UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR FISCAL YEAR ENDED DECEMBER 31, 1996
Commission File Number:
33-04345
Exact name of Registrant as specified in its charter:
Florida Income Fund II, Limited Partnership
State or other Jurisdiction of incorporation or organization:
Ohio
I.R.S. Employer Identification Number:
33-1168320
Address of Principal Executive Offices:
12800 University Drive, Ste 675
Fort Myers, FL 33907
Registrant's Telephone Number, including Area Code:
(941) 481-2011
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
The registrant 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 has been subject to such filing requirements for the past 90
days.
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FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
FORM 10-K - 1996
CONTENTS AND CROSS REFERENCE INDEX
PART ITEM FORM 10-K
NO. NO. DESCRIPTION PAGE NO.
- ---- ---- ----------- ---------
I 1 Business 3
2 Properties 4 - 8
3 Legal Proceedings 8
4 Submission of Matters to a Vote of
Security Holders 8
II 5 Market for Registrant's Partnership
Equity and Related Partner Matters 9
6 Selected Financial Data 9
7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 14
8 Financial Statements and Supplementary Data 14 - 30
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 31
III 10 Directors and Executive Officers of
the Registrant 31 - 33
11 Executive Compensation 34
12 Security Ownership of Certain Beneficial
Owners and Management 35
13 Certain Relationships and Related Party
Transactions 35
IV 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 36
Signatures 37
2
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS - Florida Income Fund II, Limited Partnership,
(the Partnership) is an Ohio Limited Partnership formed as of March 26, 1986,
for the purpose of investing in a diversified portfolio of income-producing
commercial and residential real estate properties primarily located in
Southwest Florida. The Partnership's primary objectives are to preserve and
protect the Partnership's original capital, provide distributable cash, a
portion of which may constitute nontaxable income, obtain capital appreciation
through increases in value of Partnership properties, build equity through
reductions of mortgage indebtedness and realize capital gains from the sale of
Partnership properties.
There can be no assurance that these objectives will be achieved. The
achievement of these objectives depends on many factors, including principally
the ability of the Managing General Partner to select suitable properties at
favorable prices (completed) and the successful management of those properties.
The General Partners of the Partnership are Mariner Capital Management, Inc.,
a Florida corporation (Managing General Partner or Mariner) and MCD Real
Estate, Inc., an Ohio corporation. For further information see Item 10. The
primary market is Southwest Florida. The intent was to invest in several
properties in order to achieve a measure of diversification. The Partnership's
original intent was to hold these properties as long-term investments. The
Managing General Partner has chosen to invest primarily in Southwest Florida
because of its experience in dealing in real estate in this area. Southwest
Florida offers, in management's opinion, a competitive but growing economic
base in which to meet its performance objectives.
The Partnership commenced a $15,000,000 offering of limited partnership
interest (the Units) at $1,000 per unit (15,000 total units) on June 13, 1986,
pursuant to a registration statement on Form S-11 under the Securities Act of
1933 (Reg. No. 33-04345) (Registration Statement). McDonald and Company
Securities, Inc., an affiliate of MCD Real Estate, Inc., Janney Montgomery
Scott, Inc. and J. J. B. Hilliard, W. L. Lyons, Inc., acted as the managing
dealers of the offering.
The Prospectus filed pursuant to Rule 424(B) and 424(C) under the Securities
Act of 1933 (the Prospectus) was supplemented on August 7, 1986, November 20,
1986, January 12, 1987 and March 23, 1987. The Prospectus and supplements are
incorporated herein by reference to the extent necessary or appropriate.
Pursuant to the terms of the offering, there was a right to offer for sale an
additional 5,000 units. The Partnership sold a total of $10,655,000 (10,655
units) to the public.
The Partnership itself has no executive officers as employees. The Managing
General Partner, which has responsibility for the management of the
Partnership, has assigned certain individuals to devote as much time to the
operations of the Partnership as deemed necessary. All these individuals serve
the Partnership on a part-time basis. The Managing General Partner is a General
Partner in other publicly and privately offered limited partnerships, some
having the same or similar investment objectives as the Partnership.
3
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ITEM 2. PROPERTIES
The Partnership has purchased six properties. Broadway Medical Center and
Laurel Center, which are located in Fort Myers, Florida, were purchased
on December 15, 1986. In 1987, the Partnership purchased two additional
properties. Town Centre Shopping Center, located in Marco Island, Florida was
purchased on April 9, 1987, and Manatee West Shopping Center, located in
Bradenton, Florida was purchased on November 4, 1987. Heritage Square Shopping
Center, located in Marco Island, Florida was purchased on March 11, 1988, and
Pinebrook Commons, located in Bradenton, Florida was purchased on August 3,
1988. A brief description of these properties and the terms of the purchases
by the Partnership follows:
BROADWAY MEDICAL CENTER - Broadway Medical Center is a medical office
building located in Lee County, Florida consisting of approximately 15,300
square feet of net leasable area situated on 2.23 acres of land. The
building was constructed in 1975.
Broadway Medical Center is located at the Southwest corner of Broadway and
Carroll Road, just west of U.S. 41 and East of Fowler Avenue. This
location is between Lee Memorial Hospital and Southwest Regional Medical
Center.
The Partnership acquired the Broadway Medical Center property on December
15, 1986. The Partnership has capitalized the following costs associated
with acquisition of Broadway Medical Center:
Contract Purchase Price $1,257,500
Acquisition Fee 62,875
Appraisal Fee 3,000
Survey Fee 1,479
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$1,324,854
==========
The terms of the purchase were $844,416 cash and a first mortgage of
$480,438. When purchased, the property was 100% occupied. At year end 1996
and 1995 the property was 67% and 100% occupied.
The first mortgage was paid off on September 6, 1990, with proceeds
obtained from a $6,000,000 consolidation loan, collateralized by Broadway
Medical, Town Center Mall and Heritage Square which bears an interest rate
of Prime +1%.
The partnership has entered into a contract to sell Broadway Medical
Center to an unrelated third party for a price less then the carrying
value of the property. Accordingly, a loss on impairment has been
recognized at December 1996. The sale is scheduled to occur in the second
quarter of 1997, however, there can be no assurance that the transaction
will be completed. The decision to sell the property at an amount less
than the carrying value was made in response to a declining rental market
in the Fort Myers Broadway Avenue area. The subject neighborhood has been
declining and losing many of the long term medical office tenants to newer
buildings located in more desirable areas of Lee County. This has resulted
in a high supply of vacant space versus very low demand which has in turn
led to reduced rental rates. The General Partner was of the opinion that
the problem is long term and felt it was economically prudent to sell the
property at a reduced price.
LAUREL CENTER - The Laurel Center is a 2,300 square foot medical center
on 1.95 acres of land that was acquired in 1986. The Partnership
capitalized the following costs associated with the acquisition:
Contract Purchase Price $1,657,500
Acquisition Fee 82,875
Closing Costs 4,885
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$1,745,260
==========
4
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The property was deeded to the lender in lieu of foreclosure in 1994. A
non-recourse loan in the amount of $1,337,812 was forgiven by the lender
and no further liability exists on the part of the Partnership or its
General Partner. The Partnership recorded a loss of $87,150. See 8-K which
was filed in December 1994.
The above action was taken in response to a declining rental market in the
Fort Myers Central Avenue area. The subject neighborhood has been
declining and losing many of the long term medical office tenants to newer
buildings located in more desirable areas of Lee County. This has resulted
in a high supply of vacant space versus very low demand which has in turn
led to reduced rental rates. The General Partner was of the opinion that
the problem is long term and felt economically prudent to deed the
property to the lender to eliminate the negative cash flow being generated
by the property.
TOWN CENTER - Town Center is a retail shopping center consisting of four
buildings totalling approximately 101,000 square feet of net leasable area
situated on 10.12 acres of land. The age of the buildings range from 9 to
23 years. Town Center is located on Collier Boulevard, the main
thoroughfare, on Marco Island.
The Partnership acquired Town Center on April 9, 1987. The Partnership has
capitalized the following costs associated with the acquisition of Town
Center Shopping Center.
