,401 $ 768,135
=========== =========== ===========
</TABLE>
5. TRANSACTIONS WITH AFFILIATES
Murray Realty Investors IX, Inc. ("MRI IX"), the Corporate General
Partner, entered into a property management agreement with the Partnership for
the management of 1202 Industrial Place, effective January 1, 1996. Pursuant
to this agreement, MRI IX earned property management fees in the amount of
$15,495 and $14,411 during the years ended December 31, 1997 and 1996.
19
<PAGE> 22
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
6. RECONCILIATION OF FINANCIAL STATEMENT NET EARNINGS AND PARTNERS' EQUITY TO
FEDERAL INCOME TAX BASIS NET EARNINGS AND PARTNERS' EQUITY
Reconciliation of financial statement net earnings to Federal income tax
basis net earnings is as follows:
<TABLE>
<CAPTION>
Years Ended
December 31
------------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net earnings - financial statement basis $1,108,782 $1,160,228 $1,121,097
---------- ---------- ----------
Financial statement basis depreciation/amortization
over tax basis depreciation/amortization 111,112 123,618 112,371
Financial statement basis joint venture earnings
under tax basis joint venture earnings 6,560 2,906 7,527
Tax basis rental income over (under)
financial statement basis rental income 23,404 23,274 ( 27,067)
---------- ---------- ----------
Sub-total 141,076 149,798 92,831
---------- ---------- ----------
Net earnings - Federal income tax basis $1,249,858 $1,310,026 $1,213,928
========== ========== ==========
</TABLE>
Reconciliation of financial statement partners' equity to Federal income
tax basis partners' equity is as follows:
<TABLE>
<CAPTION>
December 31
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Total partners' equity - financial statement basis $18,959,673 $19,757,473 $20,523,881
Current year tax basis net earnings over
financial statement basis net earnings 141,076 149,798 92,831
Cumulative prior years tax basis net earnings over
financial statement basis net earnings 1,175,901 1,026,103 933,272
----------- ----------- -----------
Total partners' equity - Federal income tax basis $20,276,650 $20,933,374 $21,549,984
=========== =========== ===========
</TABLE>
Because many types of transactions are susceptible to varying
interpretations under Federal and state income tax laws and regulations, the
amounts reported above may be subject to change at a later date upon final
determination by the taxing authorities.
7. BUSINESS AND CREDIT CONCENTRATION
As previously noted, the Partnership's properties are located in Nashville
and Memphis, Tennessee, and Grand Prairie, Texas.
The Partnership had no outstanding receivable balances at December 31, 1997
or 1996, which, individually, exceeded 5% of the Partnership's total assets.
Rental income from a major customer was approximately $257,000 for each of
the years ended 1997, 1996, and 1995, respectively.
20
<PAGE> 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable
21
<PAGE> 24
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.
Murray Realty Investors IX, Inc., a Texas corporation, and Crozier Partners
IX, Ltd., a Texas limited partnership, are the General Partners of the
Partnership. The Limited Partners voting a majority of the Interests may,
without the consent of the General Partners, remove a General Partner and elect
a successor General Partner.
The Partnership Agreement provides that the Partnership will have an
Investment Committee consisting initially of three members, appointed by Murray
Realty Investors IX, Inc. (the "Corporate General Partner"). A person
appointed to the Investment Committee may be removed by the Corporate General
Partner, but the Corporate General Partner must name a replacement. The
acquisition, sale, financing or refinancing of a Partnership property must be
approved by a majority of the members of the Investment Committee. The members
of the Investment Committee currently are Messrs. Jack E. Crozier, Mitchell L.
Armstrong and W. Brent Buck. Murray Realty Investors IX, Inc. is owned 60% by
Mr. Armstrong and 40% by Mr. Buck. The following is a brief description of
Jack E. Crozier, a general partner of Crozier Partners IX, Ltd., a General
Partner, and the directors and executive officers of the Corporate General
Partner:
Crozier Partners IX, Ltd, General Partner
Jack E. Crozier, 69, General Partner. From 1954 through July 1989,
Mr. Crozier was affiliated with Murray Financial Corporation and various of its
affiliates. From 1977 through 1988, he was President of Murray Financial
Corporation, and from 1982 until June 1989, he also served as President of
Murray Savings Association, a principal affiliate of Murray Financial
Corporation. He served as President or Director of various other subsidiaries
of Murray Financial Corporation which were engaged in real estate finance,
development and management. He also served as the general partner in a number
of publicly registered limited partnerships, and a number of non-registered
limited partnerships, all of which had real estate as their principal assets.
Since June 1989, he has remained as a partner or limited partner in several
real estate oriented limited partnerships. He is a consultant to several
companies.
Murray Realty Investors IX, Inc., Corporate General Partner
The directors and executive officers of Murray Realty Investors IX, Inc., are:
Mitchell L. Armstrong, 47, President and Director. Mr. Armstrong
became President of Murray Realty Investors IX, Inc. on November 15, 1989.
From September 1984 to that date, he was Senior Vice President - Product
Development of Murray Realty Investors, Inc., and Murray Property Investors and
Vice President - Tax for Murray Properties Company. From November 1988 to
November 15, 1989, he also served as Secretary to these companies. From August
1983 to September 1984, he was Executive Vice President of Dover Realty
Investors. From September 1980 to August 1983, he was with Murray Properties
Company, in charge of tax planning and reporting. From July 1972 to August
1980, he was with the international accounting firm of Deloitte Haskins & Sells
(now Deloitte & Touche). Mr. Armstrong is a Certified Public Accountant and a
Certified Financial Planner and holds a Bachelor of Business Administration
degree with high honors in Accounting from Texas Tech University. He is a
member of the American Institute of Certified Public Accountants, and a member
of the Institute of Certified Financial Planners.
W. Brent Buck, 42, Executive Vice President and Director. Mr. Buck
became Executive Vice President of Murray Realty Investors IX, Inc., on
November 15, 1989. From September 1981 to November 15, 1989, Mr. Buck served
in various capacities for Murray Properties Company and certain subsidiaries.
His primary responsibilities included property acquisitions and asset
management. He was
22
<PAGE> 25
responsible for initially identifying and negotiating the purchase of all
properties in the Partnership. Since their acquisition to the present time, he
has continued to oversee the management of all properties of the Partnership.
Mr. Buck holds a Master of Business Administration degree in Finance and a
Bachelor of Public Administration degree in Urban Administration from the
University of Mississippi. He also holds a Texas real estate salesman license
and a Mississippi broker's license.
ITEM 11. EXECUTIVE COMPENSATION.
Pursuant to an amendment to the Partnership Agreement effective
November 15, 1989, Murray Income Properties II, Ltd. is reimbursed by Murray
Income Properties I, Ltd. for forty-seven percent (47%) of executive
compensation incurred in the management of the two partnerships. Murray Income
Properties I, Ltd. is a real estate limited partnership the general partners of
which are affiliates of the General Partners. The following table presents
Murray Income Properties II, Ltd.'s share of executive compensation.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation
-------------------
All Other
Name and Principal Position Year Salary Compensation(1)
--------------------------- ---- ------ ------------
<S> <C> <C> <C>
Mitchell L Armstrong, 1997 $65,507 $2,815
President* 1996 63,414 499
1995 61,868 329
W. Brent Buck, 1997 $48,782 $1,695
Executive Vice President* 1996 47,224 221
1995 46,072 176
</TABLE>
* Offices held in Murray Realty Investors IX, Inc., the Corporate General
Partner. (1)The Partnership provides the named executive officers with certain
group life, health, medical and other non-cash
benefits generally available to all salaried employees. The amounts shown
in this column include the following:
a) Contributions by the Partnership under its SEP-IRA plan which equaled
3% of each employee's covered compensation (salary and term insurance
value). Prior to 1997, contributions were made only on behalf of the
Partnership's non-management employees. Commencing in 1997,
contributions were made on behalf of every employee of the Partnership,
including $1,991 for Mr. Armstrong and $1,474 for Mr. Buck.
b) Full premium cost of term insurance that will benefit the executive.
The Partnership and Murray Income Properties I, Ltd. entered into
severance agreements with Mr. Armstrong and Mr. Buck effective September 16,
1996. Pursuant to these agreements, upon the occurrence of specified events,
the Partnership will be obligated for fifty three (53%) of any benefits paid
pursuant to the agreements to either Mr. Armstrong or Mr. Buck. The agreement
with Mr. Armstrong provides for a benefit amount equal to the value of the
aggregate of one month of his highest monthly salary paid at any time during
the twelve months prior to his termination multiplied by fifteen (15), plus the
current monthly cost of such health, disability and life benefits (including
spousal or similar coverage and coverage for children) which he was receiving
or entitled to receive immediately prior to termination multiplied by eighteen
(18). The agreement with Mr. Buck provides for a benefit amount equal to the
value of the aggregate of one month of his highest monthly salary paid at any
time during the twelve months prior to his termination multiplied by twelve
(12), plus the current monthly cost of such health,
23
<PAGE> 26
disability and life benefits (including spousal or similar coverage and
coverage for children) which he was receiving or entitled to receive
immediately prior to termination multiplied by fourteen (14).
The Partnership has not paid and does not propose to pay any bonuses or
deferred compensation, compensation pursuant to retirement or other plans, or
other compensation to the officers, directors or partners of the General
Partners other than described in the above table or the above paragraph. In
addition, there are no restricted stock awards, options or stock appreciation
rights, or any other long term incentive payouts.
During the operational and liquidation stages of this Partnership, the
General Partners and their affiliates receive various fees and distributions.
For information on these types of remuneration, reference is made to the
section entitled "Management Compensation" as contained in the Prospectus dated
February 20, 1986 filed as part of Amendment No. 1 to Registrant's Form S-11
Registration Statement (File No. 33-2394) attached hereto as Exhibit 99d. See
"Item 13. Certain Relationships and Related Transactions" for information on
the fees and other compensation or reimbursements paid to the General Partners
or their Affiliates during the year ended December 31, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
No person (including any "group" as that term is used in Section 13 (d)(3)
of the Securities Exchange Act of 1934) is known to the Partnership to be the
beneficial owner of more than five percent of the outstanding voting Interests
as of December 31, 1997.
The following table presents certain information regarding the number of
Interests owned, directly or indirectly, by (i) a general partner of a General
Partner and executive officers and directors of a General Partner and (ii) a
general partner of a General Partner and executive officers and directors of a
General Partner as a group as of December 31, 1997:
<TABLE>
<CAPTION>
Amount and
Title Nature of Percent
of Beneficial of
Class Beneficial Owner Ownership Class
- ----- ---------------- --------- -------
<S> <C> <C> <C> <C>
Limited
Partnership
Interests, Mitchell L. Armstrong 377 (1) .12%
$100 per W. Brent Buck 251 (2) .08%
Interest Jack E. Crozier 736 (3) .23%
Limited
Partnership
Interests,
$100 per
Interest All General Partners as a group 1,057 .34%
</TABLE>
(1) The total of 377 Interests listed above includes 126 Interests owned
beneficially and of record by First Trust Corporation, Trustee for the
benefit of Mitchell L. Armstrong IRA; 195 Interests owned by Murray Realty
Investors IX, Inc., a corporation in which Mr. Armstrong is an officer,
director, and substantial owner; and 56 Interests owned by Crozier
Partners IX, Ltd., a partnership in which Mr. Armstrong is a limited
partner.
