FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1995 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 0-16862
CAPITAL SOURCE II L.P.-A
(Exact name of registrant as specified in its charter)
Delaware 38-2684691
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
CAPITAL SOURCE II L.P.-A
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1995
(Unaudited) Dec. 31, 1994
--------------- ---------------
<S> <C> <C>
Assets
Investment in real estate:
Land $ 2,800,750 $ 2,800,750
Buildings 22,960,171 22,960,171
Personal property 1,395,325 1,394,617
--------------- ---------------
27,156,246 27,155,538
Less accumulated depreciation (4,661,936) (4,285,544)
--------------- ---------------
Net investment in real estate 22,494,310 22,869,994
Cash and temporary cash investments, at cost
which approximates market value (Note 5) 704,929 3,588,037
Escrow deposits and property reserves 1,121,591 815,583
Investment in U.S. government securities (Note 5) 2,489,850 -
Investment in mortgage-backed securities (Note 5) 1,861,108 1,899,268
Interest and other receivables 53,456 31,962
Deferred mortgage issuance costs 1,867,353 1,923,094
Other assets 120,225 134,881
--------------- ---------------
$ 30,712,822 $ 31,262,819
=============== ===============
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued expenses $ 1,035,934 $ 733,089
Distribution payable (Note 3) 546,968 546,968
Due to general partners and their affiliates (Note 4) 1,076,933 1,194,915
--------------- ---------------
2,659,835 2,474,972
--------------- ---------------
Minority interest 207,696 209,288
--------------- ---------------
Partners' Capital (Deficit)
General Partners (288,677) (280,672)
Limited Partners ($7.01 per BAC in 1995 and $7.19 in 1994) 28,133,968 28,859,231
--------------- ---------------
27,845,291 28,578,559
--------------- ---------------
$ 30,712,822 $ 31,262,819
=============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
CAPITAL SOURCE II L.P.-A
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the For the Six For the Six
Quarter Ended Quarter Ended Months Ended Months Ended
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Income
Rental income $ 1,120,453 $ 1,069,592 $ 2,211,366 $ 2,163,929
Interest income on temporary cash investments and
U.S. government securities 51,868 46,723 101,466 95,970
Mortgage-backed securities income 35,406 4,540 71,385 4,540
Other income 34,896 65,191 60,870 77,452
-------------- -------------- -------------- --------------
1,242,623 1,186,046 2,445,087 2,341,891
-------------- -------------- -------------- --------------
Expenses
Real estate operating expenses 466,943 434,574 943,828 912,315
Depreciation 188,196 208,857 376,392 418,259
Property development and management fees (Note 4) 8,174 12,158 17,565 25,229
General and administrative expenses (Note 4)
Investor servicing 47,315 55,347 94,733 107,159
Professional fees 11,475 14,250 23,850 29,600
Other expenses 1,992 1,198 4,300 3,451
Asset management and partnership
administration fee (Note 4) 41,500 41,500 83,000 83,000
Amortization 31,370 28,029 62,574 56,291
-------------- -------------- -------------- --------------
796,965 795,913 1,606,242 1,635,304
-------------- -------------- -------------- --------------
Minority interest in losses of
operating partnerships 842 1,305 1,592 2,158
-------------- -------------- -------------- --------------
Net income $ 446,500 $ 391,438 $ 840,437 $ 708,745
============== ============== ============== ==============
Net income allocated to:
General Partners $ 4,465 $ 3,914 $ 8,404 $ 7,087
Limited Partners 442,035 387,524 832,033 701,658
-------------- -------------- -------------- --------------
$ 446,500 $ 391,438 $ 840,437 $ 708,745
============== ============== ============== ==============
Net income per BAC $ .1102 $ .0966 $ .2074 $ .1749
============== ============== ============== ==============
</TABLE>
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1994 $ (280,672) $ 28,859,231 $ 28,578,559
Net income 8,404 832,033 840,437
Cash distributions paid or accrued (Note 3) (16,409) (1,624,495) (1,640,904)
Net unrealized holding gains (Note 5) - 67,199 67,199
--------------- --------------- ---------------
Balance at June 30, 1995 $ (288,677) $ 28,133,968 $ 27,845,291
=============== =============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
CAPITAL SOURCE II L.P.-A
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1995 June 30, 1994
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 840,437 $ 708,745
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization 438,966 474,550
Amortization of discount on government securities (8,659) -
Property development and management fees 17,565 25,229
Minority interest in losses of operating partnerships (1,592) (2,158)
Increase in interest and other receivables (21,494) (4,499)
Increase in escrow deposits and property reserves (306,008) (91,020)
Decrease in other assets 7,823 69,687
Increase in accounts payable and accrued expenses 302,845 184,556