Contract Purchase Price $7,343,400
Acquisition Fee 220,300
Roof Inspection 602
Closing Costs 30,212
Less: Guaranteed Rent (190,000)
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$7,404,514
==========
The terms of the purchase were $3,364,302 cash and an interest only
mortgage of $4,200,000 at 9% for seven months, provided by the seller. The
purchase agreement contained a $190,000 rent guarantee to cover vacant
space. The temporary seller financing was paid off in September 1987, when
permanent financing was secured with a financial institution. This loan
was paid off on September 6, 1990, (see discussion of consolidation loan
under Broadway Medical).
When purchased, the center was 75% occupied. As of December 31, 1995
the property was 82% occupied. The 82% figure for 1995 includes a 20,000
sq. ft. grocery store which has vacated, however, the lessee is obligated
under the lease to pay rent through 2005.
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The partnership entered into a contract to sell Town Center to an
unrelated third party for a price in excess of the carrying value of the
property. A $100,000 non refundable deposit was received by the
partnership. This sale closed in the second quarter of 1996 as reported
in an 8-K filed July 1, 1996.
MANATEE WEST SHOPPING CENTER - Manatee West is a shopping center
consisting of two separate buildings consisting of approximately 46,600
square feet located in Bradenton, Florida. The property is located on
6.95 acres at Manatee Avenue West (SR-64) and 75th Street West. Manatee
Avenue West is a major east-west artery through Manatee County with
connecting access to Interstate-75.
The Partnership acquired Manatee West on November 4, 1987. The Partnership
has capitalized the following costs associated with the acquisition of
Manatee West Shopping Center.
Purchase Price $3,500,000
Acquisition Fee 175,000
Closing Costs - Escrow Assumed 19,611
Less: Guaranteed Rent (200,000)
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$3,494,611
==========
The terms of the purchase were cash of $1,689,393 and the assumption of
the existing mortgage of $1,985,607. The purchase agreement contained a
$200,000 rent guarantee to cover the vacant space. The rent guarantee has
been received.
At the time of acquisition, the Partnership assumed a first mortgage held
by a life insurance company with a fixed rate of 11 3/8%, a 30 year
amortization and a maturity date of February 1, 1993, in the amount of
$1,916,215. The loan has been renegotiated at a rate of 9% with payments
of $19,615, plus escrow of taxes and hazard insurance over a term of 177
months. The loan was extended for three years, until February 1, 1996, and
subsequently extended until June 1996. This loan was paid off out of the
proceeds of the Town Center sale.
The property was 67% and 71% occupied at December 31, 1996 and 1995.
The partnership has entered into a contract to sell Manatee West to an
unrelated third party at a price less than the carrying value of the
property. Accordingly, a loss on impairment has been recognized at
December, 1996. The sale is scheduled to close in the second quarter of
1997, however, there can be no assurance that the transaction will be
completed.
The decision to sell the property at an amount less than the carrying
value was made in response to a declining rental market in the Manatee
Avenue West area. The General Partner was of the opinion that the problem
is long term and felt it was prudent to sell the property at a reduced
price.
HERITAGE SQUARE SHOPPING CENTER - Heritage Square is an office/retail
plaza consisting of 26,600 square feet located directly across the street
from Town Center on Marco Island, Florida.
6
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The Partnership acquired Heritage Square on March 11, 1988. The
Partnership has capitalized the following costs associated with the
acquisition of Heritage Square.
Purchase Price $1,600,000
Acquisition Fee 80,000
Appraisal 5,000
Title Insurance 2,955
Attorney Fees 2,750
Survey 2,350
Other Capitalized Costs 1,742
Less: Guaranteed Rent (30,000)
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$1,664,797
==========
The terms of the purchase were all cash. When purchased the property was
65% occupied. The purchase agreement contained a $30,000 rent guarantee to
cover vacant space. The rent guarantee has been received. As of December
31, 1995, the property was 93% occupied.
The Partnership encumbered this property with a loan from a financial
institution of up to $500,000 that was paid off with refinance proceeds
(see Broadway Medical).
The Partnership sold Heritage Square to Heritage Square Real Estate,
L.L.C. on January 16, 1996. An 8-K was filed with the U.S. Securities and
Exchange Commission describing this transaction in detail. The filing
date of this 8-K was 1/30/96.
From the closing proceeds, the partnership paid in full a loan from
NationsBank with an approximate principal balance of $594,000 plus accrued
interest. That loan was secured by a second mortgage on three properties
known as Heritage Square, Broadway Medical Center and Town Center.
PINEBROOK COMMONS - Pinebrook Commons is a 33,334 square foot retail
shopping center located on approximately 4.95 acres of land. The center is
five years old and is located in Bradenton, Florida.
The Partnership acquired Pinebrook Commons on August 3, 1988. The
Partnership has capitalized the following costs associated with the
acquisition of Pinebrook Commons:
Contract Purchase Price $3,190,000
Acquisition Fee 84,350
Audit 5,000
Survey, Inspection Appraisal 6,630
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$3,285,980
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7
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The terms of the purchase were $735,480 cash and a first mortgage of
$2,550,000 obtained from a life insurance company. The current interest
rate is 8.75% with monthly payments of $20,060 and a balloon payment at
maturity on August 1, 1998.
The loan could not be prepaid before August 1, 1996, and after that the
prepayment penalty is 2% in year 4 and 1% in year 5.
Pinebrook Commons is adjoined with Frank's Nursery, a national chain.
Frank's Nursery was not included in the purchase, however, it acts as an
excellent anchor and it pays 32.4% of certain common area expenses
associated with operating the property.
When purchased, the property was 97% occupied. As of December 31, 1996 and
1995, the property was 88% and 97% occupied. During 1996, a loss on
impairment has been recognized on Pinebrook Commons of $272,000 to
reflect the current net realizable value of the property.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not a party to nor is any of the Partnership's property the
subject of any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANTS'S PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS
The units are not traded on any public market and it is not contemplated for
these units to be traded on any public market in the future. As of December 31,
1996, there were 623 Limited Partners.
The Partnership commenced paying quarterly cash distributions in January 1987.
During 1996, 1995 and 1994, the total cash distributions were $5,599,869,
$224,316 and $504,711, respectively. Distributions were not made in 1986,
except for escrow interest, because the Partnership was still raising money
and had not invested in commercial real estate until December 1986. The
Partnership intends to distribute operating cash produced by the Partnership
and the net proceeds from the potential property sales on a quarterly basis
in 1997.
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
1996 1995 1994 1993 1992
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operating revenues (including
interest of $31,150, $4,103, $2,168,
$8,199, $11,780 for 1996, 1995,
1994, 1993, and 1992) $ 6,629,439 $ 2,793,966 $ 3,219,726 $ 3,552,989 $ 3,325,846
Net income $ 3,052,602 $ 15,672 $ 263,783 $ 433,495 $ 330,161
Net income per weighted average
Limited Partnership unit $ 272.17 $ 1.39 $ 23.52 $ 38.65 $ 29.44
Total assets $ 5,491,967 $16,428,940 $16,923,891 $18,709,023 $19,454,467
Mortgages and notes payable $ 2,480,210 $10,596,357 $10,816,526 $12,375,950 $12,868,246
Distributions to Limited Partners $ 5,581,363 $ 213,100 $ 479,475 $ 788,442 $ 889,714
Distributions per Limited
Partnership unit $ 523.83 $ 20.00 $ 45.00 $ 74.00 $ 83.50
Partners' equity $ 2,929,782 $ 5,447,049 $ 5,685,693 $ 5,926,621 $ 6,323,065
Book value per Limited
Partnership unit $ 278.69 $ 530.34 $ 548.94 $ 570.43 $ 605.77
</TABLE>
Also, refer to Item #8 and the audited Financial Statements referred to herein.
9
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY - The principal sources of the Partnership's liquidity are income on
commercial real estate purchased for the Partnership's portfolio (as described
in Results of Operations), and the cash reserves held in interest-bearing
accounts.
The Managing General Partner has prepared sales packages on all of the
properties and has offered all of the properties for sale. A sale of all or
some of the properties would increase cash to the Partnership, however, future
cash flow from operations would decline due to any property sales.
