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, 1999
( ) 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 53702-3703
(Address of principal executive offices)
(414) 695-1400
(Issuer's telephone number, including area code)
- - - - - -- - - - - - - - - - - - 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
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . 2
Balance Sheet (unaudited) - September 30, 1999
and December 31, 1998 . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Operations (unaudited) - Three and Nine months
ended September 30, 1999, and 1998. . . . . . . . . . . . . . . . 3
Statement of Cash Flows (unaudited) -
Nine months ended September 30,1999, and 1998 . . . . . . . . . . 4
Statement of Changes in Partners' Equity (unaudited) -
Nine months ended September 30, 1999, and 1998. . . . . . . . . . 5
Notes to Financial Statements (unaudited). . . . . . . . . . . . 6-7
Item 2. Management's Discussion and Analysis or Plan of Operation .8-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . .10
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . .10
Item 3. Defaults Upon Senior Securities .. . . . . . . . . . . . .10
Item 4. Submission of Matters to a Vote of Security Holders . . . .10
Item 5. Other information . . . . . . . . . . . . . . . . . . . .10
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 10 11
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A Wisconsin Limited Partnership)
BALANCE SHEET
(Unaudited)
September 30, December 31,
ASSETS 1999 1998
CURRENT ASSETS
Cash and Cash Equivalent $561,032 $573,699
Other Assets 3,033 7,929
OTHER ASSETS
Investment properties, at cost
Land 516,590 516,59
Buildings and improvements 4,154,507 4,154,507
----------- ----------
4,671,097 4,671,097
Less accumulated depreciation 1,637,096 1,536,009
--------- ---------
3,622,466 3,743,571
========= =========
INTANGIBLE ASSETS:
Debt issue costs, net of accumulated
amortization of $8,155 as of 24,399 26,855
September 30, 1999, and $5,699 as ------ ------
of December 31, 1998.
$3,622,466 $3,743,571
=============================================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued expenses and other liabilities $5,928 $28,579
Tenant security deposits 27,455 26,960
Mortgage notes payable 534,066 539,334
Rent received in advance 19,844 19,666
------- -------
587,293 614,539
PARTNERS' CAPITAL (DEFICIENCY):
General Partners $46,854 $43,802
Limited Partners 2,988,319 3,085,230
(authorized 40,000 interests; --------- ---------
outstanding 20,653.69) 3,035,173 3,129,032
__________ _________
SEE NOTES TO FINANCIAL STATEMENTS. $3,622,466 $3,743,571
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A WISCONSIN LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
THREE MONTH ENDED NINE MONTHS ENDED
SEPTEMBER SEPTEMBER
1999 1998 1999 1998
OPERATING INCOME:
$188,964 $192,801 $551,143 $579,358
OPERATING EXPENSES
Operating 84,809 97,047 278,202 265,498
Administration 27,388 26,200 97,091 90,347
Deprec. and amortization 34,514 34,216 103,543 103,080
Interest 11,594 11,403 34,567 34,415
------ ------ ------- -------
158,305 168,444 513,403 493,340
_______ _______ ________ ________
INCOME(LOSS)FROM OPERATIONS 30,659 23,935 37,740 86,018
______ ______ ______ _______
OTHER INCOME (EXPENSES):
Interest income & other income 7,727 7,338 23,304 43,951
----- ----- ------ ------
NET INCOME (LOSS) $38,386 $31,273 $61,044 $129,969
======= ======= ======= ========
Net Income(Loss)attributable $1,919 $1,564 $3,052 $6,498
to General Partners (5%)
Net Income(Loss)attributable $36,467 $29,709 $57,992 $123,471
to Limited Partners (95%)
Limited Partnership $1.77 $1.44 $2.81 $5.98
Interest outstanding-20,653.69====== ====== ===== =====
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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)
Nine months Ended
September 30,
1999 1998
OPERATING ACTIVITIES
Net income(loss)for the period $61,044 $129,969
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation 101,087 103,080
Amortization of debt issue costs 2,456
Changes in operating assets and liabilities:
Other assets 4,895 (2,121)
Rents received in advance 177 2,636