Decrease in due to operating partnerships'
general partners and their affiliates (135,547) (477,151)
--------------- ---------------
Net cash provided by operating activities 1,134,336 887,939
--------------- ---------------
Cash flows from investing activities
Acquisition of U.S. government securities (2,468,945) (1,959,280)
Principal payments on mortgage-backed securities 93,113 -
Acquisition of buildings and construction in progress - (8,311)
Acquisition of personal property (708) (42,677)
--------------- ---------------
Net cash used in investing activities (2,376,540) (2,010,268)
--------------- ---------------
Cash flow used in financing activity
Distributions (1,640,904) (1,643,638)
--------------- ---------------
Net decrease in cash and temporary cash investments (2,883,108) (2,765,967)
Cash and temporary cash investments at beginning of period 3,588,037 6,630,819
--------------- ---------------
Cash and temporary cash investments at end of period $ 704,929 $ 3,864,852
=============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
1. ORGANIZATION
Capital Source II L.P.-A (the Partnership) was formed on August 22, 1986,
under the Delaware Uniform Limited Partnership Act. The General Partners of
the Partnership are Insured Mortgage Equities II L.P. and America First
Capital Source II, L.L.C. (the General Partners).
The Partnership provided virtually 100% of the debt and equity financing for
five multifamily rental housing properties. The Partnership's investment in
the properties consisted of: (i) approximately 85% in the form of permanent
mortgages and/or loans to fund construction, and (ii) the balance to purchase
up to a 99% limited partnership interest in the operating partnerships which
developed, own and operate the properties. Each loan is insured or
guaranteed, in an amount substantially equal to the face amount of the
mortgage, by the Federal Housing Administration (FHA) or the Government
National Mortgage Association (GNMA). CS Properties II, Inc. which is owned by
affiliates of the General Partners, serves as the Special Limited Partner for
the operating partnerships. The Special Limited Partner has the power, among
other things, to remove the general partners of the operating partnerships
under certain circumstances and to consent to the sale of the operating
partnerships' assets. The General Partners have negotiated agreements with
each operating partnership's general partner whereby the operating
partnership's general partner guarantees to fund certain operating deficits of
that operating partnership.
The Partnership will terminate subsequent to the sale of all properties but in
no event will the Partnership continue beyond December 31, 2035.
2. Summary of Significant Accounting Policies
A)Financial Statement Presentation
The consolidated financial statements include the accounts of the
Partnership and four subsidiary operating partnerships. The Partnership
is a limited partner with an ownership interest in three of the subsidiary
operating partnerships of up to 99%. The Partnership's ownership interest
in The Ponds at Georgetown L.P. is 68.70%. The remaining limited partner
interest of 30.29% is owned by Capital Source L.P., an affiliate of the
General Partners. All significant intercompany accounts and transactions
have been eliminated in consolidation.
The consolidated financial statements are prepared without audit on the
accrual basis of accounting in accordance with generally accepted accounting
principles. In the opinion of management, all normal and recurring
adjustments necessary to present fairly the financial position at June 30,
1995, and results of operations for all periods presented have been made.
B)Investments in U.S. Government Securities and Mortgage-Backed Securities
Investments in U.S. government securities and mortgage-backed securities are
categorized as held-to-maturity or available-for-sale. Investments in the
held-to-maturity category are carried at amortized cost. Investments in the
available-for-sale category are carried at fair value with unrealized gains
and losses as a separate component of partners' capital.
C)Depreciation and Amortization
Depreciation of real estate is based on the estimated useful life of the
properties using the straight-line method. Deferred mortgage issuance and
organization costs are being amortized over their respective periods of
benefit.
D)Income Taxes
No provision has been made for income taxes since BAC Holders are required
to report their share of the Partnership's income for federal and state
income tax purposes.
E)Temporary Cash Investments
Temporary cash investments are invested in short-term debt securities
purchased with original maturities of three months or less.
<PAGE>
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
F)Net Income per Beneficial Assignment Certificate (BAC)
Net income per BAC was calculated based on the number of BACs outstanding
(4,011,101) for all periods presented.