On January 16, 1996, the partnership sold Heritage Square Shopping Center for
$1,950,000. The sale produced net proceeds of $1,852,000. From that amount,
approximately $594,000 was used to pay off a loan which was collateralized by
a second mortgage on Town Center, Heritage Square and Broadway Medical. The
remaining funds were used to pay down additional debt.
The partnership had a loan from a life insurance company in the approximate
amount of $1,700,000 which was due on April 1, 1996. It was collateralized by a
first mortgage on Manatee West. The general partner negotiated with the
lender an extension of the maturity date until June 1, 1996. The proceeds from
the sale of Town Center were available to fully pay off the remaining balance
in June, 1996.
The partnership had a loan in the approximate amount of $5,787,000 which was
due on September 6, 1996. It was collateralized by a mortgage on Town Center
and Broadway Medical. This loan was paid from proceeds from the sale of
Town Center.
The sale of the properties would result in reductions in partnership debt
and an increase in capital distributions to the limited partners in 1997. It
would also result in a reduction in partnership assets and revenues which
would have a negative effect on future distributions.
CAPITAL RESOURCES - As of December 31, 1996, the Partnership had $251,866 in
cash and interest-bearing deposits.
Land and buildings (net of accumulated depreciation of $1,895,885 and provision
for impairment of $1,781,000) are carried at $5,128,779 at December 31, 1996.
The Partnership paid $3,750 for capital improvements in 1996. Factors that
could effect the level of capital expenditures are unexpected vacancies,
unanticipated capital improvements and general property conditions.
10
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RESULTS OF OPERATIONS
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1996 AND 1995
During the years ended December 31, 1996 and 1995 the Partnership's principal
sources of revenue were rental income of $1,527,335 and $2,269,729, and expense
reimbursements from tenants of $330,259 and $520,134. In 1996 the partnership
also reported a gain on the sale of two rental properties in the amount of
$4,740,695. Total rental revenue decreased by $742,394 due to the following
conditions:
Broadway Medical decreased $7,144, Pinebrook Commons decreased $10,907, Town
Center decreased $454,050, Heritage Square decreased $210,697 and Manatee West
increased $27,941. Broadway Medical's and Pinebrook Commons' rent decreases
were due to vacancies occurring in the centers. Town Center's and Heritage
Square's revenue decreased due to sales of the properties in 1996. Manatee
West increased in 1996 because of higher rates.
Tenant reimbursements have decreased $189,875 from 1996 to 1995 primarily as a
result of the sales of Heritage Square and Town Center in 1996.
Interest income increased $27,047 due to proceeds of the Heritage Square sale.
Property operating expenses have decreased $284,525 primarily due to the sale
of Heritage Square and Town Center.
Depreciation expense decreased $185,208 primarily due to the sale of two
properties in 1996.
Interest expense decreased $490,035 due to principal pay down of the
Partnership's debt by $8,116,147. The Partnership's outstanding debt decreased
from $10,596,357 at December 31, 1995, to $2,480,210 at December 31, 1996. This
reduction was due to the sale of Heritage Square and Town Center.
Property taxes decreased $73,980 primarily due to the sale of two properties
and closely monitoring real estate tax assessments on other properties.
Bad Debt expense increased $51,291 from 1995. Management continues to closely
monitor all tenants in order to reduce this amount.
Management recognized a loss on impairment of $1,781,000 and $0 at December 31,
1996 and 1995, respectively.
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RESULTS OF OPERATIONS
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994
During the years ended December 31, 1995 and 1994 the Partnership's principal
sources of revenue were rental income of $2,269,729 and $2,609,123, and expense
reimbursements from tenants of $520,134 and $608,435. Total revenue decreased
by $339,392 due to the following conditions:
Broadway Medical decreased $9,734, Laurel Medical Center decreased $76,689,
Pinebrook Commons increased $39,538, Town Center decreased $47,827, Heritage
Square decreased $1,029 and Manatee West decreased $112,355. Broadway Medical's
rent decrease was due to a vacancy occurring in the center. Laurel Medical
Center rent decreased because 1994 included four months of operations whereas
1995 had no activity. Pinebrook Commons rent increased due to an increase in
occupancy. Town Center's revenue decreased due to vacancies during 1995.
Heritage Square's revenue decreased slightly due to a tenant vacating the
center for part of 1995. The space has been re-leased. Manatee West decreased
in 1995 because of higher vacancy.
Income recognized from deferred rent changed from an increase in income in 1994
of $68,592 to a reduction in income of $62,706. The decrease in income
recognized from deferred rent for 1995 was attributed to charges in the
deferred rent balance of the following properties: Broadway Medical decreased
$17,057, Town Center decreased $2,261, Heritage Square decreased $29,939,
Manatee West decreased $14,134 and Pinebrook Commons increased $685.
Broadway Medical decreased due to the long term leases coming to maturity, Town
Center decreased due to vacancies occuring in the center, Heritage Square
decreased due to a vacancy occurring in the center, Manatee West decreased due
to vacancies in the center and Pinebrook increased due to a new lease being
signed.
Tenant reimbursements have decreased $88,301 from 1995 to 1994. Town Center was
down $58,698 and Manatee West decreased $35,900.
Interest income increased 1,935.
Property operating expenses have increased $62,568 due to Broadway decreased
$6,021, Laurel Center decreased $1,557, Heritage Square decreased $1,751 and
Pinebrook Commons increased $15,626.
Depreciation expense decreased $56,320 due to Laurel Center and also due to
fixed assets being fully depreciated in 1995.
Interest expense decreased $27,373 due to principal pay down of the
Partnership's debt by $220,169. The Partnership's outstanding debt decreased
from $10,816,526 at December 31, 1994, to $10,596,357 at December 31, 1995.
This reduction was due to normal principal amortization during the year.
Property taxes decreased $39,250 due to Laurel Center not being in the
portfolio and closely monitoring real estate tax assessments on other
properties.
Bad Debt expense declined from 1994. Management continues to closely monitor
all tenants in order to reduce this further.
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COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1994 AND 1993
During the years ended December 31, 1994 and 1993, the Partnership's principal
sources of revenue were rental income of $2,609,123 and $2,897,522, interest
income of $2,168 and $8,199 and expense reimbursements from tenants of $608,435
and $647,268. Total revenue decreased by $288,399 due to the following
conditions:
Broadway Medical increased $8,496, Laurel Medical Center decreased $165,422,
Pinebrook Commons decreased $65,332, Town Center decreased $45,823, Heritage
Square decreased $33,361 and Manatee West increased $13,043. Broadway Medical's
rent increase was due to stated rent increases in the leases. Laurel Medical
Center rent decreased because 1994 only included four months of operations
whereas 1993 included twelve months. Pinebrook Commons rent decreased due to
the remaining rent guarantee being recognized as income at December 31, 1993.
That amount was $50,624. The remaining decrease at Pinebrook was due to vacancy
which occurred in 1994. Town Center's revenue decreased due to vacancies during
1994. Heritage Square's revenue decreased due to a tenant vacating the center
for part of 1994. The space has been re-leased. Manatee West increased in 1994
because of higher occupancy.
Income recognized from deferred rent increased $68,592 in 1994. The increase in
income recognized from deferred rent for 1994 was attributed to changes in the
deferred rent balance of the following properties: Broadway Medical decreased
$12,007, Laurel Medical Center decreased $11,063, Town Center increased
$56,881, Heritage Square increased $34,022, Manatee West decreased $2,206,
and Pinebrook Commons increased $2,963.
Broadway Medical decreased due to the long term leases coming to maturity,
Laurel Medical Center decreased due to the property being deeded back to the
lender in 1994, Town Center increased due to new leases being signed and long
term leasess being in the early portion of their lease, Heritage Square
increased due to a new lease being signed in 1994 on previously vacant space,
Manatee West decreased due to leases nearing expiration and Pinebrook Commons
increased due to new leases in 1994 and leases being in the early part of their
lease life.
Reimbursement has decreased $38,833 from 1994 to 1993. The decrease is
primarily at two properties. Town Center was down $30,251 and Heritage Square
decreased $7,824. These properties were down due to vacancies that did not
occur in 1993.
Interest income decreased due to lower interest rates and lower funds invested.
Property operating expenses have decreased $38,571 due to operating Laurel
Center for four months in 1994 as compared to twelve months in 1993.
