SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 0-16886
Banyan Strategic Land Fund II
(Exact name of Registrant as specified in its charter)
Delaware 36-3465422
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 553-9800
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 .
Shares of common stock outstanding as of August 13, 1996: 9,936,421.
Transitional Small Business Disclosure Format: YES . NO X .
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
1996 1995
ASSETS
Cash and Cash Equivalents $ 290,182 $ 549,309
Interest Receivable on
Investments --- 3,754
Interest Receivable on
Loans 85,334 59,470
Investment Securities --- 626,946
Loans Receivable 1,033,000 785,000
Foreclosed Real Estate
Held for Sale 11,211,991 11,700,657
Investment in Real Estate
Venture 7,051,694 7,122,492
Other Assets 594,922 822,592
------------ ------------
Total Assets $ 20,267,123 $ 21,670,220
============ ============
LIABILITIES AND STOCK-
HOLDERS' EQUITY
Liabilities
Accounts Payable and
Accrued Expenses $ 393,278 $ 630,500
Accrued Real Estate Taxes 15,489 ---
------------ ------------
Total Liabilities $ 408,767 $ 630,500
------------ ------------
Stockholders' Equity
Shares of Common Stock,
$0.01 Par Value,
50,000,000 Authorized,
19,266,268 Shares
Issued 170,927,133 170,927,133
Accumulated Deficit (135,214,570) (134,033,206)
Treasury Stock at Cost,
9,329,847 Shares (15,854,207) (15,854,207)
------------ ------------
Total Stockholders' Equity 19,858,356 21,039,720
------------ ------------
Total Liabilities and
Stockholders' Equity $ 20,267,123 $ 21,670,220
============ ============
Book Value Per Share of
Common Stock (9,936,421
Shares Outstanding) $ 2.00 $ 2.12
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
INCOME 1996 1995
Interest on Note and
Loans Receivable $ 30,824 $ 10,882
Income on Investments 2,072 243,379
----------- ------------
Total Income 32,896 254,261
----------- ------------
EXPENSES
Expenses From Property
Operating Activities:
Net (Gain) Loss From
Disposition of
Foreclosed Real Estate
Held for Sale, Net (31,091) 39,846
Net Loss From Operations
of Foreclosed Real
Estate Held for Sale 540,487 913,215
Net Loss From Operations
of Real Estate Venture 86,031 59,933
----------- ------------
Total Expenses From
Property Operating
Activities 595,427 1,012,994
----------- ------------
Other Expenses:
Stockholder Expenses 80,049 95,301
Directors' Fees, Expenses
and Insurance 99,621 235,560
Other Professional Fees 90,964 366,262
General and Administrative 348,199 601,494
Recovery of Losses on
Loans, Notes and
Interest Receivable --- (23,277)
----------- ------------
Total Other Expenses 618,833 1,275,340
----------- ------------
Total Expenses 1,214,260 2,288,334
----------- ------------
Net Loss $(1,181,364) $ (2,034,073)
=========== ============
Net Loss Per Share of
Common Stock (Based on
the Weighted Average
Number of Shares Outstanding
of 9,936,421 and 18,022,992,
respectively) $ (0.12) $ (0.11)
=========== ============
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
INCOME 1996 1995
Interest on Note and Loans
Receivable $ 18,355 $ 6,996
Income on Investments 591 203,858
----------- ------------
Total Income 18,946 210,854
----------- ------------
EXPENSES
Expenses From Property
Operating Activities:
Net (Gain) Loss From
Disposition of
Foreclosed Real Estate
Held for Sale, Net (31,091) 39,846
Net Loss From Operations
of Foreclosed Real Estate
Held for Sale 190,804 430,052
Net Loss From Operations of
Real Estate Venture 52,060 33,685
----------- ------------
Total Expenses From Property
Operating Activities 211,773 503,583
----------- ------------
Other Expenses:
Stockholder Expenses 59,527 55,971
Directors' Fees, Expenses
and Insurance 48,352 112,883
Other Professional Fees 45,403 52,060
General and Administrative 194,628 248,151
----------- -----------
Total Other Expenses 347,910 469,065
----------- ------------
Total Expenses 559,683 972,648
----------- ------------
Net Loss $ (540,737) $ (761,794)
=========== ============
Net Loss Per Share of Common
Stock (Based on the
Weighted Average Number of
Shares Outstanding of
9,936,421 and 16,796,021,
respectively) $ (0.05) $ (0.05)
=========== ============
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<CAPTION>