G)Reclassifications
Certain amounts in the 1994 consolidated financial statements have been
reclassified to conform with the 1995 presentation.
3. Partnership Income, Expenses and Cash Distributions
Profits and losses from normal operations and cash available for distribution
will be allocated 99% to the investors and 1% to the General Partners.
Certain fees payable to the General Partners will not become due until
investors have received certain priority returns. Cash distributions included
in the consolidated financial statements represent the actual cash
distributions made during each period and the cash distributions accrued at
the end of each period.
The General Partners will receive 1% of the net proceeds from any sale of
Partnership assets. The General Partners will receive a termination fee equal
to 3% of all sales proceeds less actual costs incurred in connection with all
sales transactions, payable only after the investors have received a return of
their capital contributions and an 11.5% annual return on a cumulative basis.
The General Partners will also receive a fee equal to 9.1% of all cash
available for distribution and sales proceeds (after deducting from cash
available or sales proceeds any termination fee paid therefrom) after
investors have received a return of their capital contributions and an 11.5%
annual return on a cumulative basis.
4. Transactions with Related Parties
The General Partners, certain of their affiliates and the operating
partnerships' general partners have received or may receive fees,
compensation, income, distributions and payments from the Partnership in
connection with the offering and the investment, management and sale of the
Partnership's assets (other than disclosed elsewhere) as follows.
The operating partnerships' general partners provide various on-site property
development and management services. Property development and management fees
amounted to $17,565 in 1995 ($8,174 for the quarter ended June 30, 1995).
Unpaid fees which are non-interest bearing are included in amounts due to
operating partnerships' general partners and their affiliates on the
accompanying consolidated balance sheets and will be paid as the operating
partnerships reach specified performance standards, or upon sale of the
related property.
The General Partners are entitled to receive an asset management and
partnership administrative fee equal to 0.5% of invested assets per annum, the
first $50,000 of which will be paid each year with the balance payable only
during such years that a 6.5% annual return has been paid to investors on a
noncumulative basis. An additional fee equal to 0.5% of invested assets per
annum will be payable only during those years that an 11.5% annual return has
been paid to investors on a noncumulative basis. Any unpaid amounts will
accrue and be payable only after an 11.5% annual return to investors has been
paid on a cumulative basis and the investors have received the return of their
capital contributions. Accrued asset management and partnership
administration fees totalled $83,000 during 1995 ($41,500 for the quarter
ended June 30, 1995).
Substantially all of the Partnership's general and administrative expenses are
paid by a General Partner or an affiliate and reimbursed by the Partnership.
The amount of such expenses reimbursed to the General Partner during 1995 was
$143,738 ($57,737 for the quarter ended June 30, 1995). The reimbursed
expenses are presented on a cash basis and do not reflect accruals made at
quarter end.
<PAGE>
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
5. PARTNERSHIP RESERVE ACCOUNT
The Partnership maintains a reserve account which consisted of the following
at June 30, 1995.
<TABLE>
<S> <C>
Cash and temporary cash investments $ 36,828
Intercompany payable (91,765)
U.S. government securities 2,489,850
GNMA Certificates 1,861,108
--------------
Balance at June 30, 1995 $ 4,296,021
==============
</TABLE>
The reserve account was established to maintain working capital for the
Partnership and is available to supplement distributions to investors or for
other contingencies related to the ownership of investments and the operation
of the Partnership. The U.S. government securities mature in 1996 and the
GNMA Certificates mature between 2008 and 2009. During the quarter ended June
30, 1995, the Partnership transferred all securities held in the reserve
account from the held-to-maturity classification to the available-for-sale
classification. The total amortized cost, gross unrealized holding gains and
aggregate fair value are $4,283,759, $67,199 and $4,350,958, respectively.
6. Parent Company Only Financial Information
Generally accepted accounting principles require that the Partnership's
financial statements consolidate the operating partnerships since the
Partnership holds a majority ownership interest and, through CS Properties II,
Inc., it can influence decisions of the general partners in certain
circumstances. Presented below is condensed financial information of the
Partnership using the equity method of accounting for the investment in
operating partnerships, rather than the consolidation of those partnerships.
Under the equity method of accounting, the Partnership's capital contributions
are adjusted to reflect its share of operating partnership profits or losses
and distributions.