(2) The total of 251 Interests listed above includes 195 Interests owned by
Murray Realty Investors IX, Inc., a corporation in which Mr. Buck is an
officer, director and substantial owner; and 56 Interests owned by Crozier
Partners IX, Ltd., a partnership in which Mr. Buck is a limited partner.
24
<PAGE> 27
(3) The total of 736 interests listed above includes 272 Interests owned by
Crozier Partners IX, Ltd., a partnership in which Mr. Crozier is a general
partner and 464 Interests owned by Mrs. Irma Crozier as her separate
property.
No arrangements are known to the Partnership which may result in a change
of control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the year ended December 31, 1997 the Partnership was reimbursed by
Murray Income Properties I, Ltd., ("MIP I") for forty seven percent (47%) of
the costs associated with the management of the Partnership and MIP I. MIP I
is a publicly-registered real estate limited partnership, the general partners
of which are affiliates of the General Partners. The reimbursement has been
accounted for as a reduction of general and administrative expenses. Murray
Realty Investors IX, Inc. ("MRI IX"), the Corporate General Partner, entered
into a property management agreement with the Partnership for the management of
1202 Industrial Place, effective January 1, 1996. Pursuant to this agreement,
MRI IX earned property management fees in the amount of $15,495 and $14,411
during the years ended December 31, 1997 and 1996.
25
<PAGE> 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements - See Index to Financial Statements in
Item 8 of this Form 10-K.
2. Financial Statement Schedules with Independent Auditors'
Report Thereon:
(i) Valuation and Qualifying Accounts (Schedule II) - Years
ended December 31, 1997, 1996, and 1995.
(ii) Real Estate and Accumulated Depreciation (Schedule III)
- December 31, 1997.
All other schedules have been omitted because they are not
required or the required information is shown in the financial
statements or notes thereto.
(b) Reports on Form 8-K filed during the last quarter of the year:
None
(c) Exhibits:
3a Agreement of Limited Partnership of Murray Income Properties
II, Ltd. Reference is made to Exhibit A of the Prospectus
dated February 20, 1986 contained in Amendment No. 1 to
Partnership's Form S-11 Registration Statements filed with the
Securities and Exchange Commission on February 13, 1986.
(File No. 33-2294)
3b Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 15, 1989. Reference is made
to Exhibit 3b to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1989.
(File No. 0-17183)
3c Amended and Restated Certificate and Agreement of Limited
Partnership dated as of January 10, 1990. Reference is made
to Exhibit 3c to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1989.
(File No. 0-17183)
10a Form of Joint Venture Agreement between the Partnership and
Murray Income Properties II, Ltd. Reference is made to
Exhibit 10h to Post-Effective Amendment No. 1 to Partnership's
Form S-11 Registration Statements, filed with the Securities
and Exchange Commission on July 29, 1989. (File No. 33-2394)
10b Lease Agreement with General Cinema to lease certain premises
as described within the Lease Agreement dated July 23, 1985 at
Tower Place Festival Shopping Center. Reference is made to
Exhibit 10q to the 1989 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1989.
(File No. 0-17183)
10c Lease Agreement with Rafferty's Inc. to lease certain premises
as described within the Lease Agreement dated August 12, 1985
at Paddock Place Shopping Center. Reference is made to
Exhibit 10r to the 1989 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1989.
(File No. 0-17183)
10d Lease Agreement with Chili's Inc. to lease certain premises as
described within the Lease Agreement dated May 19, 1988 at
Germantown Collection Shopping Center.
26
<PAGE> 29
Reference is made to Exhibit 10t to the 1989 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 31, 1989. (File No. 0-17183)
10e Settlement and Release Agreement with Rafferty's Inc. and
Mid-South Management Group, Inc., dated December 1, 1990.
Reference is made to Exhibit 10u to the 1990 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 31, 1991. (File No. 0-17183)
10f Management Agreement with Murray Realty Investors IX, Inc. for
management and operation services described in the Management
Agreement dated January 1, 1996 at 1202 Industrial Place.
Reference is made to Exhibit 10a to the Form 10-Q for the
Quarter ended March 31, 1996 filed with the Securities and
Exchange Commission on May 13, 1996. (File No. 0-17183)
10g Data Processing System Use Agreement between Murray Income
Properties II, Ltd. and The Mavricc Management Systems, Inc.,
dated September 1, 1996. Reference is made to Exhibit 10g to
the Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 21, 1997. (File No. 0- 17183)
10h Management Agreement with CK Charlotte Overhead Limited
Partnership for management and operation services described in
the Management Agreement dated November 14, 1997 at Tower
Place Festival Shopping Center. Filed herewith.
10i Management Agreement with Trammell Crow SE, Inc. for
management and operation services described in the Management
Agreement dated August 8, 1990 (as extended pursuant to the
Modification to Management Agreement dated February 28, 1998)
at Germantown Collection Shopping Center. Filed herewith.
10j Management Agreement with Brookside Commercial Services for
management and operation services described in the Management
Agreement dated March 1, 1991 (as extended pursuant to the
Extension of Property Management Agreement dated February 18,
1997 at Paddock Place Shopping Center. Filed herewith.
10k Lease Agreement with Calidad Foods, Inc. to lease certain
premises as described within the Lease Agreement dated October
19, 1992, at 1202 Industrial Place (an office/warehouse
facility). Reference is made to Exhibit 10v to the Form 10-Q
for the Quarter ended September 30, 1992 filed with the
Securities and Exchange Commission on November 13, 1992.
(File No. 0-17183)
10l Lease Agreement with Pierce Family Partnership to lease
certain premises as described within the Lease Agreement dated
October 23, 1992, at 1202 Industrial Place (an
office/warehouse facility). Reference is made to Exhibit 10x
to the Form 10-Q for the Quarter ended September 30, 1992
filed with the Securities and Exchange Commission on November
13, 1992. (File No. 0-17183)
10m Amendment to Lease Agreement with Calidad Foods, Inc. dated
December 28, 1992 at 1202 Industrial Place (an
office/warehouse facility). Reference is made to Exhibit 10n
to the 1992 Annual Report on Form 10- K filed with the
Securities and Exchange Commission on March 19, 1993. (File
No. 0-17183)
10n Lease Agreement with Brown Group Retail, Inc. to lease certain
premises as described within the Lease Agreement dated
November 9, 1993 at Tower Place Festival Shopping Center.
Reference is made to Exhibit 10p to the 1993 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 21, 1994. (File No. 0-17183)
27
<PAGE> 30
10o Lease Agreement with Care Management Enterprises, Inc. to
lease certain premises as described within the Lease Agreement
dated November 16, 1995 at 1202 Industrial Place (an
office/warehouse facility). Reference is made to Exhibit 10p
to the 1995 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 22, 1996. (File
No. 0-14105)
10p Severance Agreement by and among Murray Income Properties I,
Ltd. and Murray Income Properties II, Ltd. and Mitchell L.
Armstrong dated September 16, 1996. Reference is made to
Exhibit 10a to the 1996 3rd Quarter Report on Form 10-Q filed
with the Securities and Exchange Commission on November 8,
1996. (File No. 0-14105)
10q Severance Agreement by and among Murray Income Properties I,
Ltd. and Murray Income Properties II, Ltd. and W. Brent Buck
dated September 16, 1996. Reference is made to Exhibit 10a to
the 1996 3rd Quarter Report on Form 10-Q filed with the
Securities and Exchange Commission on November 8, 1996. (File
No. 0-14105)
27 Financial Data Schedule. Filed herewith.
99a Glossary as contained in the Prospectus dated February 20,
1986 filed as part of Amendment No. 2 to Registrant's Form
S-11 Registration Statement (File No. 33-2394). Filed
herewith.
99b Article XIII of the Agreement of Limited Partnership as
contained in the Prospectus dated February 20, 1986 filed as
part of Amendment No. 2 to Registrant's Form S-11 Registration
Statement (File No. 33- 2394). Filed herewith.
99c Amendment number nine to the Agreement of Limited Partnership
contained in the Proxy Statement dated October 11, 1989.
Filed herewith.
99d Management Compensation as contained in the Prospectus dated
February 20, 1986 filed as part of Amendment No. 2 to
Registrant's Form S-11 Registration Statement (File No.
33-2394). Filed herewith.
(d) Financial Statement Schedules with Independent Auditors' Report
Thereon:
(i) Valuation and Qualifying Accounts (Schedule II) - Years ended
December 31, 1997, 1996, and 1995.
(ii) Real Estate and Accumulated Depreciation (Schedule III) -
December 31, 1997.
All other schedules have been omitted because they are not required
or the required information is shown in the financial statements or
notes thereto.
28
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
The Partners
Murray Income Properties II, Ltd.:
Under date of February 27, 1998, we reported on the balance sheets of Murray
Income Properties II, Ltd. (a limited partnership) as of December 31, 1997 and
1996, and the related statements of earnings, changes in partners' equity, and
cash flows for each of the years in the three-year period ended December 31,
1997, as contained in Item 8 of this annual report on Form 10-K. In connection
with our audits of the aforementioned financial statements, we also audited the
related financial statement schedules as listed in Item 14(a)2 of this annual
report on Form 10-K. These financial statement schedules are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
Dallas, Texas
February 27, 1998
29
<PAGE> 32
Schedule II
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
Balance at Charged to Balance at
beginning costs and end of
Description of period expenses Deductions period
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1995 $ 19,879 (5,845) -0- 14,034
========= ======= ======= =======
Year ended December 31, 1996 $ 14,034 (4,549) -0- 9,485
========= ======= ======= =======
Year ended December 31, 1997 $ 9,485 (6,514) 1,524 1,447
========= ======= ======= =======
</TABLE>
Deductions are primarily for writeoffs of accounts receivable deemed
uncollectible by management.
30
<PAGE> 33
Schedule III
MURRAY INCOME PROPERTIES II, LTD.