Accrued expenses and other liabilities (22,650) (23,516)
Tenant security deposits 495 3,915
NET CASH PROVIDED BY OPERATING ACTIVITIES 147,504 213,963
INVESTMENT ACTIVITY:
Addtions to investment property 0 0
FINANCING ACTIVITIES:
Distributions to partners (154,903) (149,730)
Payments on mortgage payable (5,268) (5,111)
_________ _________
NET CASH PROVIDED BY FINANCING ACTIVITIES (160,171) (154,850)
________ _________
INCREASE (DECREASE) IN CASH (12,667) 59,113
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 573,699 490,973
_______ ________
CASH AT END OF PERIOD $561,032 $550,086
======== ========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A WISCONSIN LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' EQUITY
(UNAUDITED)
SEPTEMBER 30, 1999
Limited General
Partners Partners Total
Nine Months Ended September 30, 1999
Partners' Equity, beginning of period $3,085,230 $43,802 $3,129,032
Distributions (154,903) - - (154,903)
Net Income (Loss) 57,992 3,052 61,044
--------- ------ ---------
Partners' Equity, end of period $2,988,319 $46,854 $3,035,173
==================================
Nine Months Ended September 30, 1998
Partners' Equity, beginning of period $3,178,913 $40,580 $3,219,493
Distributions (149,730 - - (149,730)
Net Income (Loss) 123,471 6,498 129,969
---------------------------------
Partners' Equity, end of period $3,152,654 $47,078 $3,199,732
=================================
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A WISCONSIN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1999
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, 1998. 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,
1999, 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., 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. National Realty Management, Inc. (NRMI an affiliate of the general
partners): The Partnership incurred property management fees of $27,995
under an agreement with NRMI for the nine month period ended September
30, 1999.
4. The mortgage note payable is secured by the 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
1999 to 2002 are: $7,009, $7,497, $8,294, $9,029, and $9,828
respectively. Maturities from 2004 and thereafter are $498,121.
5. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A WISCONSIN LIMITED PARTNERSHIP)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
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's average occupancy rate for the nine months ended September 30,
1999, was 100%. Cave Creek Lock-It Lockers' occupancy during the same
period was 91.76% based on net rentable square footage. During the
comparable period in 1998 occupancy rates were 98.21% for Amberwood and
92.20% for Cave Creek Lock-It Lockers. The Competition Study and information
gathered from the Arizona Mini-Storage Association show occupancy rates of
91% to 92% occupied for the Cave Creek Lock-It Lockers area. The market
continues to soften in the Phoenix area due to the over-building of self
storage facilities within 5-mile radius of the property.
Cave Creek rental rates currently range from $10.00 to $165.00 for the third
quarter of 1999. Rental rates for Amberwood's three bedroom apartments are
$750, and $640-$699 for two bedrooms.
INCOME STATEMENT
Nine Months Ended September 30, 1999 and 1998
Net income decreased $68,925 from $129,969 for nine months ended September
1998, to $61,044 for nine months ended September 1999.
The decrease in net income is due to a decrease in operating income of
$28,215, increased operating expenses of $20,063, and a decrease in interest
and other income of $20,646.
The decrease in operating income of $28,215 is due, in part, to increased
vacancies of $12,795 at Cave Creek Lock-It Lockers during 1999 as compared
to 1998. During these periods, occupancy decreased from 92.20% to 91.76%.
Amberwood vacancies increased $2,800, and revenue from furnished apartments
decreased $10,250 due to the fact that more residents are buying homes.
Operating expenses increased $20,063 primarily due to $22,760 for exterior
painting.
The significant decrease in other income was primarily attributable to a
positive settlement of $23,500 in 1998 in favor of the partnership.