<PAGE>
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
Parent Company Only
Condensed Balance Sheets
<TABLE>
<CAPTION>
June 30, 1995 Dec. 31, 1994
--------------- ---------------
<S> <C> <C>
Assets
Cash and temporary cash investments $ 704,929 $ 3,588,037
Investment in U.S. government securities 2,489,850 -
Investment in FHA Loan 6,607,903 6,619,989
Investment in GNMA Certificates 22,720,257 22,799,369
Investment in operating partnerships (4,543,554) (4,229,575)
Interest receivable 249,971 231,156
Other assets 321,705 350,770
--------------- ---------------
$ 28,551,061 $ 29,359,746
=============== ===============
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 158,802 $ 234,219
Distribution payable 546,968 546,968
--------------- ---------------
705,770 781,187
--------------- ---------------
Partners' Capital 27,845,291 28,578,559
--------------- ---------------
$ 28,551,061 $ 29,359,746
=============== ===============
</TABLE>
The FHA Loan and GNMA Certificates are collateralized by first mortgage loans
on the properties owned by the operating partnerships and are guaranteed or
insured as to principal and interest by FHA and GNMA, respectively. The FHA
insured mortgage loan is subject to a 1% assignment fee. The obligations of
FHA and GNMA are backed by the full faith and credit of the United States
government. The investment in operating partnerships represents the
Partnership's limited partnership interest in the deficits of those operating
partnerships. Since the Partnership is not a general partner, it is not
obligated to fund the negative balances.
If a mortgage loan goes into default and is foreclosed upon by FHA or GNMA,
the related FHA Loan or GNMA Certificate may be repaid by FHA or GNMA, and the
Partnership's investment in the operating partnership will be eliminated,
resulting in the recognition of a gain on the Partnership's financial
statements. If the investments in all operating partnerships were eliminated
at June 30, 1995, Partnership capital would increase by $4,543,554 ($1.1214
per BAC).
<PAGE>
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
Parent Company Only
Condensed Statements of Income
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1995 June 30, 1994
--------------- ---------------
<S> <C> <C>
Income
Mortgage and mortgage-backed securities income $ 1,292,027 $ 1,234,241
Interest income on temporary cash investments
and U.S. government securities 97,260 92,847
Equity in losses of operating partnerships (313,979) (364,945)
Other income 2,200 1,000
--------------- ---------------
1,077,508 963,143
Expenses
Operating and administrative 237,071 254,398
--------------- ---------------
Net income $ 840,437 $ 708,745
=============== ===============
</TABLE>
Parent Company Only
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1995 June 30, 1994
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 840,437 $ 708,745
Adjustments to reconcile net income to net cash
from operating activities
Equity in losses of operating partnerships 313,979 364,945
Amortization 31,188 31,188
Other non-cash adjustments (105,014) (106,565)
--------------- ---------------
Net cash provided by operating activities 1,080,590 998,313
--------------- ---------------
Cash flows from investing activities
FHA Loan and GNMA Certificate principal payments 53,038 48,444
U.S. government securities principal payments 93,113 -
Acquisition of U.S. government securities (2,468,945) (1,959,280)
Investment in operating partnerships - (209,806)
--------------- ---------------
Net cash used in investing activities (2,322,794) (2,120,642)
--------------- ---------------
Cash flow used in financing activity
Distributions (1,640,904) (1,643,638)
--------------- ---------------
Net decrease in cash and temporary cash investments (2,883,108) (2,765,967)
Cash and temporary cash investments at beginning of period 3,588,037 6,630,819
--------------- ---------------
Cash and temporary cash investments at end of period $ 704,929 $ 3,864,852
=============== ===============
</TABLE>
<PAGE>
Item 2.
CAPITAL SOURCE II L.P.-A
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
The Partnership originally acquired: (i) four mortgage-backed securities
guaranteed as to principal and interest by the Government National Mortgage
Association (GNMA) collateralized by first mortgage loans on multifamily
housing properties located in three states; (ii) a first mortgage loan insured
as to principal and interest by the Federal Housing Administration (FHA) on a
multifamily housing property; and (iii) Partnership Equity Investments in five
limited partnerships which own the multifamily properties financed by the GNMA
Certificates and the FHA Loan. During 1992, the deed to one of the properties
was turned over to GNMA in lieu of foreclosure, thus eliminating the
Partnership's equity interest. In March 1993, the remaining 85% investment in
the GNMA Certificate related to this property was paid in full. Collectively,
the remaining GNMA Certificates, the FHA Loan, and the Partnership Equity
Investments are referred to as the Permanent Investments. The obligations of
GNMA and FHA are backed by the full faith and credit of the United States
government.