Depreciation expense decreased $12,894 due to Laurel Center and also due to
fixed assets being fully depreciated in 1994.
Interest expense decreased $144,793 due to Laurel Center only having interest
charged for 4 months in 1994. The savings as compared to 1993 was $98,992. The
remaining difference was due to pay down of the principal on the Partnership's
outstanding debt. The Partnership's outstanding debt decreased from $12,375,950
at December 31, 1993, to $10,816,526 at December 31, 1994. This reduction was
due to the Laurel Center loan reduction of $1,342,727 and $216,697 of principal
reduction during the year.
Property taxes decreased $6,976 due to Laurel Center and closely monitoring
real estate tax assessments on other properties.
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Bad Debt expense declined from 1993. Management continues to closely monitor
all tenants in order to reduce this further.
The abandoned property expense of $87,150 is a one time loss associated with
Laurel Medical Center.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Balance Sheets of the Partnership as of December 31, 1996 and 1995 and the
Statements of Income, Statements of Partner's Capital and Statements of Cash
Flows of the Partnership for each of the three years in the period ended
December 31, 1996, as well as the Notes to Financial Statements and Schedule
III and the Report of Independent Accountants there on, dated March 3, 1997,
are set forth herein:
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Florida Income Fund II, Limited Partnership
We have audited the accompanying balance sheets of Florida Income Fund II,
Limited Partnership, as of December 31, 1996 and 1995, and the related
statements of income, partners' capital, and cash flows for each of the three
years in the period ended December 31, 1996. 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 Florida Income Fund II,
Limited Partnership, as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Myers, Florida
March 3, 1997
15
<PAGE>
<PAGE>
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents, including restricted cash of $0
and $3,232 at December 31, 1996 and 1995, respectively $ 251,866 $ 147,521
Accounts receivable, trade, net of allowance for doubtful accounts
of $102,146 and $38,181 for 1996 and 1995, respectively 32,004 65,238
Notes receivable 44,877 52,854
Prepaid expenses and other 14,391 132,608
------------- -------------------
Total current assets 343,138 398,221
------------- -------------------
RENTAL PROPERTIES, net 5,128,779 15,984,294
------------- -------------------
INTANGIBLE ASSETS
Deferred loan costs, net 20,050 46,425
------------- -------------------
Total assets $ 5,491,967 $16,428,940
============= ===================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Current maturities of notes and mortgages payable $ 24,510 $ 8,116,010
Accounts payable, trade 17,664 86,330
Accrued expenses 10,486 86,724
Customer and security deposits 53,825 182,480
------------ ------------
Total current liabilities 106,485 8,471,544
------------- -------------
NOTES AND MORTGAGES PAYABLE, less current
maturities 2,455,700 2,480,347
------------- -------------
PARTNERS' CAPITAL
General partners deficiency (39,621) (173,745)
Limited partners, 15,000 limited partnership units authorized;
10,655 issued and outstanding in 1996 and 1995 2,969,403 5,650,794
------------- -------------
Total partners' capital 2,929,782 5,477,049
------------- -------------
Total liabilities and partners' capital $ 5,491,967 $16,428,940
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
<PAGE>
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
STATEMENTS OF INCOME
years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues
Rental income $ 1,527,335 $ 2,269,729 $ 2,609,123
Tenant reimbursements 330,259 520,134 608,435
Interest income 31,150 4,103 2,168
Gain on sale of rental properties 4,740,695 0 0
---------------- ---------------- -----------------
6,629,439 2,793,966 3,219,726
---------------- ---------------- -----------------
Expenses
Property operating expenses 624,679 909,204 846,634
Interest expense 599,080 1,089,115 1,116,488
Depreciation 349,056 534,264 590,586
Property taxes 140,382 214,362 253,612
Bad debt expense 82,640 31,349 61,473
Loss on impairment of rental properties 1,781,000 0 0
Abandoned property expense 0 0 87,150
--------------- --------------- -----------------
3,576,837 2,778,294 2,955,943
---------------- --------------- -----------------
Net income $ 3,052,602 $ 15,672 $ 263,783
================ ================ =================
Net income allocated to general partners $ 152,630 $ 783 $ 13,189
================ ================ =================
Net income allocated to limited partners $ 2,899,972 $ 14,889 $ 250,594
================ ================ =================
Net income per limited partner unit $ 272.17 $ 1.39 $ 23.52
================ ================ =================
Distributions per limited parnter unit $ 523.83 $ 20.00 $ 45.00
================ ================ =================
Weighted average limited partner units outstanding 10,655 10,655 10,655
================ ================ =================
RM80</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
<PAGE>
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
---------------- ---------------- ----------------
<S> <C> <C> <C>
Balances, January 1, 1994 $ (151,265) $ 6,077,886 $ 5,926,621
Cash distributions (25,236) (479,475) (504,711)
Net income 13,189 250,594 263,783
---------------- ---------------- ----------------
Balances, December 31, 1994 (163,312) 5,849,005 5,685,693
Cash distributions (11,216) (213,100) (224,316)
Net income 783 14,889 15,672
---------------- ---------------- ----------------
Balances, December 31, 1995 (173,745) 5,650,794 5,477,049
Cash distributions (18,506) (5,581,363) (5,599,869)
Net income 152,630 2,899,972 3,052,602
---------------- ---------------- ----------------
Balances, December 31, 1996 $ (39,621) $ 2,969,403 $ 2,929,782
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
<PAGE>
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
years ended December 31, 1996, 1995 and 1994
RM132<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,052,602 $ 15,672 $ 263,783
Adjustments to reconcile net income to net cash
provided by operating activities
Gain on sale of rental property (4,740,695) 0 0
Loss on impairment of rental property 1,781,000 0 0
Depreciation 349,056 534,266 590,586
Amortization of loan costs 26,375 74,372 78,090
Abandoned property expense 0 0 87,150
(Increase) decrease in:
Accounts receivable, net 33,234 21,811 (33,657)
Notes receivable 7,977 35,865 (17,494)
Prepaid expenses and other 118,217 63,207 (82,484)
Increase (decrease) in:
Accounts payable and accrued expenses (144,904) (52,022) 19,344
Customer and security deposits (128,655) (14,116) (4,124)
---------------- ---------------- ----------------
Net cash provided by operating activities 354,207 679,055 901,194
---------------- ---------------- ----------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Improvements to rental properties (3,750) (143,400) (174,037)
Proceeds from the sale of rental property 13,469,904 0 0
---------------- ---------------- ----------------
Net cash provided by (used in) investing activities 13,466,154 (143,400) (174,037)
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes and mortgages payable (8,116,147) (220,169) (216,697)
Loan origination fees paid 0 (36,970) (4,004)
Partner distributions paid (5,599,869) (224,316) (504,711)
---------------- ---------------- ----------------
Net cash used in financing activities (13,716,016) (481,455) (725,412)
---------------- ---------------- ----------------
Net increase in cash and cash equivalents 104,345 54,200 1,745
Cash and cash equivalents at beginning of year 147,521 93,321 91,576
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 251,866 $ 147,521 $ 93,321
================ ================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for interest on borrowings $ 576,364 $ 1,089,310 $ 1,116,770
================ ================ ================
NONCASH INVESTING AND FINANCING ACTIVITIES:
Building and improvements net of accumulated depreciation and land in the amount of $1,428,878
were exchanged for forgiveness of a mortage payable in the amount of $1,342,727 during 1994.
</TABLE>
During 1996, $450,000 of selling expenses were deducted from the proceeds of the
Heritage Square and Town Center sales.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
<PAGE>
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Florida Income Fund II, Limited Partnership (the Partnership) was
formed on March 26, 1986, by the filing of a Certificate and
Agreement of Limited Partnership (Partnership Agreement) under the
laws of the State of Ohio. The general partners, MCD Real Estate,
Inc. (MCD) and Mariner Capital Management, Inc. (MCM), also the
managing general partner, contributed $20,000 and the initial
limited partner contributed $5,000 in the initial capitalization of
the Partnership. The Partnership was formed for the purpose of
investing in a diversified portfolio of income-producing commercial
and residential real estate properties located in Florida.