Three Months Ended September 30, 1999 and 1998
Net Income increased $7,113 from $31,273 for months ended September 1998 to
$38,386 for three months ended September 1999.
Operating income decreased $3,837 from $192,801 to $188,964due to a decrease
in furnished apartment income at Amberwood.
Operating expenses decreased $12,238 from $97,047 for the quarter ended
September 30, 1998, to $84,809 for the quarter ended September 30, 1999.
Operating expenses decreased due to $5,600 less spent for redi-homes and
$6,400 less spent on personnel than budgeted.
CASH FLOW
Nine Months Ended September 30, 1999 and 1998
Cash decreased $12,667 for the nine months ended September 30, 1999, as
compared to an increase of $59,113 for the nine months ended September 30,
1998. The difference is due to a lower net income and higher distributions
to investors for the nine months ended September 30, 1998, as compared to
the same period in 1999.
The cash balance on September 30, 1999, was $561,032, which is a ratio of
10.5:1 to current liabilities. As noted by this ratio, the partnership has a
strong liquidity position.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 25, 1999, a limited partner who owns interests in four
partnerships, the general partners of which are John Vishnevsky,
National Development and Investment, Inc., and E.C. Corp. (The same
general partners as in this partnership), filed a complaint in the
Waukesha County Circuit Court of the State of Wisconsin on behalf of a
putative class of all of the limited partners in the defendant
partnerships. The complaint was filed against Mr. Vishnevsky, National
Development and Investment, Inc., many partnerships for which those
general partners serve as general partners, and various individuals and
entities who are alleged to exercise control over the partnerships
and/or perform services for the partnerships. The complaint asserts
putative class claims and derivative claims under the Wisconsin Uniform
Limited Partnership Act alleging, among other things, that the general
partners wasted partnership assets and breached their fiduciary duties
to the partnerships and their limited partners by charging excessive
fees and expenses in managing the affairs of the partnerships. In
addition to money damages, the plaintiff is seeking to wind up the
affairs of the partnerships and an accounting of the partnerships to be
supervised by a receiver to be appointed by the court. The case has not
been certified to proceed as a class action. Defendants have filed
motions to dismiss plaintiff's claims; those matters have not been
decided. This partnership, National Real Estate Limited Partnership
Income Properties II, was not named in the complaint. The general
partners representing the limited partnerships named in the complaint
believe the allegations are without merit and are vigorously defending
the lawsuit.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K for the quarter ended September 30,
1999.
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 11, 1999 /S/ John Vishnevsky
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date/S/November 11, 1999 /S/ John Vishnevsky
John Vishnevsky
Chief Financial and Accounting Officer
Date/S/November 11, 1999 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 November 11, 1999 _____________________________
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date November 11, 1999 _______________________________
John Vishnevsky
Chief Financial and Accounting Officer
Date November 11, 1999 ________________________________
Stephen P. Kotecki
President
EC Corp
Corporate General Partner
J:\Wpdocs\REPORTS\10Q-NIP2-3rd qtr.dos
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 561032
<SECURITIES> 0
<RECEIVABLES> 3033
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 564065
<PP&E> 4695496
<DEPRECIATION> 1637096
<TOTAL-ASSETS> 3622466
<CURRENT-LIABILITIES> 53227
<BONDS> 534066
0
0
<COMMON> 0
<OTHER-SE> 3035173<F1>
<TOTAL-LIABILITY-AND-EQUITY> 3622466
<SALES> 574447
<TOTAL-REVENUES> 574447
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 478836
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34567
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 000
<CHANGES> 0
<NET-INCOME> 61044
<EPS-BASIC> 2.81<F2>
<EPS-DILUTED> 0
<FN>
<F1>Refers to General Partners & Limited Partners Capital.
<F2>95% Limited Partners - Interest Outstanding = 20,653.69
</FN>
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