(a limited partnership)
Real Estate and Accumulated Depreciation
December 31, 1997
<TABLE>
<CAPTION>
GROSS
AMOUNT
COSTS AT WHICH
CAPITALIZED CARRIED AT
INITIAL COST SUBSEQUENT TO CLOSE OF
TO PARTNERSHIP (A) ACQUISITION PERIOD (D)
----------------------------- ------------- ----------- ------------- -----------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL
- ----------------------- ------------ ----------- ------------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Center
Nashville, Tennessee $ 0 $ 3,153,285 $ 6,615,549 $ 420,991 $ 3,153,285 $ 7,036,540 $10,189,825
Shopping Center
Germantown (Memphis)
Tennessee $ 0 $ 1,751,518 $ 6,395,078 $ 1,055,214 $ 1,751,518 $ 7,450,292 $ 9,201,810
Office/Warehouse
Grand Prairie,
Texas $ 0 $ 884,488 $ 2,895,376 $ 112,982 $ 884,488 $ 3,008,358 $ 3,892,846
------------ ----------- ----------- ----------- ----------- ----------- -----------
$ 0 $ 5,789,291 $15,906,003 $ 1,589,187 $ 5,789,291 $17,495,190 $23,284,481
=========== =========== =========== =========== =========== =========== ===========
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN
LATEST STATEMENT
ACCUMULATED YEAR OF YEAR OF EARNINGS
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
- ---------------------- ------------ ------------ -------- ----------------
<S> <C> <C> <C> <C>
Shopping Center
Nashville, Tennessee $3,286,310 1985/86 1986 3-25 YEARS
Shopping Center
Germantown (Memphis)
Tennessee $3,180,926 1987 1988 3-25 YEARS
Office/Warehouse
Grand Prairie,
Texas $1,249,080 1980 1988 3-25 YEARS
----------
$7,716.316
==========
</TABLE>
NOTES:
(A) The initial cost to the Partnership represents the original purchase price
of the properties. (B) Reconciliation of real estate owned for 1997, 1996
and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period $23,252,896 $23,182,001 $23,178,894
Additions during period $ 31,585 $ 70,895 $ 3,107
Retirements during period $ 0 $ 0 $ 0
----------- ----------- -----------
Balance at close of period $23,284,481 $23,252,896 $23,182,001
=========== =========== ===========
</TABLE>
(C) Reconciliation of accumulated depreciation for 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period $ 6,991,905 $ 6,257,762 $ 5,515,370
Depreciation expense $ 724,411 $ 734,143 $ 742,392
Retirements during period $ 0 $ 0 $ 0
----------- ----------- -----------
Balance at close of period $ 7,716,316 $ 6,991,905 $ 6,257,762
=========== =========== ===========
</TABLE>
(D) The aggregate cost of real estate at December 31, 1997 for Federal income
tax purposes is $24,105,857.
Real Estate and Accumulated Depreciation
31
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: Crozier Partners IX, Ltd.
A General Partner
Dated: March 26, 1998 By: /s/ Jack E. Crozier
---------------------------------
Jack E. Crozier
A General Partner
By: Murray Realty Investors IX, Inc.
a General Partner
Dated: March 26, 1998 By: /s/ Mitchell Armstrong
---------------------------------
Mitchell Armstrong
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Murray Realty Investors IX, Inc.
A General Partner
Dated: March 26, 1998 By: /s/ Brent Buck
---------------------------------
Brent Buck
Executive Vice President
Director
Dated: March 26, 1998 By: /s/ Mitchell Armstrong
---------------------------------
Mitchell Armstrong
Chief Executive Officer
Chief Financial Officer
Director
32
<PAGE> 35
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C>
3a Agreement of Limited Partnership of Murray Income Properties II, Ltd. Reference is made to Exhibit A
of the Prospectus dated February 20, 1986 contained in Amendment No. 1 to Partnership's Form S-11
Registration Statements filed with the Securities and Exchange Commission on February 13, 1986. (File
No. 33-2294)
3b Amended and Restated Certificate and Agreement of Limited Partnership dated as of November 15, 1989.
Reference is made to Exhibit 3b to the 1989 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1989. (File No. 0-17183)
3c Amended and Restated Certificate and Agreement of Limited Partnership dated as of January 10, 1990.
Reference is made to Exhibit 3c to the 1989 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1989. (File No. 0-17183)
10a Form of Joint Venture Agreement between the Partnership and Murray Income Properties II, Ltd.
Reference is made to Exhibit 10h to Post-Effective Amendment No. 1 to Partnership's Form S-11
Registration Statements, filed with the Securities and Exchange Commission on July 29, 1989. (File No.
33-2394)
10b Lease Agreement with General Cinema to lease certain premises as described within the Lease Agreement
dated July 23, 1985 at Tower Place Festival Shopping Center. Reference is made to Exhibit 10q to the
1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989.
(File No. 0-17183)
10c Lease Agreement with Rafferty's Inc. to lease certain premises as described within the Lease Agreement
dated August 12, 1985 at Paddock Place Shopping Center. Reference is made to Exhibit 10r to the 1989
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File
No. 0-17183)
10d Lease Agreement with Chili's Inc. to lease certain premises as described within the Lease Agreement
dated May 19, 1988 at Germantown Collection Shopping Center. Reference is made to Exhibit 10t to the
1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989.
(File No. 0-17183)
10e Settlement and Release Agreement with Rafferty's Inc. and Mid-South Management Group, Inc., dated
December 1, 1990. Reference is made to Exhibit 10u to the 1990 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1991. (File No. 0-17183)
10f Management Agreement with Murray Realty Investors IX, Inc. for management and operation services
described in the Management Agreement dated January 1, 1996 at 1202 Industrial Place. Reference is
made to Exhibit 10a to the Form 10-Q for the Quarter ended March 31, 1996 filed with the Securities and
Exchange Commission on May 13, 1996. (File No. 0-17183)
10g Data Processing System Use Agreement between Murray Income Properties II, Ltd. and The Mavricc
Management Systems, Inc., dated September 1, 1996. Reference is made
</TABLE>
33
<PAGE> 36
<TABLE>
<S> <C>
to Exhibit 10g to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 21, 1997. (File No. 0-17183)
10h Management Agreement with CK Charlotte Overhead Limited Partnership for management and operation
services described in the Management Agreement dated November 14, 1997 at Tower Place Festival Shopping
Center. Filed herewith.
10i Management Agreement with Trammell Crow SE, Inc. for management and operation services described in the
Management Agreement dated August 8, 1990 (as extended pursuant to the Modification to Management
Agreement dated February 28, 1998) at Germantown Collection Shopping Center. Filed herewith.
10j Management Agreement with Brookside Commercial Services for management and operation services described
in the Management Agreement dated March 1, 1991 (as extended pursuant to the Extension of Property
Management Agreement dated February 18, 1997) at Paddock Place Shopping Center. Filed herewith.
10k Lease Agreement with Calidad Foods, Inc. to lease certain premises as described within the Lease
Agreement dated October 19, 1992, at 1202 Industrial Place (an office/warehouse facility). Reference
is made to Exhibit 10v to the Form 10-Q for the Quarter ended September 30, 1992 filed with the
Securities and Exchange Commission on November 13, 1992. (File No. 0-17183)
10l Lease Agreement with Pierce Family Partnership to lease certain premises as described within the Lease
Agreement dated October 23, 1992, at 1202 Industrial Place (an office/warehouse facility). Reference
is made to Exhibit 10x to the Form 10-Q for the Quarter ended September 30, 1992 filed with the
Securities and Exchange Commission on November 13, 1992. (File No. 0-17183)
10m Amendment to Lease Agreement with Calidad Foods, Inc. dated December 28, 1992 at 1202 Industrial Place
(an office/warehouse facility). Reference is made to Exhibit 10n to the 1992 Annual Report on Form 10-
K filed with the Securities and Exchange Commission on March 19, 1993. (File No. 0-17183)
10n Lease Agreement with Brown Group Retail, Inc. to lease certain premises as described within the Lease
Agreement dated November 9, 1993 at Tower Place Festival Shopping Center. Reference is made to Exhibit
10q to the 1993 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
21, 1994. (File No. 0-17183)
10o Lease Agreement with Care Management Enterprises, Inc. to lease certain premises as described within
the Lease Agreement dated November 16, 1995 at 1202 Industrial Place (an office/warehouse facility).
Reference is made to Exhibit 10p to the 1995 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 22, 1996. (File No. 0-14105)
10p Severance Agreement by and among Murray Income Properties I, Ltd. and Murray Income Properties II, Ltd.
and Mitchell L. Armstrong dated September 16, 1996. Reference is made to Exhibit 10a to the 1996 3rd
Quarter Report on Form 10-Q filed with the Securities and Exchange Commission on November 8, 1996.
(File No. 0-14105)
10q Severance Agreement by and among Murray Income Properties I, Ltd. and Murray Income Properties II, Ltd.
and W. Brent Buck dated September 16, 1996. Reference
</TABLE>
34
<PAGE> 37
<TABLE>
<S> <C>
is made to Exhibit 10a to the 1996 3rd Quarter Report on Form 10-Q filed with the Securities and
Exchange Commission on November 8, 1996. (File No. 0-14105)
27 Financial Data Schedule. Filed herewith.
99a Glossary as contained in the Prospectus dated February 20, 1986 filed as part of Amendment No. 2 to
Registrant's Form S-11 Registration Statement (File No. 33-2394). Filed herewith.
99b Article XIII of the Agreement of Limited Partnership as contained in the Prospectus dated February 20,
1986 filed as part of Amendment No. 2 to Registrant's Form S-11 Registration Statement (File No. 33-
2394). Filed herewith.
99c Amendment number nine to the Agreement of Limited Partnership contained in the Proxy Statement dated
October 11, 1989. Filed herewith.
99d Management Compensation as contained in the Prospectus dated February 20, 1986 filed as part of
Amendment No. 2 to Registrant's Form S-11 Registration Statement (File No. 33-2394). Filed herewith.
</TABLE>
35
<PAGE> 1
EXHIBIT 10h
November 14, 1997
Mr. Brent Buck
Murray Income Properties
299 South 9th Street
Suite 203
Oxford, MS 38655
RE: Tower Place Festival
Management Contract Renewal
Dear Brent:
Our current management agreement, dated December 12, 1994 and renewed December
1, 1995 and November 21, 1996 in letter agreements between Murray Income
Properties and CK Retail Charlotte Overhead Limited Partnership is in the
process of expiring. It is our desire to renew this management contract upon the
same terms and conditions as the previous management, dated December 12, 1994,
with the exception that the term shall now expire on December 31, 1998. I have
attached as Exhibit "A", a copy of the December 12, 1994 management agreement
and would like you to indicate your approval of the renewal and the new
expiration date by signing this renewal agreement in the appropriate space
below.
It has been a pleasure to be the property manager/leasing agent at Tower Place
Festival and we look forward to continuing our relationship as your management
agent in the future.
RENEWAL AGREEMENT ACCEPTED:
<TABLE>
<S> <C>
CK Charlotte Overhead Limited Partnership Tower Place Joint Venture
a North Carolina Limited Partnership By: Murray Income Properties I, LTD.
By: Childress Klein Retail-Charlotte A Texas Ltd. Partnership, Joint Venturer
#2, Inc., Its General Partner By: Murray Realty Investors VIII, Inc.