Common Stock Accumulated Treasury
Shares Amount Deficit Stock Total
<S> <C> <C> <C> <C> <C>
Stockholders'
Equity,
December 31,
1995 19,266,268 $170,927,133 $(134,033,206) $(15,854,207) $21,039,720
Net Loss --- --- (1,181,364) --- (1,181,364)
----------- ------------ ------------ ------------ ------------
Stockholders'
Equity,
June 30,
1996 19,266,268 $170,927,133 $(135,214,570) $(15,854,207) $19,858,356
=========== ============ ============ ============ ===========
<FN> The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS $ (1,181,364) $(2,034,073)
Adjustments to Reconcile
Net Loss to Net Cash Used
In Operating Activities:
Net (Gain) Loss From
Disposition of Real
Estate Held For
Sale, Net (31,091) 39,846
Recovery of Losses on
Loans, Notes and
Interest Receivable --- (23,277)
Net Loss From Operations
of Real Estate Venture 86,031 59,933
Net Change In:
Interest Receivable on
Investments 3,754 (53,210)
Interest Receivable on
Loans Receivable (25,864) (12,779)
Other Assets 227,670 (138,231)
Accounts Payable and
Accrued Expenses (237,222) (403,674)
Accrued Real Estate Taxes 15,489 (107,563)
----------- -----------
Net Cash Used In Operating
Activities (1,142,597) (2,673,028)
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from Sale of
Investment Securities 310,007 ---
Principal Payments on
Investment Securities 316,939 ---
Proceeds from the Sale
of Foreclosed
Real Estate Held
for Sale 271,757 21,700,202
Recovery of Losses
on Loans, Notes and
Interest Receivable --- 23,277
Collection of Loan
Receivable --- 16,000
Forfeited Proceeds from
Sales Contracts --- 43,824
Payment of Liabilities
Assumed at Foreclosure
of Real Estate Held
for Sale --- (349,900)
Investments in Real Estate
Venture (15,233) (98,684)
Payment to Affiliate --- (730,229)
----------- -----------
Net Cash Provided By Investing
Activities 883,470 20,604,490
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Elimination of Shares
of Common Stock --- (19,606)
Acquisition of Treasury
Shares --- (15,826,570)
----------- -----------
Net Cash Used In Financing
Activities --- (15,846,176)
----------- -----------
Net (Decrease) Increase in
Cash and Cash Equivalents (259,127) 2,085,286
Cash and Cash Equivalents at
Beginning of Period 549,309 290,366
----------- -----------
Cash and Cash Equivalents at
End of Period $ 290,182 $ 2,375,652
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
Readers of this quarterly report should refer to Banyan Strategic Land
Fund II's (the "Fund's") audited consolidated financial statements for the year
ended December 31, 1995, which are included in the Fund's 1995 Annual Report and
Form 10-KSB for the year ended December 31, 1995, as certain footnote
disclosures which would substantially duplicate those contained in such audited
statements have been omitted from this report.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Fund and its wholly-owned subsidiaries and consolidated venture which hold
title to the Fund's properties. All intercompany balances and transactions have
been eliminated in consolidation. The Fund's 47% interest in the H Street
Assemblage is accounted for on the equity method as an investment in real estate
joint venture.
FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the previously reported 1995
consolidated financial statements in order to provide comparability with the
1996 consolidated financial statements. These reclassifications have not
changed the 1995 results. In the opinion of management, all adjustments
necessary for a fair presentation have been made to the accompanying
consolidated financial statements as of June 30, 1996 and for the six and three
months ended June 30, 1996 and 1995.
2. FORECLOSED REAL ESTATE HELD FOR SALE AND LOANS RECEIVABLE
RANCHO MALIBU
Rancho Malibu is a 274-acre parcel of undeveloped land north of Malibu,
California. On July 1, 1992 a joint venture (the "Venture") between the Fund
and Banyan Mortgage Investment Fund ("BMIF") acquired title to the property
pursuant to a deed in lieu of foreclosure agreement. The Fund owns a 98.6%
general partner interest in the Venture while BMIF owns the remaining 1.4%
interest as a limited partner. The Venture's results are consolidated in the
accompanying financial statements.