The FHA Loan, GNMA Certificates, U.S. government securities and Partnership
Equity Investments in operating partnerships represent the Partnership's
principal assets as shown in the Parent Company Only Financial Information in
Note 6 to the financial statements. The parent company information is
presented using the equity method of accounting for the investment in
operating partnerships. Generally accepted accounting principles, however,
require that the Partnership's financial statements consolidate the operating
partnerships, since (i) the Partnership holds a majority ownership interest,
and (ii) through CS Properties II, Inc., it can influence decisions of the
general partners in certain circumstances.
The following FHA Loan, GNMA Certificates and U.S. government securities were
owned by the Partnership at June 30, 1995. Interest income from the FHA Loan,
GNMA Certificates and U.S. government securities is the primary source of
cash available for distribution to investors.
<TABLE>
<CAPTION>
Guaranteed Interest Maturity Carrying
Property Name or Insured by Rate Date Value
- - ----------------------------------- --------------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Crane's Landing GNMA 8.75% 12-15-2030 $ 10,341,694
Delta Crossing FHA 9.10% 10-01-2030 6,607,903
Monticello Apartments GNMA 8.75% 11-15-2029 5,393,308
The Ponds at Georgetown GNMA 9.00% 12-15-2029 5,124,147
Pools of single-family properties GNMA 7.58% (1) 2008 to 2009 1,861,108
U.S. government securities U.S. government 6.41% (1) 03-31-1996 2,489,850
-----------
$ 31,818,010
===========
(1)Represents yield to the Partnership.
</TABLE>
<PAGE>
CAPITAL SOURCE II L.P.-A
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
DISTRIBUTIONS
Cash distributions paid or accrued per BAC were as follows:
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1995 June 30, 1994
-------------- --------------
<S> <C> <C>
Regular monthly distributions
Income $ .2074 $ .1749
Return of capital .1976 .2301
-------------- --------------
$ .4050 $ .4050
============== ==============
Distributions
Paid out of cash flow $ .3287 $ .2847
Paid out of reserves .0763 .1203
-------------- --------------
$ .4050 $ .4050
============== ==============
</TABLE>
Regular monthly distributions to BAC Holders consist primarily of interest
received on the FHA Loan, GNMA Certificates and U.S. government securities.
Additional cash for distributions is received from other investments. The
Partnership may draw on reserves to pay operating expenses or to supplement
cash distributions to investors. The Partnership is permitted to replenish
reserves with cash flows in excess of distributions paid. For the quarter
ended June 30, 1995, $309,149 was withdrawn from reserves to supplement
regular monthly cash distributions. The total amount held in reserves at
June 30, 1995, was $4,296,021 of which $4,350,958 was invested in GNMA
Certificates and U.S. government securities.
Asset Quality
The FHA Loan and GNMA Certificates owned by the Partnership are guaranteed as
to principal and interest by FHA and GNMA, respectively. The obligations of
FHA, GNMA and the government securities are backed by the full faith and
credit of the United States government. The Partnership Equity Investments,
however, are not insured or guaranteed. The value of these investments is a
function of the value of the real estate owned by the limited partnerships
which own the properties financed by the FHA Loan and GNMA Certificates.
The overall status of the Partnership's investments has remained relatively
constant since March 31, 1995.
The following table shows the occupancy levels of the properties financed by
the Partnership as of June 30, 1995:
<TABLE>
<CAPTION>
Number Percentage
Number of Units of Units
Property Name Location of Units Occupied Occupied
- - ------------------------------------- ------------------ --------- ---------- -----------
<S> <C> <C> <C> <C>
Crane's Landing Winter Park, FL 252 219 87%
Delta Crossing Charlotte, NC 178 167 94%
Monticello Apartments Southfield, MI 106 104 98%
The Ponds at Georgetown Ann Arbor, MI 134 120 90%
--------- ---------- -----------
670 610 91%
========= ========== ===========
</TABLE>
<PAGE>
CAPITAL SOURCE II L.P.-A
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The table below compares the results of operations for each period shown.