A Texas Corp., General Partner
BY: /s/ DAVID S. MILLER By: /s/ BRENT BUCK
------------------------------------ -------------------------------------------
David S. Miller, President Brent Buck, Executive Vice President
Attest/Witness: Witness:
- ---------------------------------------- --------------------------------------
Title: Name:
</TABLE>
(Corporate Seal)
<PAGE> 1
EXHIBIT 10i
STATE OF TENNESSEE
COUNTY OF SHELBY
MODIFICATION TO MANAGEMENT AGREEMENT
This Modification to Management Agreement is made and entered into this
25th day of February, 1998, by and between Murray Income Properties, II, LTD, a
Texas limited Partnership ("Owner") and Trammell Crow SE, Inc., a Delaware
corporation ("Operator").
WITNESSETH:
Whereas, Owner and Operator entered into that certain Management
Agreement for the Managing and operating of certain improved real property,
("Project") commonly known as Germantown Collection, dated August 8, 1990.
Whereas, the Owner and Operator desire to modify and amend the
Management Agreement;
Now, therefore, for and in consideration of the Modification to
Management Agreement, the sum of Ten and 00/100 Dollars ($10.00) in hand paid by
Owner to Operator, the mutual agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do agree as follows:
1 Owner and Operator acknowledge and agree the Management
Agreement shall be extended for a period of twelve (12)
months, such extension shall commence on January 1, 1998 and
expire on December 31. 1998.
2. All other terms and conditions of the Management Agreement not
specifically amended by this Modification to Management
Agreement, are hereby deemed to remain in full force and
effect.
3. "Permitted Assignment. Notwithstanding any other provision of
this Management Agreement, Operator shall be permitted to
assign all of its right, title and interest in and to this
Management Agreement to any other entity that is directly or
indirectly wholly-owned by Trammell Crow Company, a Delaware
corporation ("TCC"). Such permitted assignment shall include
any assignment that may be deemed to occur by operation of law
in connection with any merger or consolidation of TCC entity
with and/or into any other entity directly or indirectly
wholly-owned by TCC (an "Intragroup Merger"). Any such
Intragroup Merger"). Any such Intragroup Merger shall not be
deemed a breach of, cause a default under or trigger any right
of termination under, any other provision of this Agreement."
IN WITNESS WHEREOF, the parties have executed the foregoing
Modification as of the day and year written above.
OWNER: OPERATOR:
Murray Income Trammell Crow SE, Inc.
Properties, II, LTD.
By: Murray Realty Investors IX, Inc.
By: Brent Buck By: Phil Fawcett
Title: Executive Vice President Title: Sr. Vice President
<PAGE> 1
EXHIBIT 10j
EXTENSION OF PROPERTY MANAGEMENT AGREEMENT
The Extension of Property Management Agreement entered into this 18th
day of February, 1998 by and between Murray Income Properties II, Ltd., a Texas
limited partnership (hereinafter called the "Owner") and Brookside Properties,
Inc., (hereinafter called the "Agent").
RECITALS:
1. Owner and Agent are parties to that certain Property
Management Agreement dated March 1, 1991 covering the Paddock
Place Shopping Center, located at the Southwest corner of
White Bridge Road and Brookwood Terrace, Nashville, Tennessee.
2. The term of the aforesaid Property Management Agreement
expired on February 28, 1994, was extended with an expiration
date of February 28, 1995, was extended with an expiration
date of February 29, 1996, was extended with an expiration
date of February 28, 1997, and was extended with an expiration
date of February 28, 1998. The parties thereto are mutually
desirous of extending the term of the Property Management
Agreement.
NOW, THEREFORE, it is hereby agreed as follows:
1. The expiration date of the Property Management Agreement shall
be midnight, December 31, 1998.
2. All other terms and conditions of the Property Management
Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this document the day and
year first above written.
WITNESS BROOKSIDE PROPERTIES, INC.
/s/ CHARLES H. WARFIELD, JR. /s/ W. MILES WARFIELD
- ------------------------------ ----------------------------------------
Charles H. Warfield, Jr. W. Miles Warfield
MURRAY INCOME PROPERTIES II, LTD
a Texas Limited Partnership by
Murray Realty Investors IX, Inc. a
Texas Corporation, its General Partners
(Owners)
/s/ MITCHELL ARMSTRONG /s/ BRENT BUCK
- ------------------------------- ----------------------------------------
Mitchell Armstrong By: Brent Buck, Executive Vice President
<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-K for the Year Ended
December 31, 1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 890,256
<SECURITIES> 896,000
<RECEIVABLES> 409,248
<ALLOWANCES> 1,447
<INVENTORY> 0
<CURRENT-ASSETS> 2,194,057
<PP&E> 23,284,481
<DEPRECIATION> 7,716,316
<TOTAL-ASSETS> 19,396,894
<CURRENT-LIABILITIES> 297,971
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 18,959,673
<TOTAL-LIABILITY-AND-EQUITY> 19,396,894
<SALES> 0
<TOTAL-REVENUES> 2,927,389
<CGS> 0
<TOTAL-COSTS> 1,477,350
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (6,514)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,108,782
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,108,782
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,108,782
<EPS-PRIMARY> 3.40
<EPS-DILUTED> 3.40
</TABLE>
<PAGE> 1
EXHIBIT 99.A
above are not met, the General Partners may repurchase a portion of such
Interests or defer the repurchase of all such Interests. If the General
Partners determine to defer all or a portion of the repurchase of certain
Interests, the affected Limited Partners will be deemed to have priority over
subsequent requests for repurchases. Investors should be aware that the General
Partners have no obligation to repurchase Interests. If Interests are
repurchased, the General Partner then owning such Interests shall in all
respects be treated as a Limited Partner with respect to those Interests
repurchased.
Special Power of Attorney
Under the Partnership Agreement and Subscription Agreement each Limited
Partner irrevocably appoints the General Partners his attorneys-in-fact to
make, execute, sign, acknowledge, swear to, deliver, record and file any
document or instrument which may be considered necessary or desirable by the
General Partners executing the same to carry out fully the provisions of the
Partnership Agreement.
Dissolution and Liquidation
Article XV of the Partnership Agreement provides that the Partnership
shall be dissolved and its business wound up upon the earliest to occur of (a)
180 days from the date of this Prospectus, unless subscriptions for 30,000
Interests are accepted by such date, (b) the date of disposition of all assets
of the Partnership, (c) the date of the removal, resignation, adjudication of
bankruptcy, insolvency or dissolution of a General Partner, unless the Limited
Partners elect to continue the business of the Partnership, (d) that date on
which Limited Partners holding a majority of Interests vote in favor of
dissolution and termination, or (e) January 31, 2025.
Upon the election by the Limited Partners to continue the business of
the Partnership after an event specified in (c) above, the Partnership shall be
required to purchase the General Partners' general partnership interest
pursuant to Section 12.2 and Section 12.3 of the Partnership Agreement.
Upon the completion of the liquidation of the Partnership, the General
Partners have the authority to execute and record a certificate of cancellation
of the Partnership, as well as any and all other documents required to
effectuate the dissolution and termination of the Partnership.
GLOSSARY
As used in this Prospectus, the following definitions of terms are
applicable:
"Affiliate": (i) any person directly or indirectly controlling,
controlled by, or under common control with, another person, (ii) a person
owning or controlling 10% or more of the outstanding voting securities or
beneficial interests of such other person, (iii) any officer, director,
partner, general trustee, or any other person acting in a substantially
similar capacity of such person, and (iv) if such other person is an
officer, director, partner, trustee or holder of 10% or more of the voting
securities or beneficial interests of such person, any other entity for
which such person acts in any capacity.
"Average Annual Unreturned Invested Capital": The total of all the
Limited Partners' Original Invested Capital reduced by the total of all Cash
Distributions from Sales or Refinancings (excluding Cash Distributions from
Sales or Refinancings applied to the Limited Partners' Preferred Return) to
Limited Partners (but not below zero), as reflected on the partnership's
books and records, weighted on a daily average basis for the period.
"Cash Distributions from Operations": Distributions of cash receipts
from Gross Revenues after (i) operating expenses (without deduction for
depreciation), (ii) amounts set aside for reasonable reserves, and (iii)
payments on the Partnership's other current obligations.
"Cash Distributions from Sales or Refinancings": Distributions of cash
receipts from Net Proceeds from Sales or Refinancings realized by the
Partnership from sales or refinancings of the
68
<PAGE> 2
Partnership's properties after (i) amounts set aside for reasonable
reserves, and (ii) payments on the Partnership's other current obligations.
"Closing Date": Such date as designated by the General Partners as the
date when the last Interest has been sold by the Partnership, but in no
event later than 18 months after the Registration Statement first became
effective.
"Crozier Partners": Crozier Partners IX, Ltd.
"Escrow Agent": MBank Dallas, N.A., Dallas, Texas, or its successor.
"General Partners": Murray Realty Investors IX, Inc. and Crozier
Partners IX, Ltd.
"Gross Revenues": All Partnership revenues from whatever source derived,
exclusive of revenues from the sale or refinancing of Partnership
properties.
"Initial Closing Date": The date on which subscriptions for the minimum
of 30,000 Interests have been accepted by the General Partners.
"Initial Limited Partner": Richard H. Shaw.
"Interest": The limited partnership interest in the Partnership acquired
by the payment of $100 to the Partnership.
"Limited Partners": All subscribers for Interests who are admitted to
the Partnership as limited partners and listed on Schedule A to the
Partnership Agreement.
"Minimum Deadline": The date that is 180 days after the date of this
Prospectus.
"MRI": Murray Realty Investors IX, Inc.
"NASAA Guidelines": The guidelines for real estate programs as adopted
by the North American Securities Administrators Association as they exist on
the date the Partnership's Registration Statement is declared effective by
the Securities and Exchange Commission.
"Net Proceeds from Sales or Refinancings": The net cash realized by the
Partnership from sales, refinancings or other dispositions of Partnership
properties after the payment of all debts and expenses related to the
transactions.
"Organizational and Offering Expenses": Expenses incurred in connection
with the organization of the Partnership and the offering of the Interests
(excluding selling commissions and the dealer manager fee), including legal
fees, accounting fees, printing costs, filing and qualification fees,
reimbursement of expenses (excluding salaries and related salary expenses
incurred during the organization of the Partnership) incurred by the General
Partners or their Affiliates and other disbursements in connection with the
sale and distribution of Interests.
"Original Invested Capital": An amount equal to $100 per Interest.
"Partner": Any General Partner, Limited Partner or, until the Initial
Closing Date, the Initial Limited Partner.
"Partnership": The partnership created under the Amended and Restated
Certificate and Agreement of Limited Partnership attached as Exhibit A.
"Partnership Agreement": The Amended and Restated Certificate and
Agreement of Limited Partnership attached as Exhibit A.