From the acquisition date, the Venture has engaged in zoning and
entitlement activities which have been opposed by the City of Malibu. The city
initiated two separate legal actions intended to preclude the issuance of a
Coastal Development Permit, the most recent of which has been decided in favor
of the Venture and as to which the City of Malibu appealed. On December 5,
1995, the Court of Appeals of the State of California decided this appeal in
favor of the Fund and on January 4, 1996 a petition for rehearing was denied.
Concurrent with the aforementioned appeal, the Venture pursued
entitlements before the Board of Supervisors for the County of Los Angeles. In
August 1995, the Los Angeles County Regional Planning Commission, by a 3 to 2
vote, approved a revised plan to develop a fifty-one unit housing community on
the Rancho Malibu property. The Los Angeles County Regional Planning
Commission's approval was appealed to the Los Angeles County Board of
Supervisors. On January 23, 1996, the Los Angeles County Board of Supervisors
tentatively approved a compromise forty-six unit project. On May 7, 1996, the
Venture obtained from the County of Los Angeles approvals to create forty-six
single family lots. These approvals are specified in Los Angeles County CUP No.
91-315(3), Oak Tree Permit No. 91-315(3) and Tentative Tract No. 46277
(revised), approved May 7, 1996. On June 17, 1996 a neighboring homeowners
association filed an action entitled La Chusa Highlands Property Owners
Association, Inc. v. Los Angeles County, et al., Los Angeles County Superior
Court Case No. BS039789 (the "La Chusa Litigation"), challenging the aforesaid
approvals. The defendants have not yet answered the petition.
The Venture challenged the General Plan and the Environmental Impact
Report associated with it adopted by the City of Malibu on Nov. 20, 1995 in an
action entitled BMIF/BSLFII Rancho Malibu Limited Partnership v. City of Malibu,
Los Angeles County Superior Court Case No. SS006374. On July 31, 1996, the
Venture and the City of Malibu executed and delivered a settlement agreement
which, among other things, resulted in a dismissal of the lawsuit challenging
the city's General Plan and precludes the city from challenging the Venture's
entitlements before any public body (in the absence of a significant requested
change). The city is also precluded by the settlement agreement from
participating in the La Chusa Litigation.
During the six months ended June 30, 1996, the Fund expended approximately
$500,000 relating to entitlement activities, holding costs and litigation
relating to Rancho Malibu. These costs were included in total expenses from
property operating activities on the Fund's consolidated statements of income
and expenses. As of June 30, 1996 and December 31, 1995, the Fund's carrying
value of the property is $9,961,991.
LAKE ROGERS
On February 15, 1996, the Fund sold the remaining 11 single family home
lots comprising the Lake Rogers property to a unaffiliated third party for
approximately $165,400. After prorations for closing costs of approximately
$19,400, the Fund received net proceeds of approximately $146,000 and recognized
a loss of approximately $77,300 which was reflected in the consolidated
statements of income and expenses for the year ended December 31, 1995. The
Fund had obtained ownership of the Lake Rogers property pursuant to a deed in
lieu of foreclosure settlement on its Westholme loans.
HEMET PHASE III
Hemet Phase III is an approximately 19-acre land parcel zoned for the
development of 75 single family home lots located in Hemet, California. On
April 18, 1996, the Fund sold its interest in the Hemet Phase III property to an
unaffiliated third party (the "Purchaser") in exchange for cash proceeds of
approximately $125,000 and a $248,000 collateralized promissory note (the
"Note"). After prorations for closing costs of approximately $14,700, the Fund
recognized a gain on disposition of approximately $31,100. The Note bears
interest at a fixed rate of 10% per annum and requires monthly payments of
interest. Upon the sale of each lot by the Purchaser, the Purchaser is required
to apply such payments to the Fund first to any fees due, second to accrued and
unpaid interest and finally to the outstanding principal. Final payment of any
accrued and unpaid interest and outstanding principal balance of the Note is due
and payable upon its maturity date of April 18, 1997. The Fund obtained
ownership of the Hemet Phase III property pursuant to a deed in lieu of
foreclosure settlement on its Westholme loans.
