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 March 31, 1998
( ) 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
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Balance Sheet (unaudited) - March 31, 1998
and December 31, 1997. . . . . . . . . . . . . . . . . . . . .2
Statement of Operations (unaudited) - Three months
ended March 31, 1998 and 1997. . . . . . . . . . . . . . . . .3
Statement of Cash Flows (unaudited) -
Three months ended March 31,1998 and 1997. . . . . . . . . . .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
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INCOME PROPERTIES-II
(A Wisconsin Limited Partnership)
Balance Sheet
(Unaudited)
March 31, December 31,
1998 1997
ASSETS
Current Assets:
$ 545611.53 $ 490973
Cash and cash
equivalent
Other assets 3737.86 142
Other Assets:
Investment properties, at cost
Land 516590.13 516590
Buildings and improvements 4151845.85 4151846
4668435.98 4668436
Less accumulated depreciation 1435868.29 1402262
3232567.69 3266174
Intangible Assets:
Debt issue costs, net of accumulated amortization
of $3,283 as of March 31, 1998 and
$2,441 as of December 31, 1997 29296.68 30139
$ 3811214.76 $ 3787428
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accruedexpensesand other $ 1776.45 $ 2869
liabilities
Tenant security deposits 27250 24920
Mortgage notes payable (Note 5) 544362.54 546217
Rent received in advance 18333.18 12339
591722.17 586345
Partners' Capital (Note 3):
General Partners 40580.0315 37336
Limited Partners 3178912.7985 3163747
(authorized----40,000 Interests;
outstanding--20,653.69)
3219492.83 3201083
$ 3811215 $ 3787428
See notes to financial statements.
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROERTIES-II
(A Wisconsin Limited Partnership)
Statement of Operations
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
1998 1997
Income:
OperatingIncome $ 190932 166664
190931.87 166664
Operating expenses:
Operating 81006.85 88613
Administration 28770.1 45945
Depreciation and amortization 34448.82 34253
Interest (Note 6) 11321.11 7090
155546.88 175901
Income (Loss) from operations 35384.99 -9237
Other income (expense):
Interest and other income 29495.64 7314
Net
Income/(Loss) 64881 -19237
Net Income/(Loss) attributable to
GeneralPartners(5%) $ 3244.0315 $ -97.15
Net Income/Loss attributable to
LimitedPartners(95%) $ 61636.5985 $ -1825.85
Per Limited Partnership
Interest outstanding-20,653.69 $ 2.98428990171 $ -0.0884
See notes to financial statements.
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROPERTIES-II
(A Wisconsin Limited Partnership)
Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
1998 1997
Operating Activities:
Netincome $ 64880.63 $ -1923
(loss) forthe period
Adjustments to reconcile net income (loss) to $
net cash used in operating activities: $
Depreciation 33605.89 33748
Amortization of debt issue costs 842.93 505
Changes in operating assets and
liabilities:
Other assets -3596.86 -409
Rents received in advance 5993.18 5449
Accrued expenses and other liabilities -1091.55 -7274
Tenant security deposits 2330 1242
NET CASH PROVIDED BY
OPERATING ACTIVITIES 102964.22 31338
Investment activity:
Additions to investment property 0.019999999553 0
Financing activities:
Distributions to partners -46470.8 -46471
Payments on mortgage payable -1854.46 -7333
NET CASH PROVIDED BY FINANCING
ACTIVITIES -48325.26 -53804
INCREASE (DECREASE) IN CASH 54638.98 -22466
Cash and cash equivalant at beginning of period 490973 442747
$ 545611.98 $ 420281
CASH
AT END
OF
PERIOD
See notes to financial statements.
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A WISCONSIN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
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 presentation. 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, 1997. Refer to the footnotes of those statements for
additional details of the
Partnership's financial condition. The operating results for the period
ended March 31, 1998 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 authorizes 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 March 31, 1998
Partners' Equity, beginning of quarter $3,163,747 $37,336 $3,201,083
Distributions (46,471) - - (46,471)
Net Income (Loss) 61,637 3,244 64,881
Partners' Equity, end of quarter $3,178,913 $40,580 $3,219,493
Quarter Ended March 31, 1997
Partners' Equity, beginning of quarter $3,324,425 $36,009 $3,360,434
Distributions (46,471) - - (46,471)
Net Income (Loss) (1,826) (97) (1,923)
Partners' Equity, end of quarter $3,276,128 $35,912 $3,312,040
4. National Realty Management, Inc. (NRMI): The Partnership incurred
property management fees of
$10,093 under an agreement with NRMI for the three month period ended
March 31, 1998.