"Preferred Return": The cumulative preferred return to each Limited
Partner equal to 10% per annum on his Average Annual Unreturned Invested
Capital from either Cash Distributions from Operations or Cash Distributions
from Sales or Refinancings. Such cumulative preferred return shall be
calculated from the beginning of the first full fiscal quarter after such
Limited Partner purchased such Interest. A Limited Partner shall be deemed
to have purchased an Interest as of
69
<PAGE> 3
the date on which the purchase of such Interest is reflected on the
certificate of limited partnership filed with the Secretary of State of
Texas.
"Property Management Fee": The fee payable for property management
services.
"Prospectus": The prospectus contained in the Registration Statement, as
amended or supplemented.
"Registration Statement": The Partnership's Registration Statement on
Form S-11 filed with the Securities and Exchange Commission and as amended
from time to time.
"Repurchase Fund": 25% of MRI's share of Cash Distributions from
Operations to be used to repurchase Limited Partner Interests under certain
circumstances.
"Subordinated Amount": MRI's unpaid Cash Distributions from Operations
subordinated to the Limited Partners' 7% noncumulative annual return.
THE OFFERING
Subject to the conditions set forth in this Prospectus and in
accordance with the terms and conditions of the Partnership Agreement, the
Partnership offers through the Dealer Manager 300,000 Interests at $100 per
Interest, subject to the right of the Dealer Manager to increase the offering
by up to an additional 200,000 Interests. Except for investors in certain
states that have imposed higher purchase requirements as set forth in the
Subscription Agreement, a form of which is included as Exhibit B, the minimum
subscription for an Individual Retirement Account or a Keogh Plan is 20
Interests. The minimum subscription for other investors is 50 Interests.
The Interests are being offered on a "best efforts" basis through
Murray Securities Corporation (the "Dealer Manager"), an Affiliate of the
General Partners. As compensation for their services in soliciting and
obtaining subscribers for the purchase of the Interests, the Partnership has
agreed to pay the Dealer Manager a commission of up to a maximum of 8% of the
gross proceeds on all sales made directly by it or by other dealers in
accordance with the following schedule:
<TABLE>
<CAPTION>
Amount of Investment
-------------------- Commission
From To Rate
---------- -------- ----------
<S> <C> <C>
$ 2,000 $ 99,999 8%
100,000 249,999 7%
250,000 499,999 6%
500,000 749,999 5%
750,000 999,999 4%
1,000,000 and over 2%
</TABLE>
Subscriptions may be combined for the purpose of determining the total
commissions payable in the case of subscriptions made by any investor who,
subsequent to his initial purchase of Interests, subscribes for the purchase of
additional Interests. To be eligible for combination, subscriptions must be
identical for all of the following: registration, type of ownership and tax
identification or social security number. Any request to combine subscriptions
will be subject to verification by the General Partners that all of such
subscriptions were made by a single investor. In such an event, the commission
payable with respect to the initial purchase of Interests will be computed
using the commission schedule set forth above. The commission payable with
respect to any subsequent purchase of Interests will equal the commission that
would have been payable in accordance with the commission schedule set forth
above if all purchases had been made simultaneously, less the commissions that
previously have been paid with respect to all prior purchases of Interests by
such an investor. The difference between 8% of the gross proceeds from the sale
of Interests and the amount payable to the Dealer Manager with respect to such
sale will be reimbursed to the Limited Partner as soon as possible after his
admission to the Partnership or, at the option of such Limited Partner, as
evidenced on his executed subscription agreement in the form of Exhibit B
hereto, will be applied to
70
<PAGE> 1
EXHIBIT 99.B
"Terminated General Partner") shall be purchased by the Partnership for a
purchase price determined according to the provisions of Section 12.3 hereof.
The last to remain of MRI and Crozier Partners, and the successors thereof,
shall not resign or withdraw from the Partnership without the concurrence of a
majority in interest of the Limited Partners. If such retirement or resignation
is voluntary, the purchase price shall be paid in the form of a non-interest
bearing unsecured promissory note with principal payable, if at all, from
distributions which the Terminated General Partner otherwise would have
received had the Terminated General Partner not resigned or retired. If such
termination is involuntary, the Partnership shall have the option to pay the
purchase price of such interest to the Terminated General Partner either in
cash or by a promissory note of the Partnership, payable to such Terminated
General Partner in a face amount equal to said purchase price and containing
provisions as would be usual and customary in a commercial promissory note,
including provisions for interest, at a rate equal to the prime rate of
interest from time to time charged by MBank Dallas, N.A. to its best commercial
customers (but in no event to exceed the maximum rate permitted by law to be
paid to the Terminated General Partners by the Partnership), such interest to
be payable at the time of each installment of principal, which shall be payable
as the Terminated General Partner and the Partnership may agree, or if they
cannot so agree, then annually over a period of five years from the date of the
Terminated General Partner's removal, adjudication of bankruptcy, insolvency or
dissolution. No prepayment penalty shall be charged to the Partnership for the
early payment of its note.
12.3 The fair market value of the Terminated General Partner's
interest to be purchased by the Partnership according to the provisions of
Section 12.2 above shall be determined by agreement between the Terminated
General Partner and the Partnership. If the Terminated General Partner and the
Partnership cannot agree upon the fair market value of such Partnership
interest within 90 days after the date of the Terminated General Partner's
resignation, removal, adjudication of bankruptcy, insolvency or dissolution,
then the Terminated General Partner and the Partnership shall each select an
independent appraiser within the next thirty days. If such appraisers fail to
agree on the fair market value of the Terminated General Partner's interest
within the next 90 days, then the two appraisers shall jointly appoint a third
appraiser whose determination shall be final and binding. The Terminated
General Partner and the Partnership shall each compensate their respective
appraisers, and the compensation of the third appraiser, if necessary, shall be
borne equally by each party. If the Partnership or the Terminated General
Partner fails to appoint an independent appraiser within the thirty day period
provided for in this paragraph, then the fair market value of the Terminated
General Partner's interest will be determined in accordance with the then
current rules of the American Arbitration Association, and the expense of such
arbitration shall be borne equally by the Terminated General Partner and the
Partnership.
12.4 Within 90 days after the resignation, removal, adjudication of
bankruptcy, insolvency or dissolution of a General Partner (except that a
General Partner shall not voluntarily withdraw from the Partnership without
complying with the terms of Section 12.2 and without at least 90 days' prior
written notice to the other General Partner and the Limited Partners of
intention to withdraw, and in such event, within the period from the date of
the notice of intention to withdraw to the date of withdrawal specified in the
notice of intention), Limited Partners holding a majority of the Interests may
elect to continue the business of the Partnership and, if they desire to do so,
may elect a successor General Partner or continue the business of the
Partnership with the remaining General Partner.
ARTICLE XIII
TRANSFER OF A PARTNERSHIP INTEREST
13.1 The General Partners may, pursuant to this Article XIII, admit as
a substituted Limited Partner any successor in interest to a Limited Partner
who is either deceased or under legal disability or who is an assignee of a
Limited Partner.
<PAGE> 2
13.2 Subject to the provisions of this Article XIII, compliance with the
suitability standards imposed by the Partnership, applicable "blue sky" laws
and the applicable rules of any other governmental authority, a Limited Partner
shall have the right to assign the whole or any portion of his Interests (but
not less than 50 Interests unless to an Individual Retirement Account or Keogh
Plan and then not less than 20 Interests) by a written assignment, the terms of
which are not in contravention of any of the provisions of this Agreement.
Any assignment in contravention of any of the provisions of this Article XIII
shall be of no force and effect and shall not be binding upon or recognized by
the Partnership.
(a) Except as provided in (b) below, an assignee of a Limited
Partner's Interest who is not admitted as a substituted Limited
Partner shall have no right to require any information or account of
the Partnership's transactions or to inspect the Partnership's books;
he shall only be entitled to receive distributions from the Partnership
and the share of income, gain, loss, deduction and credit attributable
to the Interests acquired by reason of such assignment from the first
day of the month following the month in which the written instrument
of assignment, executed by the assignor and in form and substance
reasonably satisfactory to the General Partners, and other documents
reasonably deemed necessary or appropriate by the General Partners
(as, for example, evidence that the assignee meets investor suitability
standards) shall have been received by the Partnership.
(b) Anything herein to the contrary notwithstanding, both the
Partnership and the General Partners shall be entitled to (i) treat
the assignor of such Interests as the absolute owner thereof in all
respects, and shall incur no liability for allocations of income, gain,
loss, deduction or credit or for distributions or for transmittal of
reports and notices required to be given to holders of Interests,
until the last day of the month in which the Partnership shall have
received the written assignment executed by the assignor in form and
substance reasonably satisfactory to the General Partners and other
documents reasonably deemed necessary or appropriate by the General
Partners (including evidence of the assignee's compliance with
standards imposed by applicable "blue sky" laws) or (ii) treat the
assignee as a substituted Limited Partner in the place of his assignor,
should the General Partners deem, in their absolute discretion, that
such treatment is in the best interests of the Partnership for any of
its purposes or for any of the purposes of this Agreement.
13.3 No assignee shall have the right to become a substituted Limited
Partner in place of his assignor unless all of the following conditions are
satisfied:
(a) The written consent of the General Partners to such
substitution shall be obtained, the granting of which shall not be
unreasonably withheld;
(b) A duly executed written instrument of assignment setting forth
the intention of the assignor that the assignee shall become a
substituted Limited Partner in his place shall have been filed with
the Partnership;
(c) The Interests being acquired by the assignee shall consist of
at least 20 Interests if such assignee is an Individual Retirement
Account or Keogh Plan and at least 50 Interests if such assignee is not
an Individual Retirement Account or Keogh Plan and, if the assignor
shall retain any Interests, such retention shall consist of at least
20 Interests if such assignor is an Individual Retirement Account or
Keogh Plan and at least 50 Interests if such assignor is not an
Individual Retirement Account or Keogh Plan;
(d) The assignor and assignee shall execute and acknowledge such
other instruments as the General Partners reasonably deem necessary
or desirable to effect such assignment and admission, including,
but not limited to, evidence of the assignee's compliance with
standards imposed by any applicable "blue sky" laws, the written
acceptance and adoption by the assignee of the provisions of this
Agreement and his execution, acknowledgement and delivery to the
General
A-21
<PAGE> 3
Partners of a special power of attorney, the form and content of which
are more fully described in Article XXI hereof; and
(e) The Partnership shall have received from the assignor or
assignee a transfer fee to cover all reasonable expenses of the
transfer, not to exceed $500 per transaction, but such transfer fee
may be waived by the General Partners, in their discretion.
13.4 Any person admitted to the Partnership as a substituted Limited
Partner shall be subject to all of the provisions of this Agreement as if an
original party to it.
13.5 The General Partners shall amend the certificate of limited
partnership at least once each quarter to add assignees as substituted Limited
Partners.