3. TRANSACTIONS WITH AFFILIATES
Administrative costs, primarily salaries and general and administrative
expenses, are reimbursed by the Fund to Banyan Management Corp. ("BMC"). These
costs are allocated to the Fund and other entities to which BMC provides
administrative services based upon the actual number of hours spent by BMC
personnel on matters related to that particular entity in relation to total BMC
personnel hours. The Fund's allocable share of costs for the six months ended
June 30, 1996 and 1995 aggregated $185,245 and $363,663, respectively. As one
of its administrative services, BMC serves as the paying agent for general and
administrative costs of the Fund. As part of providing this payment service,
BMC maintains a bank account on behalf of the Fund. As of June 30, 1996, the
Fund had a net receivable due from BMC of $66,608. The net receivable is
included in other assets in the Fund's Consolidated Balance Sheet.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN
OF OPERATION
GENERAL
The Fund was originally established to invest primarily in short-term,
junior, predevelopment and construction mortgage loans. The borrowers
subsequently defaulted on these mortgage loan obligations, adversely affecting
the Fund. The Fund has ceased funding mortgage loans except where necessary to
protect the value of its assets acquired through foreclosure or otherwise. In
1990, the Fund implemented a plan designed to preserve its assets and manage its
properties acquired through foreclosure or otherwise until they would be
disposed of in an orderly manner. In addition, in 1990 the Fund suspended
distributions to stockholders due to its modest cash position and the
uncertainty regarding its remaining assets and future cash requirements. The
Fund continues to focus on preserving and maximizing the value of its assets,
including managing and/or improving development rights regarding such
properties.
The Fund currently holds an ownership interest in a 274 acre land parcel
located in Southern California known as the Rancho Malibu property as well as
other small parcels of land located in Florida and California. In addition, the
Fund acquired a 47% partnership interest in the H Street Venture which holds
title to an approximately 55,900 square foot office building and an adjacent
land parcel containing 17,000 square feet located in Washington D.C. The Fund's
current loan portfolio consists of the Northholme Partners and Hemet III and IV
loans.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents consist of cash and short-term investments. The
Fund's cash and cash equivalents balance at June 30, 1996 and December 31, 1995
was $290,182 and $549,309, respectively. In addition, at December 31, 1995 the
Fund owned investment securities in the amount of $626,946. The decrease in
total cash, cash equivalents and investment securities of approximately $886,000
is primarily due to the payment of approximately $500,000 related to
entitlement, litigation and holding costs associated with the Rancho Malibu
property and the payment of the Fund's property operating and other expenses of
approximately $619,000. Partially offsetting these decreases was the receipt of
interest income of approximately $33,000 and net proceeds totalling
approximately $272,000 resulting from the sales of the Lake Rogers and Hemet III
properties during the six months ended June 30, 1996. See Results of Operations
below for further details.
The Fund's future liquidity needs are expected to be funded from cash
proceeds from the sale or any potential third party joint development of its
properties, collection of principal and interest on the Fund's loans receivable
and interest earned on the Fund's short-term investments. The Fund's cash
resources, as well as cash anticipated to be generated from the sale of its
various smaller land parcels located in Florida and California which had
collateralized the Fund's loans, is anticipated to provide adequate liquidity to
meet the Fund's operating expenses plus the holding costs and operating expenses
for the upcoming year consistent with the Fund's business plan for the H Street
Assemblage, Rancho Malibu property and other various land parcels acquired
through foreclosure. In the event the Fund is unable to sell its various real
estate assets, the Fund will be required to seek additional sources of liquidity
to meet its operational needs.
As of June 30, 1996 and December 31, 1995, the Fund's mortgage loan
portfolio consisted of three loans with a carrying value totaling $1,033,000.
For the six months ended June 30, 1996 and 1995, the Fund accrued interest on
these loans totalling approximately $30,800 and $10,700, respectively.
The Fund's ability to resume distributions to its stockholders is
dependent upon, among other things: (i) the Fund's ability to sell its
properties and the eventual sales price of these properties; (ii) operating
results of the Fund's properties and (iii) the Fund's ability to control its
operating expenses.