The Partnership purchased Heritage Square, Manatee West, Pinebrook
Commons, Town Center (four retail shopping centers), Laurel Center
and Broadway Medical Center (two medical complexes). During 1994,
the Partnership deeded the Laurel Medical Center assets and assigned
all rents to Ohio National Life Insurance Company in lieu of
foreclosure and full satisfaction of the loan outstanding on the
property in the amount of $1,342,727. The Partnership sold Heritage
Square in January 1996 and Town Center in June 1996. In addition,
the Partnership has contracts to sell the Manatee West and Broadway
Medical properties (See Note 2).
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies of the Partnership
follows:
RENTAL INCOME: The Partnership leases space in its retail centers.
These leases range from one to 15 years and include provisions for
minimum rent increases at stated amounts or the Consumer Price
Index. Rental income is recognized by amortizing the total contract
minimum rent on a straight-line basis over the life of the lease.
The difference between rental income recognized and actual rental
receipts is accumulated as deferred rent incentives and included as
prepaid expenses and other in the accompanying balance sheets.
ALLOCATION OF NET INCOME: In accordance with the Partnership
Agreement, net income (loss), prior to recoupment (as defined in the
prospectus) of the partners' original capital investment, is
allocated five percent (5%) to the general partners and ninety-five
percent (95%) to the limited partners as a class. Subsequent to
recoupment, income (loss) is allocated twenty percent (20%) to the
general partners and eighty percent (80%) to the limited partners as
a class.
20
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RENTAL PROPERTIES: In March 1995, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (SFAS 121). The Statement
requires that long-lived assets and certain identifiable intangibles
to be held and used be reviewed for impairment whenever events or
changes in circumstances indicate that their carrying amount may not
be recoverable. In assessing recoverability, estimates of future
cash flows expected to result from the use of the asset and its
eventual disposition should be used. If the sum of the expected
future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the asset, an impairment loss
should be recognized based on the value of the asset. SFAS 121 is
effective for financial statements for fiscal years beginning after
December 15, 1995 with earlier application encouraged. Management
has reviewed the Partnership's property holdings and believes no
impairment exists at December 31, 1996. A loss on impairment of the
Pinebrook Commons, Manatee West and Broadway Medical properties of
$272,000, $939,000 and $570,000, respectively, has been recognized in
the year ended December 31, 1996.
Depreciation is computed principally under the straight-line method
over the estimated useful lives of the assets. Repairs and
maintenance are included in operating expenses and improvements are
capitalized.
Upon the sale or retirement of depreciable assets, the cost and
related accumulated depreciation are removed from the accounts and
the difference between the carrying value and any proceeds realized
on sale is included in the determination of net income.
TENANT REIMBURSEMENTS: Common area maintenance, property tax and
utilities expenses for the rental properties are reimbursed to the
fund through tenant assessments. These costs are included in
property operating expenses and property tax expense.
DEFERRED LOAN COSTS: Loan costs incurred from financing and
refinancing the various property acquisitions have been capitalized
at cost and are being amortized over the lives of the related loans.
Amortization of loan costs is included with interest expense in the
income statements.
INCOME TAXES: The accompanying financial statements do not show a
provision or liability for Federal or State income taxes because the
partners are taxed individually on their share of Partnership
earnings.
PER UNIT INCOME: Per unit income is based on the weighted average
number of units outstanding for the years ended December 31, 1996,
1995 and 1994.
CASH EQUIVALENTS: For purposes of the statement of cash flows, the
Partnership considers all highly liquid investments with a maturity
of three months or less to be cash equivalents.
21
<PAGE>
<PAGE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FAIR VALUE OF FINANCIAL INSTRUMENTS: Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments," requires that the Partnership disclose
estimated fair values of financial instruments. The recorded value
for cash and cash equivalents approximates fair value because of the
short maturity of these instruments. The fair value of the
Partnership's short- and long-term notes and mortgages payable at
December 31, 1996, based upon market rates, approximates the amounts
disclosed in Footnote 4.
MANAGEMENT'S USE OF ESTIMATES: 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 revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
2. RENTAL PROPERTIES:
Rental properties consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
<S> <C> <C>
Land $ 3,291,700 $ 7,185,362
Buildings and improvements 5,513,964 12,847,870
Loss on impairment of asset (1,781,000) 0
---------------- ----------------
7,024,664 20,033,232
Accumulated depreciation (1,895,885) (4,048,938)
---------------- ----------------
Rental properties, net $ 5,128,779 $ 15,984,294
================ ================
</TABLE>
Management has entered into contracts to sell the Manatee West
and Broadway Medical properties at prices less than each of the
property's carrying value. Accordingly, an impairment loss was
recognized. The carrying value was written down to the contractual
sales price less selling expenses. The carrying value of the Manatee
West and Broadway Medical properties were $2,150,450 and $498,703,
respectively, at December 31, 1996.
Depreciation expense was $349,056, $534,264 and $590,586 for the
years ended December 31, 1996, 1995 and 1994, respectively.
22
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. RENTAL PROPERTIES, CONTINUED
Based on the Partnership's noncancelable leases with terms in excess of
one year in existence at December 31, 1996, future minimum annual
rentals from these leases over the next five years, and in the
aggregate, will be approximately as follows:
1997 $ 659,912
1998 375,764
1999 262,535
2000 133,463
2001 62,901
----------------
$ 1,494,575
================
3. INTANGIBLE ASSETS:
Intangible assets at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
<S> <C> <C>
Deferred loan costs $ 60,150 $ 98,132
Accumulated amortization (40,100) (51,707)
---------------- ----------------
$ 20,050 $ 46,425
================ ================
</TABLE>
Additions to deferred loan costs relate to modifications of note terms
and other refinancing transactions during the year ended December 31,
1995. Certain loan costs became fully amortized during the years ended
December 31, 1996, 1995 and, therefore, were written off. Amortization
expense was $26,915, $74,372 and $58,949 for the years ending December
31, 1996, 1995 and 1994, respectively.
23
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. NOTES AND MORTGAGES PAYABLE:
Notes and mortgages payable consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
<S> <C> <C>
Notes and mortgages payable to banks:
Mortgage payable with monthly payments of $4,561 plus
interest at prime plus 1%, principal balloon payment of
approximately $5,750,000 due September 1996. $ 0 $ 5,786,979
Mortgage payable with monthly payments of $4,978 plus
interest at prime plus 1%, principal balloon payment of
approximately $560,000 due September 1996. 0 599,613
Mortgages payable to life insurance companies:
Monthly payments of $19,615, including interest at 9%, principal
balloon payment of approximately $1,694,000 due April
1996. 0 1,706,954
Monthly payments of $20,061 including interest at 8.75%,
principal balloon payment of approximately $2,442,320
due August 1998. 2,480,210 2,502,811
---------------- ----------------
2,480,210 10,596,357
Less current maturities (24,510) (8,116,010)
---------------- ----------------
$ 2,455,700 $ 2,480,347
================ ================
</TABLE>
Notes and mortgages payable are scheduled to mature approximately as
follows:
1997 $ 24,510
1998 2,455,700
----------------
$ 2,480,210
================
Pinebrook Commons is pledged as collateral for notes and mortgages
payable, as well as rents and receivables related to Pinebrook Commons.
See Note 6 regarding additional collateral pledged for the Pinebrook
Commons mortgage.
24
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. RELATED PARTY TRANSACTIONS:
The Partnership participated in the following related party
transactions:
The general partners and their affiliates are entitled to receive
compensation for leasing and managing the properties in an amount
not to exceed 6% of gross revenues produced by commercial
Partnership properties. For the years ending December 31, 1996, 1995
and 1994, the general partners and their affiliates received fees of
$34,769, $175,411 and $180,427, respectively.
The general partners and their affiliates are also entitled to
reimbursement of costs (including amounts of any salaries paid to
employees and officers of a general partner or its affiliates)
directly attributable to the operation of the Partnership which
could have been performed by independent parties. Expenses amounting
to $52,792, $259,916 and $295,941 were incurred during the years
ending December 31, 1996, 1995 and 1994, respectively, of which
$1,359, $13,375 and $28,752 were included in accounts payable for
the years ending December 31, 1996, 1995, and 1994, respectively.