13.6 Upon the death or legal disability of an individual who is a
Limited Partner, his personal representative shall have all of the rights of
a Limited Partner for the purpose of settling or managing his estate, and such
power as the decedent or incompetent possessed to constitute a successor as an
assignee of his Interests and to join with such assignee in making application
to substitute such assignee as a Limited Partner. However, such personal
representative shall not have the right to become a substituted Limited
Partner in the place of his predecessor in interest unless the conditions of
this Article XIII (other than the requirement that the assignor execute and
acknowledge instruments) are first satisfied.
13.7 Upon the adjudication of bankruptcy or insolvency, dissolution
or other cessation of existence as a legal entity of a Limited Partner which
is not an individual, the authorized representative of such entity shall have
all of the rights of a Limited Partner for the purpose of effecting the orderly
winding up and disposition of the business of such entity and such power as
such entity possessed to constitute a successor as an assignee of its
Interests and to join with such assignee in making application to substitute
such assignee as a Limited Partner. However, such representative shall not
have the right to become a substituted Limited Partner in the place of his
predecessor in interest unless the conditions of this Article XIII (other
than the requirement that the assignor execute and acknowledge instruments) are
first satisfied.
13.8 A General Partner may not assign his or its interest as a General
Partner to anyone other than the Partnership as provided in Article XII of
this Agreement.
13.9 No assignment of any Interests may be made if the Interests
sought to be assigned, when added to the total of all other Interests assigned
within the period of 12 consecutive months prior to the proposed date of
assignment, would, in the opinion of counsel for the Partnership, result in
the termination of the Partnership under Section 708 of the Internal Revenue
Code of 1954, as amended.
13.10 Any assignment, sale, exchange or other transfer in contravention
of any of the provisions of this Article XIII shall be void and ineffectual,
and shall not bind or be recognized by the Partnership.
ARTICLE XIV
INDEMNIFICATION
14.1 No General Partner and no officer, director, partner or Affiliate
of a General Partner shall be liable to the Partnership or any Limited Partner
for any loss or damage suffered by the Partnership or any Limited Partner which
arises out of any error in judgment or other action or inaction not
constituting negligence (gross or ordinary), fraud or breach of fiduciary duty
which was taken in good faith, in accordance with the exercise of reasonable
business judgment and pursuant to a determination that such course of conduct
was in the best interest of the Partnership. The Partnership or its receiver
or trustee shall indemnify, save harmless and pay all judgments and claims
against the General Partners (and each of them) or their officers, directors,
partners and Affiliates from any liability, loss or damage incurred by them
or by the Partnership by reason of any act performed or omitted to be
A-22
<PAGE> 1
EXHIBIT 99.C
for this purpose include only the price of goods and materials paid to
independent third parties and direct costs incurred by the General Partners or
their Affiliates in the transaction, including overhead directly attributable
to the transaction but excluding general and administrative overhead. Further,
all such transactions between the Partnership and a General Partner or an
Affiliate of a General Partner must be pursuant to the terms of a written
contract between the Partnership and such General Partner or Affiliate which
precisely described the services to be rendered or the goods or materials
to be provided and the compensation therefor.
These provisions are inconsistent with the direct management by the
Partnership of its business, operations and affairs and the proposed
restructuring wherein the Partnership and Murray Income Properties, Ltd.-84
will employ their own executive and managerial personnel, secretaries,
accountants and other staff, rent office space, pay their own utility bills,
and in general run their own business, operations and affairs and share
expenses. Murray Income Properties, Ltd.-84 is an Affiliate of the Partnership.
Consequently, this amendment proposes to create an exception to the scope of
Section 10.9 that would allow the Partnership, in conjunction with Murray
Income Properties, Ltd.-84, to manage its own business and affairs and
conduct its own operations through its own staff out of its own office and
to share personnel, office and other general and administrative overhead
expenses with Murray Income Properties, Ltd.-84. Further, the amendment
allows the salaried personnel to be persons who are Affiliates of the
General Partners so long as their compensation and benefits are comparable
to the amounts that would be paid for their services if they were not
Affiliates of a General Partner.
The Amendment. A new paragraph is hereby added to the end of
Section 10.9 that reads as follows:
"Notwithstanding anything contained in this Section 10.9 or
elsewhere in this Agreement, the Partnership may directly conduct,
operate and manage its business and affairs. The Partnership may
employ, either alone or in association with Murray Income Properties,
Ltd.-84, managerial and executive personnel, secretaries, accountants
and other support staff in the conduct of the business, operations
and affairs of the Partnership. If any person employed by the
Partnership is an Affiliate of a General Partner (or if an Affiliate
of a General Partner is employed by Murray Income Properties, Ltd.-84
and the Partnership is to reimburse Murray Income Properties, Ltd.-84
for a portion of the compensation and benefits paid to such person),
the compensation and benefits paid by the Partnership (or by Murray
Income Properties, Ltd.-84 as appropriate) for the services of such
person shall be comparable to the amount that would be paid to such
person if such person was not an Affiliate of a General Partner.
The Partnership may reimburse Murray Income Properties, Ltd.-84 for
that proportion of any expenditure made by Murray Income Properties,
Ltd.-84 which the General Partners deem to be the fair, just and
equitable share that should be borne by the Partnership and,
conversely, the Partnership may pay, and seek reimbursement from,
Murray Income Properties, Ltd.-84 for that proportion of any
expenditure made by the Partnership which the General Partners
deem to be the fair, just and equitable share that should be borne
by Murray Income Properties, Ltd.-84."
Amendment No. 9
Explanation of Amendment. Section 10.17 requires MRI to allocate
25% of its share of Cash Distributions from Operations to a "Repurchase
Fund" for the purchase of Interests upon the request of a Limited Partner.
MRI is permitted to commingle the amount allocated to the "Repurchase Fund"
with other assets of MRI. To the present time, however, MRI has not been
paid any Cash Distributions from Operations since the allocation and payment
of Cash Distributions to MRI is subordinated to the prior receipt by the
Limited Partners of a noncumulative 7% annual return from either Cash
Distributions from Operations or Cash Distributions from Sales or
Refinancings, or both, on their Average Annual Unreturned Invested Capital.
(vi)
<PAGE> 2
Since the amendments herein will reduce the allocation of Cash
Distributions from Operations to MRI from 8% to 3% and will reallocate 5% of
such 8% to Crozier Partners (subordinate, of course, in each instance to the
prior receipt by the Limited Partners of a noncumulative 7% annual return
from either Cash Distributions from Operations or Cash Distributions from
Sales or Refinancings, or both), this amendment will require both MRI and
Crozier Partners, in the proportions of 3/8ths for MRI and 5/8ths for Crozier
Partners, respectively, to allocate 25% of their respective shares of any
such subordinated Cash Distributions from Operations to a "Repurchase Fund"
to be established by each of them, respectively.
The Amendment. The third and fourth sentences in Section 10.17 are
hereby deleted and there is hereby substituted in lieu thereof the following
three sentences:
"MRI will allocate 25% of its share of Cash Distributions from
Operations to a "Repurchase Fund" and Crozier Partners will allocate
to a "Repurchase Fund" 25% of its 5% share of Cash Distributions
from Operations that is subordinated to the prior receipt by the
Limited Partners of a noncumulative 7% annual return from either
Cash Distributions from Operations or Cash Distributions from Sales or
Refinancings, or both, on their Average Annual Unreturned Invested
Capital. MRI's share of Cash Distributions from Operations allocated
to the Repurchase Fund will be commingled with other assets of MRI and
Crozier Partners' share of Cash Distributions from Operations
allocated to the Repurchase Fund will be commingled with other
assets of Crozier Partners. Any repurchase of Interests pursuant to
this Section 10.15 shall be in the proportions of 3/8ths by MRI
and 5/8ths by Crozier Partners, respectively."
Amendment No.10
Explanation of Amendment. Section 11.3 provides in respect of voting on
any matter on which the Limited Partners are entitled to vote that each Limited
Partner will be deemed to be "...the holder of only those Interests shown on
Exhibit A, as amended by the last-filed certificate of limited partnership." The
Texas Uniform Limited Partnership Act requires the filing of a certificate of
limited partnership that lists the name and address of each limited partner of a
limited partnership and the amount of the contribution of each limited partner
to the partnership. The certificate of limited partnership filed in the office
of the Secretary of State is authoritative as to the identity of limited
partners. The Texas Uniform Limited Partnership also does not permit an owner of
a limited partnership interest to be considered a "limited partner," with the
voting and other rights appurtenant to that status, unless the owner is named in
the certificate of limited partnership. The Texas Revised Limited Partnership
Act that will be adopted by these amendments no longer requires that the
identity of the limited partners be disclosed in the certificate of limited
partnership filed in the office of the Secretary of State, which filing was
often burdensome on limited partnerships and considered by some people to be an
invasion of their financial privacy. Instead, the Texas Revised Limited
Partnership Act requires the limited partnership to maintain records showing the
name and mailing address of each partner and a written statement of the date on
which each partner in a limited partnership became a partner. This amendment
makes the records of the Partnership authoritative as to the identity of the
holders of Interests entitled to vote on any particular matter that is submitted
to a vote of the Limited Partners.
The Amendment. The Last sentence of Section 11.3 is hereby amended
to read as follows:
"For purposes of determining the number of votes which he is entitled
to cast, a Limited Partner shall be deemed to be the holder of only
those Interests which are reflected as owned by him by the records
of the Partnership."
(vii)
<PAGE> 1
EXHIBIT 99.D
MANAGEMENT COMPENSATION
The following table sets forth the types and estimates of the
amounts of all fees, compensation, income, distributions and other payments
that the General Partners and their Affiliates will or may receive in
connection with the operations of the Partnership. SUCH FEES, COMPENSATION,
INCOME, DISTRIBUTIONS AND OTHER PAYMENTS WERE NOT DETERMINED BY ARM'S-
LENGTH BARGAINING. See "Conflicts of Interest."
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- -------------------- ---------------- ---------------------------
Offering Stage
<S> <C> <C>
Selling Commissions Murray Securities Up to $8 per Interest sold,
Corporation(1) reduced for purchases by one
investor of more than 1,000
Interests and for purchases
by officers, directors,
partners, employees or
Affiliates of the General
Partners or their Affiliates.
Actual amount depends upon
number of Interests sold but
could be $2,400,000 if 300,000
Interests are sold or
$4,000,000 if 500,000 Interests
are sold.(2)
Dealer Manager Fee Murray Securities Up to $2 per Interest sold,
Corporation(1) reduced for purchases by
officers, directors, partners,
employees or Affiliates of the
General Partners or their
Affiliates. Actual amount
depends upon number of
Interests sold but could be
$600,000 if 300,000 Interests
are sold or $1,000,000 if
500,000 Interests are sold.(2)
Reimbursement of MRI or its Affiliates Actual out-of-pocket
Organizational Organizational and Offering
Offering Expenses(3) Expenses, including accounting,
legal, printing, registration
fees, etc.