RESULTS OF OPERATIONS
Total income for the six months ended June 30, 1996 decreased to $32,896
from $254,261 for the six months ended June 30, 1995. This decrease is due
primarily to a decrease in income on investments. Income on investments
decreased due to a decrease in cash available for investment.
Total expenses for the six months ended June 30, 1996 decreased to
$1,214,260 from $2,288,334 for the six months ended June 30, 1995. This
decrease of approximately $1,074,000 for the six months ended June 30, 1996 when
compared to the prior year's period is due primarily to decreases of
approximately $418,000 in total expenses from property operating activities and
approximately $656,000 in total other expenses. The decrease in total property
operating expenses is primarily due to a decrease in net loss from operations of
foreclosed real estate held for sale. The decrease in the net loss from
operations of foreclosed real estate held for sale is due to a reduction in
legal and entitlement costs relating to the Rancho Malibu property during the
six months ended June 30, 1996 as compared to the same period in 1995. Further
contributing to the decrease in total expenses from property operating expenses
is a net gain from disposition of foreclosed real estate held for sale of
$31,091 for the six months ended June 30, 1996 as compared to a net loss from
disposition of foreclosed real estate held for sale of ($39,846) for the same
period in 1995. See below for further details regarding the disposition of the
Fund's various property interests during 1996. Partially offsetting these
decreases in total property operating expenses is an increase in net loss from
operations of real estate venture relating to the Fund's interest in the H
Street property. See discussion below for further details regarding the
operating results of the H Street property. The decrease in total other
expenses is due primarily to decreases in directors fees, expenses and
insurance, other professional fees and general and administration expenses.
Director's fees, expense and insurance decreased for the six months ended June
30, 1996 as compared to the same period in 1995 due to a decrease in the premium
for insurance coverage of approximately $110,000 and a decrease in director's
fee and other compensation of approximately $15,000 as a result of a decrease in
the number of meetings held and the number of directors on the Fund's Board.
Other professional fees decreased because the legal costs incurred in 1995
relating to the Fund's Key Biscayne litigation were nonrecurring. The decrease
in general and administrative expenses was due primarily to a decrease in
expenses incurred by BMC on behalf of the Fund and a decrease in administrative
costs associated with the Rancho Malibu litigation and entitlement activities.
The above discussed changes resulted in a decrease in the net loss for the
six months ended June 30, 1996 to $1,181,364 ($0.12 per share) from $2,034,073
($0.11 per share) for the six months ended June 30, 1995. On May 5, 1995, the
Fund commenced a tender offer which resulted in the purchase by the Fund of
9,309,747 shares of common stock. As a result, the net loss for the six months
ended June 30, 1996 is based on the weighted average number of shares of
9,936,421 as compared to 18,022,992 weighted average shares for the same period
in 1995.
Total income for the three months ended June 30, 1996 decreased to $18,946
from $210,854 for the three months ended June 30, 1995. This decrease is due
primarily to a decrease in income on investments. Income on investments
decreased due to a decrease in cash available for investment.
Total expenses for the three months ended June 30, 1996 decreased to
$559,683 from $972,648 for the three months ended June 30, 1995. This decrease
of approximately $413,000 for the three months ended June 30, 1996 when compared
to the prior year's period is due primarily to decreases of approximately
$292,000 in total expenses from property operating activities and approximately
$121,000 in total other expenses. The decrease in total property operating
expenses is due to a decrease in net loss from operations of foreclosed real
estate held for sale of approximately $239,000 and a gain from disposition of
foreclosed real estate held for sale for 1996 of approximately $31,000 offset
partially by an increase in net loss from operations of real estate venture.
See below for further details regarding the increase in net loss from operations
of real estate venture and the gain on disposition of foreclosed real estate
held for sale. The decrease in net loss from operations of foreclosed real
estate held for sale is due to a reduction in legal and entitlement costs
relating to the Rancho Malibu property during the three months ended June 30,
1996 as compared to the same period in 1995. The decrease in total other
expenses is due primarily to decreases in directors fees, expenses and
insurance, other professional fees and general and administration expenses.