<TABLE>
<CAPTION>
For the For the Increase
Quarter Ended Quarter Ended (Decrease)
June 30, 1995 June 30, 1994 From 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Rental income $ 1,120,453 $ 1,069,592 $ 50,861
Interest income on temporary cash investments
and U.S. government securities 51,868 46,723 5,145
Mortgage-backed securities income 35,406 4,540 30,866
Other income 34,896 65,191 (30,295)
--------------- --------------- ---------------
1,242,623 1,186,046 56,577
--------------- --------------- ---------------
Real estate operating expenses 466,943 434,574 32,369
Depreciation 188,196 208,857 (20,661)
Property development and management fees 8,174 12,158 (3,984)
Investor servicing 47,315 55,347 (8,032)
Professional fees 11,475 14,250 (2,775)
Other expenses 1,992 1,198 794
Asset management and partnership administration fees 41,500 41,500 -
Amortization 31,370 28,029 3,341
--------------- --------------- ---------------
796,965 795,913 1,052
--------------- --------------- ---------------
Minority interest in losses of operating partnerships 842 1,305 (463)
--------------- --------------- ---------------
Net income $ 446,500 $ 391,438 $ 55,062
=============== =============== ===============
<CAPTION>
For the Six For the Six Increase
Months Ended Months Ended (Decrease)
June 30, 1995 June 30, 1994 From 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Rental income $ 2,211,366 $ 2,163,929 $ 47,437
Interest income on temporary cash investments
and U.S. government securities 101,466 95,970 5,496
Mortgage-backed securities income 71,385 4,540 66,845
Other income 60,870 77,452 (16,582)
--------------- --------------- ---------------
2,445,087 2,341,891 103,196
--------------- --------------- ---------------
Real estate operating expenses 943,828 912,315 31,513
Depreciation 376,392 418,259 (41,867)
Property development and management fees 17,565 25,229 (7,664)
Investor servicing 94,733 107,159 (12,426)
Professional fees 23,850 29,600 (5,750)
Other expenses 4,300 3,451 849
Asset management and partnership administration fees 83,000 83,000 -
Amortization 62,574 56,291 6,283
--------------- --------------- ---------------
1,606,242 1,635,304 (29,062)
--------------- --------------- ---------------
Minority interest in losses of operating partnerships 1,592 2,158 (566)
--------------- --------------- ---------------
Net income $ 840,437 $ 708,745 $ 131,692
=============== =============== ===============
</TABLE>
<PAGE>
CAPITAL SOURCE II L.P.-A
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Rental income, net of real estate operating expenses, depreciation and
amortization increased $35,812 and $51,508 for the quarter and six months
ended June 30, 1995, respectively, compared to the same periods in 1994. The
increases were due to higher rental income primarily due to an increase in
rental rates in certain markets and a decrease in depreciation due to certain
personal property becoming fully depreciated. The increase in rental income
and decrease in depreciation expense during these periods were partially
offset by higher real estate operating expenses which were primarily
attributable to an increase in property taxes and overall expense increases.
Mortgage-backed securities income increased for the quarter and six months
ended June 30, 1995, compared to the same periods in 1994, due to the
acquisition of mortgage-backed securities during the second quarter of 1994.
Other income consists of income such as garage rentals, washer/dryer and
vending income earned by the properties. Other income decreased for the
quarter and six months ended June 30, 1995, compared to the same periods in
1994, due to a decrease in such income.
Property development and management fees, investor servicing expenses and
professional fees decreased by $13,997 and $24,991 for the quarter and six
months ended June 30, 1995, compared to the same period in 1994, due to overall
expense decreases.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Form 8-K
The registrant did not file a report on Form 8-K during the
quarter for which this report is filed.
<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.
Dated: August 11, 1995 CAPITAL SOURCE II L.P.-A
By America First Capital
Source II, L.L.C., General
Partner
By /s/ Michael Thesing
Michael Thesing
Vice President, Secretary and
Treasurer (Principal Financial
Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
CONSOLIDATED STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 704,929
<SECURITIES> 4,350,958
<RECEIVABLES> 53,456
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,230,934
<PP&E> 27,156,246
<DEPRECIATION> (4,661,936)
<TOTAL-ASSETS> 30,712,822
<CURRENT-LIABILITIES> 1,582,902
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 27,845,291
<TOTAL-LIABILITY-AND-EQUITY> 30,712,822
<SALES> 0
<TOTAL-REVENUES> 2,445,087
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,606,242
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 840,437
<INCOME-TAX> 0
<INCOME-CONTINUING> 840,437
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 840,437
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