<CAPTION>
Acquisition Stage
<S> <C> <C>
Reimbursement of Murray Properties Actual costs incurred in
Acquisition and Company or its acquiring and holding
Holding Costs(4) Affiliates properties prior to their
acquisition by the Partnership.
Dollar amount is not
determinable at this time.(5)
Title Insurance Dallas Title Company A portion of the premium paid for
Commissions(6) or Texas Title title insurance upon acquisition
Company(7) of a property. The premium in
Texas is fixed by the State.
Dollar amount is not determinable
at this time.(5)
</TABLE>
10
<PAGE> 2
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- -------------------- ---------------- ---------------------------
Operational Stage
<S> <C> <C>
Property Management Murray Management For its management services,
Fees Corporation(8) an amount not to exceed the
lesser of (i) in the case of
apartment complexes, 5% of
gross revenues, in the case
of shopping centers, office
buildings and office/showroom
centers, 6% of gross revenues
(or 3% if leasing performed
by third parties) and in the
case of shopping centers,
office buildings and office/
showroom centers which are
leased on a long-term (ten or
more years) net (or similar)
basis, 1% of gross revenues
or (ii) the amount customarily
charged in arm's-length
transactions by others
rendering comparable services
in the locality where the
property is located, considering
the size and type of each such
property. In addition, Murray
Management Corporation will be
reimbursed for the actual
costs of on-site personnel
engaged in the management,
leasing and maintenance of the
property of the Partnership.
Dollar amount is not
determinable at this time.(5)
Reimbursement of MRI or its Affiliates Actual cost of goods and
Partnership materials used for and by the
Operational Partnership and obtained from
Expenses(9) an entity not affiliated with
a General Partner or an
Affiliate of the General
Partners and certain
administrative services. Dollar
amount is not determinable
at this time.(5)
Casualty Insurance Murray General A portion of the premiums paid
Commissions Agency, Inc.(10) for casualty insurance. The
cost of the insurance cannot
exceed the lower quote for
comparable terms and
coverage from two independent
brokers. Dollar amount is not
determinable at this time.(5)
Partnership Murray Savings The excess of Murray Savings
Administrative Association(11) Association's rate of return
Account and on the Partnership funds in
Property Operating such accounts over the interest
Accounts rate paid to the Partnership
on such accounts. Dollar
amount is not determinable at
this time.(5)
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- -------------------- ---------------- ---------------------------
<S> <C> <C>
Interest and Other A General Partner or An amount not in excess of the
Financing Charges an Affiliate of the amounts that would be charged
or Fees General Partners(12) by unrelated lending
institutions on comparable
loans for the same purpose and
in the same locality but never
in excess of 2% over the prime
rate of MBank Dallas, N.A.,
Dallas, Texas. Dollar amount is
not determinable at this
time.(5)
Distributive Share of Crozier Partners and Crozier Partners will receive
Cash Distributions MRI(14) 2% of all Cash Distributions
from Operations(13) from Operations. MRI will
receive 8% of all Cash
Distributions from Operations,
subject to the Limited Partners
having received a noncumulative
annual cash return equal to
7% of their Average Annual
Unreturned Invested Capital,
calculated from the Initial
Closing Date. Dollar amount
is not determinable at this
time.(5)
<CAPTION>
Liquidation Stage
<S> <C> <C>
Real Estate Crozier Partners or An amount not to exceed the
Commissions its Affiliates; lesser of (i) 50% of the
MRI or its competitive real estate
Affiliates(14)(15) commission or (ii) 3% of the
sales price of the property,
provided that all real estate
commissions or similar fees
paid to all persons shall not
exceed the lesser of the
competitive real estate
commission or 6% of the sales
price of the property. Such
commissions will be payable
only after 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.
Dollar amount is not
determinable at this time.(5)
Title Insurance Dallas Title Company A portion of the premiums paid
Commissions or Texas Title for title insurance upon sale,
Company(7) financing or refinancing of a
property if such title
insurance is provided by Dallas
Title Company or Texas Title
Company. The premium in Texas
is fixed by the State. Dollar
amount is not determinable
at this time.(5)
</TABLE>
12
<PAGE> 4
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- -------------------- ---------------- ---------------------------
<S> <C> <C>
Distributive Share Crozier Partners Crozier Partners will receive
of Cash and MRI(14) 1% of all Cash Distributions
Distributions from from Sales or Refinancings.
Sales or The remaining 99% shall be
Refinancings(13)(16) allocated (a) first, to the
Limited Partners until they
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, (b) then, to
MRI in an amount equal to any
unpaid Cash Distributions
from Operations subordinated
to the Limited Partners' 7%
noncumulative annual return
and (c) thereafter, the
remainder shall be allocated
85% to the Limited Partners
and 15% to the General Partners.
See "Income and Losses and
Cash Distributions." Dollar
amount is not determinable
at this time.(5)
</TABLE>
- --------------------
(1) The Dealer Manager may authorize certain other broker-dealers who are
members of the National Association of Securities Dealers, Inc., to
sell Interests on a "best efforts" basis. In the event of sales by
such other broker-dealers, the Dealer Manager has advised the
Partnership that the Dealer Manager will reallow to such other broker-
dealers all or a portion of the selling commissions with respect to
such sales. Such other broker-dealers, together with the Dealer
Manager, may also be reimbursed up to an additional 1/2% of gross
offering proceeds in connection with their due diligence activities.
(2) See "The Offering" for a discussion of the rebate of selling commissions
payable with respect to sales to one purchaser of more than 1,000
Interests and the rebate of selling commissions and the dealer manager
fee with respect to sales to officers, directors, partners, employees
or Affiliates of the General Partners or their Affiliates.
(3) For nonleveraged programs such as the Partnership, the NASAA
Guidelines require that, at a minimum, 82% of the Limited Partners'
capital contributions be committed to investment in properties.
Investment in properties, as defined under the NASAA Guidelines,
is the amount of capital contributions actually paid or allocated to
the purchase, development, construction or improvement of properties
acquired by the Partnership (including the purchase of properties,
working capital reserves not in excess of 5% of gross offering proceeds
and other cash payments such as interest and taxes but excluding front-
end fees, defined as fees and expenses paid by any party for any
services rendered during the Partnership's organizational or
acquisition phase including organization and offering expenses,
acquisition fees, acquisition expenses and any other similar fees,
however designated). The remaining capital contributions not invested
in properties are available for the payment of Organizational and
Offering Expenses, selling commissions, acquisition fees and
acquisition expenses. Acquisition fees for this purpose shall be the
total of all fees and commissions paid by any party in connection
with the purchase or development of property by the Partnership,
including real estate commissions, acquisition fees, selection fees,
development fees, nonrecurring management fees, or any fees of a
similar nature,
13
<PAGE> 5
however designated, but excluding a development fee paid to a person not
affiliated with the General Partners or their Affiliates in connection
with actual development of property after acquisition by the
Partnership. Acquisition expenses for this purpose include, but are not
limited to, legal fees and expenses, travel and communication expenses,
costs of appraisals, loan commitment and loan fees ("points"),
nonrefundable option payments on properties not acquired, accounting
fees and expenses, title insurance, and miscellaneous expenses related
to selection and acquisition of properties, whether or not acquired. The
Partnership will acquire its properties on an unleveraged basis. In
addition, the Partnership will not pay any acquisition fees to the
General Partners or their Affiliates and the total of acquisition fees
to unaffiliated parties and acquisition expenses will not exceed 1% of
the Limited Partners' capital contributions. Based on those assumptions
and assuming the sale of 300,000 Interests with Organizational and
Offering Expenses, selling commissions and the dealer manager fee equal
to 13.0% of the Limited Partners' capital contributions, the amount that
would be invested in properties would be equal to 86.0% of such
contributions. The amount invested in Partnership properties will comply
with the NASAA Guidelines limitations set forth above.
(4) An Affiliate of the General Partners may purchase property in its own
name and temporarily hold title thereto for the purpose of facilitating
the acquisition of such property or any other purpose related to the
business of the Partnership. In such event, such Affiliate may be
reimbursed for its costs incurred in acquiring and holding such real
property prior to the acquisition of such property by the Partnership.
Such costs will consist of the price paid by such Affiliate for
such property, plus the amount of any net cash flow deficit or minus the
amount of any net cash flow surplus incurred by such Affiliate during
its ownership and operation of such property.
(5) Any prediction of such dollar amount would necessarily involve
assumptions of future events that cannot be determined at this time.
(6) To the extent a seller of property to the Partnership sets the sales
price at a level sufficient to cover the premium for title insurance,
the Partnership, if effect, will pay the premium in the purchase price
of the property.
(7) The Partnership has entered into nonexclusive contracts with Dallas
Title Company and Texas Title Company, Affiliates of the General
Partners, pursuant to which each has agreed that, upon the request of
the Partnership, it will handle the closing of purchases, sales,
financings or refinancings by the Partnership of properties situated in
Texas and will cause to be issued title insurance policies on such
properties. Either of such title insurance agencies may receive a
portion of the commission on premiums paid for title insurance by the
Partnership or by a seller of real property to the Partnership. In
Texas, title insurance premiums and the policy forms are prescribed by
the State. Each contract provides that if such title insurance agency
does not derive, in any calendar year, at least 75% if its gross income
from persons or entities not affiliated with a General Partner, that
agency's contract will terminate upon the earlier of 60 days after the
end of the calendar year or as soon as the Partnership can arrange for
another person or entity to perform such services. Each contract also
provides that it may be terminated by either party, without penalty, on
60 days' prior written notice and that such title insurance agency shall
not render services or receive title insurance commissions in connection
with the reinvestment of any proceeds from a sale or refinancing of
Partnership properties.
(8) The Partnership has entered into an agreement with Murray Management
Corporation, an Affiliate of the General Partners, pursuant to which
Murray Management Corporation will be responsible for the management
of each property and the collection of its rental income, for which
services it will receive a monthly Property Management Fee. This
Property Management Fee is payable for professional supervisory
management services undertaken in connection with the operation of
the Partnership's properties. In the case of apartment complexes,
such fee shall include all leasing and releasing fees and bonuses,
and leasing-related services. In the case of shopping centers, office
buildings and office/showroom centers, where Murray Management
Corporation is not responsible for leasing, re-leasing and leasing-
related services with respect to
14
<PAGE> 6
the property, its fee shall not exceed 3% of gross revenues.