6. RESTRICTED CASH:
Pursuant to an agreement between the Partnership and one of its
insurance company lenders, the Partnership deposited approximately
$114,500 into escrow resulting from the settlement of a major tenant's
early lease termination in 1993.
The escrow account, in compliance with the terms of the agreement, was
managed by the lender's servicing agent. The escrow balance is applied
to tenant improvements, leasing commissions and debt service related to
the vacated space, as governed by the agreement. During 1995 and 1994,
the lender released approximately $40,100 and $10,500, respectively, to
the Partnership, which is included in Partnership rental income. The
restricted balance related to the escrowed lease settlement was $0 and
$40,100 at December 31, 1996 and 1995, respectively.
Certain tenants have required security deposits be maintained in a
restricted account not available to the Partnership for operating
activities. Restricted security deposit balances were $0 and $3,232
for December 31, 1996 and 1995, respectively.
25
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the financial statements of Florida Income Fund II, Limited
Partnership, is included on page 15 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 36 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Fort Myers, Florida
March 3, 1997
26
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER, 31, 1996
COL. A COL. B COL. C COL. D COL. E
COST CAPITALIZED GROSS AMT AT WHICH
INITIAL COST SUBSEQUENT TO CARRIED AT CLOSE
TO PARTNERSHIP ACQUISITION OF PERIOD
-------------- ---------------- ------------------
BLDGS. & IMPROVE- CARRYING BLDGS &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS MENTS COSTS LAND IMPROVEMENTS TOTAL
- ----------- ------------ ---------- ------------ --------- -------- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Broadway Medical
Center (a)
Ft. Myers, FL $ 0 $ 450,450 $ 874,404 $ 76,657 $ 0 $ 450,450 $ 381,061 $ 831,511
Pinebrook Commons
Retail Shop. Ctr. (b)
Bradenton, FL 2,480,210 1,196,250 2,089,730 83,146 0 1,196,250 1,900,876 3,097,126
Manatee West
Retail Shop. Ctr. (c)
Bradenton, FL 0 1,645,000 1,849,611 540,416 0 1,645,000 1,451,027 3,096,027
----------- ---------- ---------- -------- ---- ---------- ----------- -----------
TOTALS $ 2,480,210 $3,291,700 $4,813,745 $700,219 $ 0 $3,291,700 $ 3,732,964 $7,024,664
=========== ========== ========== ======== ==== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
COL. A COL. F COL. G COL. H COL. I
LIFE IN WHICH
DEPRECIATION IN
LATEST INCOME
ACCUMULATED DATE OF DATE STATEMENT IS
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- ----------- ------------ ------------ -------- ---------------
<S> <C> <C> <C> <C>
Broadway Medical
Center
Ft. Myers, FL $ 332,808 1975 12/15/86 30 years
Pinebrook Commons
Retail Shop. Ctr.
Bradenton, FL 617,500 1987 08/03/88 30 years
Manatee West
Retail Shop. Ctr.
Bradenton, FL 945,577 1984 11/04/87 30 years
----------
TOTALS $1,895,885
==========
<FN>
SEE ACCOMPANYING NOTES TO SCHEDULE III
(a) This includes a loss on impairment in the amount of $570,000 to
reflect the net realizable value.
(b) This includes a loss on impairment in the amount of $272,000 to
reflect the net realizable value.
(c) This includes a loss on impairment in the amount of $939,000 to
reflect the net realizable value.
</FN>
</TABLE>
27
<PAGE>
<PAGE>
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1996
REAL ESTATE AND ACCUMULATED DEPRECIATION
Balance as of 12/31/93 $21,566,170
Additions During 1994:
Acquisitions through foreclosures $ 0
Other Acquisitions 174,037
Improvements, etc. 0
Other 0 174,037
---------- ------------
Deductions During 1994:
Cost of real estate sold 0
Other cost of real estate
deeded to lender (1,850,373) ( 1,850,373)
---------- ------------
Balance as of 12/31/94 19,889,834
Additions During 1995:
Acquisitions through foreclosures 0
Other Acquisitions 143,398
Improvements, etc. 0
Other 0 143,398
---------- ------------
Balance as of 12/31/95: 20,033,232
Additions During 1996:
Acquisitions through foreclosures 0
Other acquisitions 3,750
Improvements, etc. 0
Cost of real estate sold (11,231,318)
Impairment of value ( 1,781,000) (13,008,568)
------------- -------------
Balance as of 12/31/96 $ 7,024,664
=============
28
<PAGE>
<PAGE>
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1996
REAL ESTATE AND ACCUMULATED DEPRECIATION
Balance as of 12/31/93 $ 3,344,584
Accumulated depreciation on
disposal of fixed assets $ (420,496)
Depreciation expense for 1994 590,586 170,090
----------- -----------
Balance as of 12/31/94 3,514,674
Depreciation expense for 1995 534,264 534,264
----------- -----------
Balance as of 12/31/95 4,048,938
Accumulated depreciation on
disposal of fixed assets (2,502,109)
Depreciation expense for 1996 349,056 (2,153,053)
------------ ------------
Balance as of 12/31/96 $ 1,895,885
============
29
<PAGE>
<PAGE>
FLORIDA INCOME FUND II LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1996
REAL ESTATE AND ACCUMULATED DEPRECIATION
(A) The aggregate cost of land and buildings is the same for Federal
Income Tax purposes, except for Town Centre, Manatee West and
Heritage Square. The guaranteed rent received of $190,000, $200,000
and $30,000, respectively, is considered taxable income, whereas
these amounts are accounted for as basis reductions for financial
statement reporting purposes.
(B) Included in the acquisitions of 1988, 1987 and 1986 are $164,350,
$395,300 and $145,750 of acquisition fees and expenses paid to the
General Partner in connection with acquiring the properties.
(C) See Note 1 to the Financial Statements for depreciation method.
(D) See Note 4 to the Financial Statements for further information on
debt obligations.
30
<PAGE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(A) AND (B) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Partnership, as an entity, does not have any directors or officers. The
Managing General Partner is Mariner Capital Management, Inc. (located at 12800
University Dr., Ste. 675, Fort Myers, Florida 33907), a Florida corporation
formed for the purpose of becoming the general partner in limited partnerships
formed principally to invest in real estate. The Managing General Partner is a
wholly owned subsidiary of The Mariner Group, Inc., an Ohio corporation
(referred to herein as "Mariner Group"). The executive officers/directors of
the Managing General Partner as of December 31, 1996 were as follows: Robert M.
Taylor, Timothy R. Bogott, Lawrence A. Raimondi and Joe K. Blacketer.
Each of the officers named above, except Joe K. Blacketer, has served as an
officer of the Mariner Capital Management, Inc., since its incorporation on
July 11, 1983. Joe K. Blacketer replaced Michael J. Scullion as a
Secretary/Treasurer as of May 1, 1996.
MCD Real Estate, Inc. (located at 800 Superior Avenue, Suite 2100, Cleveland,
Ohio 44114) (referred to herein as "MCD") is a Co-General Partner. MCD is an
Ohio corporation and a wholly owned subsidiary of McDonald & Company
Securities, Inc., the Managing Dealer of the offering. McDonald & Company
Securities, an Ohio corporation, is a wholly owned subsidiary of McDonald &
Company Investments, Inc., a publicly-traded Delaware corporation listed on
the New York Stock Exchange. MCD was formed in February of 1981 for the
principal purpose of becoming the general partner of limited partnerships
formed to provide equity financing for various real estate projects. The
directors and officers of MCD as of December 31, 1995, were as follows: James
C. Redinger, Thomas M. O'Donnell and Richard R. Cundiff.
(C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
Not applicable
(D) FAMILY RELATIONSHIP
Not applicable
31
<PAGE>
<PAGE>
(E) BUSINESS EXPERIENCE
ROBERT M. TAYLOR: Age 55, is Chairman of the Board and a Director of
the Managing General Partner. He founded Mariner Group in 1971 and
served as its President until his election as Chairman and Chief
Executive Officer of Mariner Group in 1979. He also serves as an
officer or director of various other Affiliates of Mariner Group. Mr.
