U. S. Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission File Number: 01-16874
National Real Estate Limited Partnership Income
Properties II(Exact name of small business issuer as specified in its charter)
Wisconsin 39-1553195
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1155 Quail Court, Pewaukee, Wisconsin 53072-3703
(Address of principal executive offices)
(414) 695-1400
(Issuer's telephone number)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - N/A - - - - -
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Sections
13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
<PAGE>
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
INDEX
Page
PART I. FINANCIAL INFORMATION
Balance Sheet (unaudited) - September 30, 1997
and December 31, 1996. . . . . . . . . . . . . . . . . . . .2
Statement of Operations (unaudited) - Three and nine months
ended September 30, 1997 and 1996. . . . . . . . . . . . . .3
Statement of Cash Flows (unaudited) -
Nine months ended September 30,1997 and 1996 . . . . . . . .4
Notes to Financial Statements (unaudited) . . . . . . . . . . .5-6
Management's Discussion and Analysis of
Financial Condition and Results of Operation . . . . . . . .7
PART II. OTHER INFORMATION AND SIGNATURES. . . . . . . . . . . . . .8-9
<PAGE>
NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROPERTIES-II
(A Wisconsin Limited Partnership)
Balance Sheet
(Unaudited)
September 30, December 31,
1997 1996
ASSETS
Current Assets:
Cash $ 460,491 $ 442,747
Escrow and other deposits (Note 5) 12,157 0
Accounts receivable and other assets 3,682 5,600
Other Assets:
Investment properties, at cost
Land 516,590 516,590
Buildings and improvements 4,151,846 4,151,846
4,668,436 4,668,436
Less accumulated depreciation 1,369,035 1,267,441
3,299,401 3,400,995
Intangible Assets:
Debt issue costs, net of accumulated amortization
of $1606 as of September 30, 1997 and
$9760 as of December 31, 1996 30,946 337
$ 3,806,676 $ 3,849,679
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses and other liabilities $ 26,019 $ 5,128
Tenant security deposits 28,450 22,380
Mortgage notes payable (Note 6) 547,253 448,021
Rent received in advance 17,508 13,716
619,231 489,245
Partners' Capital (Note 3):
General Partners (deficit) 34,331 36,009
Limited Partners
(authorized----40,000 Interests; 3,153,114 3,324,425
outstanding--20,653.69)
3,187,445 3,360,434
$ 3,806,676 $ 3,849,679
See notes to financial statements.
<PAGE>
NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROERTIES-II
(A Wisconsin Limited Partnership)
Statement of Operations
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
1997 1996 1997 1996
Income:
Operating Income $ 198,376 $ 175,431 $ 546,081 $
531,991 347,705
198,376 175,431 546,081 531,991
347,705
Operating expenses:
Operating 136,884 86,398 356,409 260,525
219,525
Administration 27,793 29,731 107,010 97,503
79,217
Depreciation and amortization 34,907 35,808 103,537
107,423 68,630
Interest (Note 6) 11,516 12,273 31,148 36,769
19,632
211,099 164,210 598,103 502,220
387,004
Income (Loss) from operations (12,723) 11,221 (52,023)
29,771 (39,298)
Other income (expense):
Interest and other income 4,705 7,980 18,445 20,416
13,740
Net Income/(Loss) $ (8,019) $ 19,201 (33,578)
50,186 (25,559)
Net Income/(Loss) attributable to
General Partners (5%) $ (401) $ 960 (1,679) 2,509
(1,278)
Net Income/Loss attributable to
Limited Partners (95%) $ (7,617) $ 18,241 (31,899)
47,676 (24,281)
Per Limited Partnership
Interest outstanding-20,653.69 $ (0.37) $ 0.88 (1.54) 2.31
(1.81)
See notes to financial statements.
<PAGE>
NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROPERTIES-II
(A Wisconsin Limited Partnership)
Statement of Cash Flows
(Unaudited)
Nine months ended
September 30, 1997
1997 1996
Operating Activities:
Net income (loss) for the period $ (33,578) $ 50,186
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 101,594 105,908
Amortization of debt issue costs 1,943 1,515
Gain on retirement of personal property 0 0
Changes in operating assets and
liabilities:
Escrow deposits and other assets (10,238) (7,418)
Rents received in advance 3,792 6,140
Accrued expenses and other liabilities 20,891 (15,971)
Tenant security deposits 6,070 390
Accrued real estate taxes 0 0
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 90,474 140,750
Investment activity:
Additions to investment property 0 (1,786)
Financing activities:
Distributions to partners (139,412) (139,412)
Proceeds from mortgage note payable 109,313 0
Payments on mortgage payable (10,080) (32,312)
Debt Issue Costs (32,552) 0
NET CASH PROVIDED BY FINANCING
ACTIVITIES (72,731) (171,725)
INCREASE (DECREASE) IN CASH 17,744 (32,760)
Cash at beginning of period 442,747 478,326
CASH AT END OF PERIOD $ 460,491 $ 445,566
See notes to financial statements.
<PAGE>
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A Wisconsin Limited Partnership)
Notes to Financial Statements
(Unaudited)
September 30, 1997
1. In the opinion of the General Partners, the accompanying unaudited
financial statements contain all adjustments (consisting of normal recurring
accruals) which are necessary for a fair representation. The statements,
which do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements,
should be read in conjunction with the National Real Estate Limited
Partnership Income Properties-II annual report for the year ended December
31, 1996. Refer to the footnotes of those statements for additional details
of the Partnership's financial condition. The operating results for the
period ended September 30, 1997 may not be indicative of the operating
results for the entire year.