Notwithstanding the foregoing, a separate competitive fee may be paid
for the one-time initial lease-up of a newly constructed property if
such service is not included in the purchase price of the property,
provided that such fee shall not exceed the lesser of cost or 90%
of the competitive price that would be charged by unaffiliated persons
rendering similar services in the same or comparable geographic
location. In the case of shopping centers, office buildings and office/
showroom centers which are leased on a long-term net (or similar)
basis, a one-time initial leasing fee of 3% of gross revenues may be
taken on each lease payable over the first five full years of the
original term of the lease. Murray Management Corporation shall pay
from the Property Management Fee, and not as an expense of the
Partnership, the expenses of rendering supervisory property management
services; provided, however, that the wages and expenses of on-site
personnel engaged in the management, leasing and maintenance of the
Partnership's properties and personnel, supplies, repairs, furniture
and equipment costs and other costs directly attributable to the
Partnership's property operations shall be deemed to be property
operating expenses and as such shall be borne by the Partnership by
reimbursement to Murray Management Corporation. Wages and other actual
expenses of personnel may be allocated between properties of the
Partnership and other properties managed by Murray Management
Corporation if such properties are owned by (i) a public or private
program sponsored by the General Partners or their Affiliates or any
joint venture in which a General Partner or an Affiliate is a party
or (ii) an unaffiliated third party. Murray Management Corporation
has the right to subcontract to third parties a portion or all of the
management services to be rendered by it with respect to any particular
property, provided that (a) Murray Management Corporation shall at all
times remain responsible for the management of such property, (b)
the Partnership shall not be required to pay for duplicative services
and (c) the aggregate cost to the Partnership will not exceed the
amount which would be customarily charged in arm's-length transactions
by others rendering similar services in the locality where the
property is located, considering the size and type of each such
property, if only one entity had provided all such services. The
agreement between the Partnership and Murray Management Corporation
may be terminated by either party, without penalty, on 60 days' prior
written notice.
(9) Except as set forth below, reimbursements to a General Partner or an
Affiliate of a General Partner shall not be allowed. A General Partner
or an Affiliate of a General Partner may be reimbursed for: (a) the
actual cost of goods and materials used for or by the Partnership and
obtained from an entity not affiliated with a General Partner or an
Affiliate of a General Partner; and (b) the lesser of the cost or
90% of the competitive price charged by unaffiliated parties for (i)
salaries and related salary expenses for services that could be
performed directly for the Partnership by independent parties, including
legal, accounting, transfer agent, data processing, duplicating
and administration of investor accounts and (ii) Partnership reports
and communications to investors. All such transactions shall be
pursuant to the terms of a written contract between the Partnership
and such General Partner or Affiliate which precisely describes the
services to be rendered or the goods or materials to be provided and
the compensation therefor. No reimbursement shall be permitted for
services for which the General Partners or Affiliates receive a
separate fee or for (i) salaries, related salary expenses, traveling
expenses, and other administrative items which are incurred by any
Controlling Person or which are not directly attributable to the
rendering of reimbursable services to the Partnership and (ii) any
indirect expenses incurred in performing services for the Partnership,
such as rent or depreciation, utilities, capital equipment, and other
administrative items. "Controlling Person" for this purpose shall
mean any person, regardless of title, who performs executive or senior
management functions for the General Partners or Affiliates similar
to those of directors, executive management and senior management, or
any person who either holds 5% or more equity interest in the General
Partners or Affiliates or has the power to direct or cause the
direction of the General Partners or Affiliates, whether through the
ownership of voting securities, by contract, or otherwise, or, in the
absence of a specific role or title, any person having the power to
direct or cause the direction of the management level employees and
policies of the General Partners or
15
<PAGE> 7
Affiliates. It is not intended that every person who carries a title
such as vice president, senior vice president, secretary or treasurer
be included in the definition of Controlling Person. In no event shall
any amount charged to the Partnership as a reimbursable expense by the
General Partners exceed the lesser of the actual cost of such services
or 90% of the amount which the Partnership would be required to pay to
independent parties for comparable services. "Costs" for purposes of
this paragraph shall include the price of goods and materials paid
to independent third parties, and direct costs incurred by the General
Partners or their Affiliates in the transactions including overhead
directly attributable to the transaction but excluding general or
administrative overhead. Notwithstanding the foregoing, reimbursements
are also allowable for certain organizational and offering expenses
and for the actual costs of on-site personnel engaged in the
management, leasing and maintenance of the property of the Partnership
as provided in note (8) above.
(10) The Partnership has entered into a nonexclusive contract with Murray
Insurance Agency, Inc., an Affiliate of the General Partners, pursuant
to which, upon the request of the Partnership, such agency will endeavor
to obtain fire, casualty, or similar insurance on the properties of
the Partnership. Any commission on any casualty insurance brokered by
it will not exceed the amount customarily received by it from the
brokerage of comparable policies for unaffiliated persons. Before such
agency brokers any fire, casualty or similar insurance on any property
of the Partnership, quotes must have been received from two unaffiliated
insurance brokers for coverage and terms comparable to that proposed
to be provided by such agency. No insurance will be brokered by the
Partnership through such agency unless the cost of such insurance will
be no greater than the lower quote of the two unaffiliated insurance
agencies. The contract with Murray Insurance Agency, Inc., provides
that if such agency does not derive at least 75% of its gross income
from business done with persons or entities not affiliated with a
General Partner, that agency's contract will terminate upon the earlier
of 60 days after the end of the calendar year or as soon as the
Partnership can arrange for another person or entity to perform such
services. The contract also provides that it may be terminated by
either party, without penalty, on 60 days' prior written notice.
Murray General Agency, Inc., an Affiliate of the General Partners,
will receive commissions on insurance premiums paid through Murray
Insurance Agency, Inc., by virtue of contractual arrangements between
it and Murray Insurance Agency, Inc.
(11) The General Partners may open and maintain an interest-bearing
Partnership administrative account and property operating accounts at
Murray Savings Association, a stock association organized under the
Texas Savings and Loan Act. Murray Savings Association is a wholly-
owned subsidiary of Murray Financial Corporation, an Affiliate of the
General Partners. Such accounts are insured up to a maximum of
$100,000 in the aggregate by the Federal Savings and Loan Insurance
Corporation ("FSLIC"). The General Partners will not permit the balance
of such accounts to exceed the maximum amount insured by the FSLIC.
Murray Savings Association may receive indirect compensation to the
extent that Murray Savings Association's rate of return on the
Partnership funds in such accounts exceeds the interest rate paid to the
Partnership on such accounts. The Partnership will receive an interest
rate competitive with similar accounts at unrelated institutions and
will not be charged any servicing fees on the accounts.
(12) It is not contemplated that a General Partner or any Affiliate of a
General Partner will make a loan to the Partnership, but the Partnership
Agreement permits a General Partner or any Affiliate of a General
Partner to make a loan to the Partnership if the interest and other
financing charges or fees on any such loan are not in excess of the
amounts which would be charged by unaffiliated lending institutions
on comparable loans for the same purpose in the same locality but not
in excess of 2% over the prime rate of MBank Dallas, N.A. Any
financing charges or fees on any loan to the Partnership by a General
Partner or an Affiliate of a General Partner will be only those
incurred by such General Partner or Affiliate in connection with the
making of such loan. Neither a General Partner nor an Affiliate of
a General Partner will make a profit from the Partnership's payment
of financing charges or fees. No property of the Partnership shall
secure
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<PAGE> 8
any loan made to the Partnership by a General Partner or an Affiliate
of a General Partner if, at the inception of the loan, any payment of
principal or interest is to be made more than two years after the
date of the loan. No loans, secured or unsecured, may be made to the
Partnership by a General Partner or an Affiliate of a General Partner
if at the inception of the loan any payment of principal or interest
is to be made more than three years after the date of the loan.
(13) For a discussion of Cash Distributions from Operations and Cash
Distributions from Sales or Refinancings, see "Income and Losses and
Cash Distributions."
(14) Crozier Partners was formed as of December 19, 1985, under The Texas
Uniform Limited Partnership Act with Jack E. Crozier as the general
partner and Fulton Murray, individually, Fulton Murray in his capacity
as Trustee of the Beverly Murray Wilson Trust and Fulton Murray and
RepublicBank Dallas, N.A., in their capacities as Trustees of a trust
created under the Will of Owen M. Murray, Deceased, as the limited
partners.
(15) Real estate commissions are payable to the General Partners or their
Affiliates only if such General Partner or Affiliate provides a
substantial amount of the services in the sales effort. All real estate
commissions payable to the General Partners or their Affiliates for
services in connection with sales of properties of the Partnership shall
be cumulative but shall be paid only after the Limited Partners have
been returned their Original Invested Capital from Cash Distributions
from Sales or Refinancings, plus their Preferred Return. If an
unaffiliated broker participates in the sale of a Partnership property,
the subordination requirement will apply only to the commission, if any,
earned by the General Partners or their Affiliates. The total of all
real estate commissions payable to all parties in connection with the
sale of a Partnership property shall not exceed the lesser of a
competitive real estate commission which is reasonable, customary and
competitive in light of the size, type and location of the property or
6% of the sales price of the property. Real estate commissions payable
to the General Partners or their Affiliates will be allocated one-third
to Crozier Partners or its Affiliates and two-thirds to MRI or its
Affiliates.
(16) Cash Distributions from Sales or Refinancings payable to the General
Partners (other than the 1% of Cash Distributions from Sales or
Refinancings payable to Crozier Partners) will be allocated one-third
to Crozier Partners and two-thirds to MRI.
CONFLICTS OF INTEREST
The General Partners are subject to various conflicts of interest
because of other activities and entities in which they have a direct or
indirect financial interest. This Prospectus attempts to highlight those
conflicts of interest but a potential investor should be aware that because of
future activities or circumstances not now foreseen, the listing herein may not
be complete. The General Partners, having the exclusive authority to manage the
operations and affairs of the Partnership and to make all decisions regarding
the business of the Partnership, will seek to resolve any matter involving a
conflict of interest in a manner which, in their best judgment, is fair and
reasonable to the Partnership.
Murray Realty Investors IX, Inc., a General Partner, is a wholly-owned
subsidiary of Murray Realty Investors, Inc., which is a wholly-owned subsidiary
of Murray Properties Company. Murray Properties Company is a wholly-owned
subsidiary of Murray Financial Corporation. The general partner of Crozier
Partners IX, Ltd., a General Partner, is Jack E. Crozier, and the limited
partners are Fulton Murray, individually, Fulton Murray in his capacity as
Trustee of the Beverly Murray Wilson Trust and Fulton Murray and RepublicBank
Dallas, N.A. in their capacities as Trustees of a trust created under the Will
of Owen M. Murray, Deceased. Jack E. Crozier owns approximately 11% of the
outstanding stock and is the President of Murray Financial Corporation and is
an officer and director of substantially all Affiliates of Murray Financial
Corporation. Fulton Murray, members of his family and trusts for their
benefit own the remaining outstanding stock of Murray Financial Corporation.
Mr. Murray is the Chairman of the Board and Chief Executive Officer and a
director of Murray Financial Corporation and is an officer and director of
substantially all Affiliates of Murray Financial Corporation. Murray Financial
Corporation is engaged, directly or through subsidiaries, in various real
estate
17