5. The mortgage note payable is secured by Amberwood Apartments. The loan
bears interest at a
variable rate of interest (based on five year treasury securities) plus
2.25% adjusting to 2.35% on May
1, 2002. Monthly payments of principal and interest are due based on a
twenty five year amortization
schedule, which also adjusts on May 1, 2002. All unpaid principal and
interest is due on April 1,
2007. Maturities from 1998 to 2002 are: $7,100, $7,700, $8,400, $9,100,
and $9,900 respectively.
Maturities from 2003 and thereafter are $504,000.
6. In 1992, the Partnership purchased 12 units of Amberwood Condominiums
from National Real Estate
Limited Partnershipship is contingently liable
to pay NRELPVI proceeds from a future sale of Amberwood Condominiums as
set forth in a Future
Interest Proceeds Agreement. Upon the future sale of Amberwood
Condominiums, NRELPVI 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, NRELPVI will
receive 60% of the net sales price above $57,500 per unit.
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A WISCONSIN LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1998
The Partnership owns and operates two investment properties: a portion of Cave
Creek Lock-It Lockers,
containing 37,792 of 46,028 net rentable square feet, 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.
Amberwood's occupancy rate for the first quarter of 1998 was 95.83%. Cave
Creek Lock-It Lockers'
occupancy during the same period was 93.28% based on net rentable square
footage. During the comparable
period in 1997 occupancy rates were 80.06% for Amberwood and 94.99% for Cave
Creek Lock-It Lockers.
Amberwood's higher occupancy can be partially attributed to increased
marketing efforts to rent the property
and reduced rental rates.
Partnership net income increased $66,804 from the $1,923 loss for the quarter
ended March 31, 1997, to
$64,881 of net income for the quarter ended March 31, 1998. The increase is
attributed to an increase in
operating income of $24,268, a decrease of operating expenses of $20,354, and
an increase in interest and
other income of $22,182.
The increase of $24,268 in operating income is primarily attributed to the
reduced vacancies at Amberwood
during the first quarter of 1998 as compared to the first quarter of 1997.
During these periods, occupancy
improved from 80.06% to 95.83%.
Operating expenses decreased $20,354 primarily due to reduced administrative
expenses. Specifically, the
timing of audit fees incurred and the reduction of computer related expenses
accounted for the majority of
the reduction.
The significant increase in other income was primarily attributable to a
positive settlement in favor of the
partnership related to the Cave Creek Lock-It Lockers.
Distributions were $2.25 per share, totaling $46,471 for the first quarter of
1998 as compared to $46,471
for the same quarter a year ago. These distributions are required to be
allocated 100% to the Limited
Partners, as outlined in the prospectus.
PART II. OTHER INFORMATION
ITEM 6(B). REPORTS ON FORM 8-K
There were no reports on Form 8-K for the quarter ended March 31, 1998.
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 /May 15, 1998 /S/ John
Vishnevsky
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date /S/May 15, 1998 /S/ John
Vishnevsky
John Vishnevsky
Chief Financial and Accounting Officer
Date /S/May 15, 1998
Stephen P. Kotecki
Stephen P. Kotecki
President
EC Corp
Corporate General Partner
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 May 15, 1998
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date May 15, 1998
John Vishnevsky
Chief Financial and Accounting Officer
Date May 15, 1998
Stephen P. Kotecki
President
EC Corp
Corporate General Partner
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 549,350
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 549,350
<PP&E> 4,668,436
<DEPRECIATION> 1,435,868
<TOTAL-ASSETS> 3,811,215
<CURRENT-LIABILITIES> 591,722
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<OTHER-SE> 3,219,493<F1><F3>
<TOTAL-LIABILITY-AND-EQUITY> 3,811,215
<SALES> 0
<TOTAL-REVENUES> 190,932
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 144,226
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,321
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,385
<EPS-PRIMARY> 2.98<F2><F4>
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<F1>Refers to general partners and limited partners capital.
<F2>95% limited partners - interest outstanding.
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