Taylor is a Director of Acme-Cleveland Corporation, Cleveland, Ohio, a
manufacturer of machine tools; Barnett Bank of Fort Myers, Fort Myers,
Florida; MIL- COM Electronics Corporation, San Antonio, Texas; Florida
Council of 100; the Fort Myers Chamber of Commerce, and Chairman of
the Business Development Corporation of Southwest Florida, Fort Myers,
Florida. Since 1971, Mr. Taylor has directed the completion of over 30
real estate developments in Lee County, Florida. Prior to 1971, Mr.
Taylor was a management consultant employed by McKinsey & Company,
Inc., Cleveland, Ohio.
TIMOTHY R. BOGOTT: Age 50, is a Director and the former President of
the Managing General Partner. He was involved in all aspects of the
organization and management of Florida Income Fund, L.P., Florida
Income Fund II and Florida Income Fund III until January 1994 when he
became President of South Seas Resorts Company. He joined Mariner
Group in 1976 and has held the positions of Project Manager and
Director of Administration and Secretary/Treasurer. Prior to 1976, Mr.
Bogott was employed as an Assistant Vice President of Palmetto Federal
Savings and Loan Association, Fort Myers, Florida (1974-1976) and held
various management positions with the First National Bank of Fort
Myers (1970-1974). Mr. Bogott was elected Secretary/Treasurer of
Mariner Group in 1979 and Vice President -Finance in 1983. Mr. Bogott
is also President of Mariner Capital Investment Corporation and is an
officer or director of various other Affiliates of Mariner Group.
LAWRENCE RAIMONDI: Age 49, is President and Director of the Managing
General Partner. He became President in January 1994 after serving as
Executive Vice President in charge of property acquisitions and
financing of partnership debt. He was involved in all property
acquisitions for Florida Income Fund, L.P., Florida Income Fund II and
Florida Income Fund III. He joined Mariner Group in 1981 and served as
Director of Project Finance until joining the general partner. He was
employed in the Real Estate Department of Mellon Bank from 1969 to
1981 in various capacities with his most recent position being a
Commercial Mortgage Officer.
JOE K. BLACKETER: Age 44 is the Secretary/Treasurer of the Managing
General Partner. Mr. Blacketer has been a Certified Public Accountant
since 1983. He is a member of the American Institute of Certified
Public Accounts (AICPA), and a member of the Florida Institute of
Certified Public Accountants (FICPA). Mr. Blacketer joined Mariner
Group in 1983. Mr. Blacketer was employed by Coopers & Lybrand, CPA's
(1979-1983) prior to that time.
32
<PAGE>
<PAGE>
JAMES C. REDINGER: Age 60. Mr. Redinger joined McDonald & Company (a
partnership that transferred all of its assets to McDonald & Company
Securities, Inc.) in March 1974, becoming a partner in 1977, working
in the area of corporate underwriting and syndication of real estate
and oil and gas ventures. He has had extensive experience in site
selection, cost projections of both commercial and residential real
estate projects and the syndication of such projects through limited
partnerships. Mr. Redinger has served as Chairman of the District Nine
Committee of the National Association of Securities Dealers, Inc., is
a Vice President and a Director of MCD Oil and Gas Company, Inc., a
Director of McDonald & Company Venture Capital, Inc., a Director of
McDonald & Company Securities, Inc., and a Managing Director of
McDonald & Company Securities, Inc.
THOMAS M. O'DONNELL: Age 61. Mr. O'Donnell joined McDonald & Company
in 1965 in the Corporate Finance Department. Mr. O'Donnell became a
partner of McDonald & Company in 1968 and has been a member of its
Policy Committee since 1971. Mr. O'Donnell is a Chartered Financial
Analyst and a member of the Cleveland Society of Security Analysts.
Mr. O'Donnell is a director of Seaway Food Town, Inc., Maumee, Ohio, a
grocery retailer. Mr. O'Donnell is Chief Executive Officer and
Chairman of the Board of McDonald & Company Investments, Inc., Chief
Executive Officer and Chairman of the Board of McDonald, which
operates an insurance agency; a Director of MCD Oil & Gas Company,
Inc., a Director of McDonald & Company Venture Capital, Inc.; and a
Director of McDonald Financial Services.
RICHARD R. CUNDIFF, III: Age 37. Mr. Cundiff joined McDonald & Company
in December 1982 and has assisted in the development of the Real
Estate and Specialty Finance Department. Specializing in real estate
and oil and gas investment banking, his responsibilities include
structuring, marketing and monitoring investments in these particular
areas. Mr. Cundiff is a First Vice President of McDonald & Company.
(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
No director or officer of the Managing General Partner was involved in
any event during the past five years which would be responsive to this
question.
33
<PAGE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
(A) CURRENT REMUNERATION OF GENERAL PARTNERS, THEIR DIRECTORS AND
OFFICERS
No direct remuneration was paid or payable by the Partnership for the
period ended December 31, 1996, to directors or officers of the
General Partners.
In accordance with the Partnership Agreement, net income or loss,
prior to recoupment or the partner's original capital investment, is
allocated five percent (5%) to the General Partners and ninety-five
percent (95%) to the Limited Partners as a class. Subsequent to
recoupment, income or loss is allocated twenty percent (20%) to the
general partners and eighty percent (80%) to the limited partners as a
class.
The General Partners and their affiliates are entitled to
reimbursement of the actual cost to the General Partners or their
affiliates of goods, materials and services used for or by the
Partnership and obtained from unaffiliated entities and also the cost
of services performed by officers and employees of the General
Partners and their affiliates which could be performed directly for
the Partnership by independent parties. Expenses amounting to
$52,792, $259,916 and $295,941 have been charged for the years ending
December 31, 1996, 1995 and 1994, of which $1,359 and $13,375 were
included in accounts payable at December, 31, 1996, and 1995,
respectively. A portion of this amount is for the payment of insurance
premiums which are collected by Mariner Group, Inc. (for all Mariner
affiliates) and paid to the carrier on behalf of Florida Income Fund
II. The balance is for reimbursement for on- site property management
personnel and for reimbursement of other costs for services performed
by the general partner or affiliates which the Partnership would be
required to pay to third parties for comparable services in the same
geographical location
The General Partners and their affiliates are entitled to receive
compensation for leasing and management fees in an amount not to
exceed 5% of gross revenues from residential partnership properties or
6% of gross revenues produced by commercial partnership properties.
Management fees totaling $34,769, $175,411 and $180,427 were paid to
the Managing General Partner or its affiliates for the years ending
December 31, 1996, 1995 and 1994, respectively.
(B) PROPOSED REMUNERATION
Except for the payment of acquisition fees and the allocation of net
income or loss as described above, the Partnership has no ongoing plan
or arrangement to compensate the persons and entities named above.
However, the Managing General Partner or its affiliates may receive
leasing and management fees in connection with the management of the
Partnership's properties, subject to the limitations described herein
below.
34
<PAGE>
<PAGE>
The Managing General Partner or its affiliates are entitled to receive
property management fees not to exceed 6% of the gross revenues from
commercial properties and 5% from residential properties. Other
expenses attributable to the operation of the Partnership may be
reimbursed to the General Partners or affiliates of the Managing
General Partner.
The Managing General Partner or its affiliates are entitled to one
half of the commissions paid as a result of the sale of Partnership
properties based on property sales prices, in an amount not to exceed
3% of such prices and subordinated to the right of the Limited
Partners to receive aggregate cash distributions from the Partnership
equal to their adjusted capital contribution plus the applicable
preference amount.
(C) REMUNERATION OF DIRECTORS
None.
(D) OPTIONS, WARRANTS AND RIGHTS
The Registrant has granted no options, warrants or rights.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person is known to the Partnership to be the beneficial owner of over 5% of
the outstanding Partnership units. For information on net income or loss
allocation see Item 11. (A).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
See Note 5, Related Party Transactions in Notes to the Financial Statements, on
page 24 in Item 8.
35
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENT SCHEDULES
The following Financial Statement Schedules of the Partnership are
included in Part II, Item 8:
PAGE
----
Report of Independent Accountants 14
Balance Sheets as of December 31, 1996 and 1995 15
Statements of Income for the years ended
December 31, 1996, 1995 and 1994 16
Statements of Partners' Capital for the years
ended December 31, 1996, 1995 and 1994 17
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 18
Notes to Financial Statements 19 - 24
Report of Independent Accountants on Schedule III 25
Schedule III Real Estate and Accumulated Depreciation 26 - 29
Schedules Omitted:
Other schedules have been omitted because of the absence of
conditions under which they are required or because the
required information is included in the Financial Statement
and Notes thereto.