2. National Real Estate Limited Partnership Income Properties-II (the
"Partnership") was organized under the Wisconsin Uniform Limited Partnership
Act pursuant to a Certificate of Limited Partnership dated June 5, 1986, to
acquire primarily existing commercial and residential real properties and
hotels. John Vishnevsky and National Development and Investment, Inc., have
contributed the sum of $1,000 to the Partnership as General Partners. The
Limited Partnership Agreement had authorized the issuance of 40,000 Limited
Partnership Interests (the "Interests") at $250 per Interest with the
offering period running from August 18, 1986 through August 18, 1988. On
August 18, 1988, the Partnership concluded its offering and capital
contributions totaled $5,163,031 for 20,653.69 Limited Partnership Interests.
Pursuant to the Escrow Agreement with the First Wisconsin Trust Company,
Milwaukee, Wisconsin, until the minimum number of Interests (4,850) and
investors (100) were subscribed, payments were impounded in a special
interest-bearing escrow account. On February 2, 1987, the Partnership
received the required minimum capital contributions and $1,332,470,
representing 5,329.88 Interests, was released to the Partnership.
3. Changes in Partners' Equity:
Limited General
Partners Partners Total
Quarter Ended September 30, 1997
Partners' Equity, beginning of quarter $3,207,203 $34,732 $3,241,935
Distributions (46,471) - - (46,471)
Net Income (Loss) 32,905 1,732 34,637
Partners' Equity, end of quarter $3,193,637 $36,464 $3,230,101
Quarter Ended September 30, 1996
Partners' Equity, beginning of quarter $3,476,549 $23,634 $3,500,183
Distributions (30,981) - - (30,981)
Net Income (Loss) 32,274 1,699 33,973
Partners' Equity, end of quarter $3,477,842 $25,333 $3,503,175
4. National Realty Management, Inc. (NRMI): The Partnership incurred
property management fees of $29,995 under an agreement with NRMI for the
nine month period ended September 30, 1997.
5. The mortgage note payable is secured by Amberwood Apartments. The loan
of $550,000 originated on April 16, 1997, and has a 10 year maturity with
payments based on a 25 year amortization. The loan has an interest rate of
8.4%, fixed for the first five years, then adjustable to a new fixed rate for
the remaining five years. Maturities of the mortgages for 1997 and 1998 are
$452,463 and $7,145, respectively.
6. In 1992, the Partnership purchased 12 units of Amberwood Condominiums
from National Real Estate Limited Partnership VI (NRELP VI), an affiliated
partnership. The Partnership is contingently liable to pay NRELP VI proceeds
from a future sale of Amberwood Condominiums as set forth in a Future
Interest Proceeds Agreement. Upon the future sale of Amberwood Condominiums,
NRELP VI is entitled to receive 50% of the net sales price above $57,500 per
unit (reduced by normal selling costs) until the Partnership earns a
cumulative return of 20% on its investment. After that, NRELP VI will receive
60% of the net sales price above $57,500 per unit.
<PAGE>
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A Wisconsin Limited Partnership)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
September 30, 1997
The Partnership owns and operates two investment properties: a portion of
Cave Creek Lock-It Lockers,located in Phoenix, Arizona, and the Amberwood
Apartments, a 56-unit apartment complex in Holland, Michigan.
National Real Estate Limited Partnership Income Properties ("NRELP-IP") owns
the remaining portion of Cave Creek Lock-It Lockers. NRELP-IP is a Wisconsin
limited partnership, affiliated with the General Partners.
Amberwood is located in a wooded setting and is conveniently located near
shopping, bike paths and businesses, and offers superior amenities, such as
fireplaces and attached garages.
Amberwood's occupancy rate for the third quarter of 1997 was 97.71%. Cave
Creek Lock-It Lockers' occupancy during the same period was 94.63% based on
net rentable square footage. During the comparable period in 1996 occupancy
rates were 80.14% for Amberwood and 94.51% for Cave Creek Lock-It Lockers.
Amberwood's lower occupancy during the first and second quarters can be
partially attributed to increased competition from new townhouses built in
the area. These new units are in direct competition to Amberwood's three
bedroom units. To remain competitive, the rental rate for three bedroom units
was lowered about $50.
Total operating revenues for Cave Creek Lock-It Lockers in 1997 are in line
with the comparable period of 1996. Total operating revenue year to date for
Amberwood Apartments decreased due to higher vacancies. Operating expenses
have increased over 1996 due to increased personnel and advertising expense
at Amberwood Apartments. Interest expense remained in line with 1996.
The distributions have remained $2.25 per share per quarter and totaled
$46,470.80 for the second quarter. These distributions are required to be
allocated 100% to the Limited Partners, as outlined in the prospectus.
<PAGE>
PART II. OTHER INFORMATION
Item 6(b). Reports on Form 8-K
There were no reports on Form 8-K for the quarter ended September 30, 1997.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Real Estate Limited Partnership
Income Properties-II
(Registrant)
Date /November 13, 1997 /S/ John Vishnevsky
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date /S/November 13, 1997 /S/ John Vishnevsky
John Vishnevsky
Chief Financial and Accounting Officer
Date /S/November 13, 1997 Stephen P. Kotecki
Stephen P. Kotecki
President
EC Corp
Corporate General Partner
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Real Estate Limited Partnership
Income Properties II
(Registrant)
Date November 13, 1997
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and
Investment, Inc.
Corporate General Partner
Date November 13, 1997
John Vishnevsky
Chief Financial and Accounting
Officer
Date November 13, 1997
Stephen P. Kotecki
President
EC Corp
Corporate General Partner
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