(A) 2. EXHIBITS
27 Financial Data Schedule (for SEC use only)
99 Form 8-K
(A) 3. REPORTS ON FORM 8-K
None.
36
<PAGE>
<PAGE>
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.
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
(Registrant)
March 29, 1996
By: /s/ LAWRENCE A. RAIMONDI
----------------------------------------
LAWRENCE A. RAIMONDI
President, Director and CEO
Mariner Capital Management, Inc.
(Principal Executive Officer)
By: /s/ JOE K. BLACKETER
----------------------------------------
JOE K. BLACKETER
Mariner Capital Management, Inc.
(Principal Financial and Accounting Officer)
37
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 251,866
<SECURITIES> 0
<RECEIVABLES> 134,150
<ALLOWANCES> 102,146
<INVENTORY> 0
<CURRENT-ASSETS> 343,138
<PP&E> 7,024,664
<DEPRECIATION> 1,895,885
<TOTAL-ASSETS> 5,491,967
<CURRENT-LIABILITIES> 106,485
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,929,782
<TOTAL-LIABILITY-AND-EQUITY> 5,491,967
<SALES> 0
<TOTAL-REVENUES> 6,629,439
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,922,032
<LOSS-PROVISION> 82,640
<INTEREST-EXPENSE> 572,165
<INCOME-PRETAX> 3,052,602
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,688,093)
<DISCONTINUED> 4,740,695
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,052,602
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99
FORM 8-K
SALE OF TOWN CENTER SHOPPING CENTER
TABLE OF CONTENTS
ITEM 2
ACQUISITION OR DISPOSITION OF ASSETS
ITEM 5
HISTORICAL SUMMARY OF GROSS REVENUES AND
CERTAIN DIRECT OPERATING EXPENSES
EXHIBIT 99.1
SELLERS CLOSING STATEMENT
SIGNATURES
Page 1<PAGE>
<PAGE>
ITEM 2 - FORM 8-K
ACQUISITION OR DISPOSITION OF ASSETS
SALE OF TOWN CENTER SHOPPING CENTER
The partnership sold Town Center, the 101,664 sq. ft. shopping
center located on Marco Island to American Heritage/Buckhead, L.P.
a Delaware limited partnership, on July 1, 1996 at a price of
$12,000,000.
Closing costs totaled $378,000 which included a selling commission
of $240,000 split equally between two unrelated, third party real
estate brokerage companies. Additional closing adjustments totaled
$130,000. A copy of the Seller's Closing Statement is attached.
From the closing proceeds, the partnership paid in full a first
mortgage loan from NationsBank in the amount of $5,764,000. That
loan was secured by a mortgage on both Town Center and Broadway
Medical Center. That mortgage has now been satisfied in full. An
additional $500,000 is being reserved from the closing to be paid
against the partnership's loan on Manatee West. That sum, plus
approximately $1,200,000 which was reserved from a prior property
sale will pay the loan on Manatee West Shopping Center in full
provided that the lender will not grant a satisfactory extension to
that loan which is due and payable on September 1, 1996.
The net proceeds from sale less the $500,000 mentioned above will
be distributed to the limited partners during the last week of June
or first week of July.
Pursuant to the information required by Article 11 of regulation S-
X, if the partnership had disposed of the property on March 31,
1996, the effect on the partnership's unaudited balance sheet of
that same date would have been a decrease in net asset value of
$1,430,000, a decrease in debt by $5,782,000, and a higher net
worth of approximately $4,352,000.
If this sale had occurred on January 1, 1996, the effect on the
unaudited income statement for three months ended March 31, 1996
would have been to decrease revenue by $378,000, decrease operating
expense by $91,000, decrease interest expense by $136,000, decrease
other non-operating expenses by $16,000, decrease depreciation and
amortization expenses by $70,000. All of the foregoing adjustment
would have resulted in a decrease in net income of $65,000.
Included in this report is the historical summary of gross revenues
and certain direct operating expenses for the twelve months ending
12/31/95, 12/31/94 and 12/31/93.
Page 2<PAGE>
<PAGE>
<TABLE>
<CAPTION> TOWN CENTER SHOPPING CENTER
HISTORICAL SUMMARY OF GROSS REVENUES AND
CERTAIN DIRECT OPERATING EXPENSES
12/31/95 12/31/94 12/31/93
---------- --------- ----------
<S> <C> <C> <C>
GROSS REVENUES
Rental Income
and other 1,499,190 1,603,837 1,701,092
Total Revenue 1,499,190 1,603,837 1,701,092
CERTAIN DIRECT
OPERATING EXPENSES
Grounds Maintenance 41,580 37,054 33,937
Building Maintenance 45,338 19,362 7,484
Utilities 55,950 54,023 41,267
Management Fee 92,272 91,215 100,540
Real Estate Taxes 77,730 80,095 80,361
Insurance 55,864 58,574 49,733
Administrative 64,384 84,767 76,574
Other Expenses 64,143 41,442 60,505
Bad Debts 0 0 51,800
_______ _______ _______
TOTAL CERTAIN DIRECT 497,261 466,532 502,201
OPERATING EXPENSES
EXCESS OF GROSS 1,001,929 1,137,305 1,198,891
REVENUES OVER CERTAIN
DIRECT OPERATING
EXPENSES
</TABLE>
Page 3<PAGE>
<PAGE>
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.
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
(REGISTRANT)
JULY 1, 1996
LAWRENCE A. RAIMONDI
PRESIDENT AND DIRECTOR, AND CEO
MARINER CAPITAL MANAGEMENT, INC.
(PRINCIPAL EXECUTIVE OFFICER)
(SIGNATURE)
JOE K. BLACKETER
SECRETARY/TREASURER
MARINER CAPITAL MANAGEMENT, INC.
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
(SIGNATURE)
Page 4<PAGE>
SELLER'S CLOSING STATEMENT
Seller: Florida Income Fund II, Limited Partnership
Buyer: American Heritage/Buckhead, L.P.
Property: Town Center Shopping Center, Marco Island, Florida
Date of Closing: July 1, 1996.
Purchase Price: $12,000,000.00
EXPENSES:
1. Owner's Title Insurance $ 36,575.00
2. Documentary Stamps on Deed $ 84,000.00
3. Title Search $ 650.00
4. 1996 Real Estate Taxes,
prorated (1/1-6/27/96 $ 37,751.09
5. 1996 Personal Property Taxes,
prorated (1/1-6/27/96) $ N/A
6. Rents, prorated (6/27-6/30/96)
(excluding Fleming) $ 12,974.11
7. Seller's Attorney Fee payable to
Norman A. Hartman, Jr., P.A. $ 14,750.00
8. Copies, postage, Federal Express,
facsimile, long distance
calls (est) $ 225.00
9. NationsBank Mortgage
Payoff (6/27/96) $5,794,961.76
10. Recording of Affidavits of
Partnership $ 30.00
11. Rent Credit to Buyer for Fleming $ 909.10
12. Deposit from Buyer $ 100,000.00
13. Real Estate Commission $ 240,000.00
14. Security Deposits $ 90,575.72
15. Prepaid Rent (Aslan Cleaners) $ 1,757.50
_____________
TOTAL EXPENSES $6,415,159.28
PURCHASE PRICE LESS EXPENSES: $5,584,840.72
CREDITS:
1. Unpaid June Rents $ 14,062.30
_____________
TOTAL CREDITS $ 14,062.30
PURCHASE PRICE LESS EXPENSES PLUS CREDITS: $5,598,903.02
Page 5
<PAGE>
I HEREBY CERTIFY THE ABOVE TO BE TRUE AND CORRECT:
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
BY: MARINER CAPITAL MANAGEMENT, INC. a Florida Corporation, its
Managing General Partner
BY: LAWRENCE A. RAIMONDI FEDERAL TAX ID NO. 31-1168320
PRESIDENT
(SIGNATURE)
CORPORATE SEAL
(SEAL)
Page 6