Director's fees, expense and insurance decreased for the three months ended June
30, 1996 as compared to the same period in 1995 due to a decrease in the premium
for insurance coverage of approximately $55,000 and as a result of a decrease in
the number of meetings held and number of directors on the Fund's Board. Other
professional fees decreased because the legal costs incurred in 1995 relating to
the Fund's Key Biscayne litigation were nonrecurring. The decrease in general
and administrative expenses was due primarily to a decrease in expenses incurred
by BMC on behalf of the Fund, and a decrease in administrative costs associated
with the Rancho Malibu litigation and entitlement activities.
During the six months ended June 30, 1996 and 1995, the Fund recorded net
losses of $86,031 and $59,933, respectively, from the operations of the H Street
Venture. During the three months ended June 30, 1996 and 1995, the Fund
recorded net losses of $52,060 and $33,685, respectively, from the operations of
the H Street Venture. Net loss from operations of real estate venture includes
the Fund's 47% interest in the real estate venture known as the H Street
Venture. The H Street Venture owns an approximately 55,900 square foot office
building (the "Victor Building") and an adjacent land parcel consisting of
17,000 square feet (the "H Street Assemblage") located in Washington, D.C. The
net loss at the H Street Assemblage for the six months ended June 30, 1996 as
compared to the same period in 1995 increased slightly due to an increase of
approximately $74,000 in real estate tax expense resulting from a property
reassessment during 1996 of the H Street Assemblage. The Venture is currently
appealing this reassessment. The H Street Venture completed and obtained the
zoning, entitlement and historic preservation rights for the development of an
approximately 330,000 square foot commercial building on the H Street site. The
H Street Venture has not made any significant capital expenditures on the H
Street Assemblage and is allowing occupancy to decline by selectively
retenanting the Victor Building at the H Street Assemblage with short term
leases so that the building will be more marketable to a potential buyer which
would need to vacate the Victor Building before its redevelopment. The H Street
Venture is currently marketing the H Street Assemblage for sale. The Venture
will continue to try to find ways to limit holding costs at the H Street
Assemblage while attempting to sell the property.
The above discussed changes resulted in a decrease in the net loss for the
three months ended June 30, 1996 to $540,737 ($0.05 per share) from $761,794
($0.05 per share) for the three months ended June 30, 1995.
On a quarterly basis, management reviews the mortgage loans in the Fund's
portfolio and records appropriate loss provisions. The provisions are based
upon a number of factors, including analysis of the value of the collateral and,
in certain cases, ongoing negotiations regarding disposition of this collateral,
as well as consideration of the general business conditions affecting the Fund's
portfolio. Management also reviews the investment properties held by the Fund
on a quarterly basis and, when it has been determined that a permanent
impairment in the value of a given property has occurred, the carrying value of
the property is then written down to its fair market value. Management has
determined that no reductions are necessary for the six months ended June 30,
1996.
Rancho Malibu is a 274-acre parcel of undeveloped land north of Malibu,
California. On July 1, 1992 a joint venture (the "Venture") between the Fund
and Banyan Mortgage Investment Fund ("BMIF") acquired title to the property
pursuant to a deed in lieu of foreclosure agreement. The Fund owns a 98.6%
general partner interest in the Venture while BMIF owns the remaining 1.4%
interest as a limited partner.
From the acquisition date, the Venture has engaged in zoning and
entitlement activities which have been opposed by the City of Malibu. The city
initiated two separate legal actions intended to preclude the issuance of a
Coastal Development Permit, the most recent of which has been decided in favor
of the Venture and as to which the City of Malibu appealed. On December 5,
1995, the Court of Appeals of the State of California decided this appeal in
favor of the Fund and on January 4, 1996 a petition for rehearing was denied.
Concurrent with the aforementioned appeal, the Venture pursued entitlements
before the Board of Supervisors for the County of Los Angeles. In August 1995,
the Los Angeles County Regional Planning Commission, by a 3 to 2 vote, approved
a revised plan to develop a fifty-one unit housing community on the Rancho
Malibu property. The Los Angeles County Regional Planning Commission's approval
was appealed to the Los Angeles County Board of Supervisors. On January 23,
1996, the Los Angeles County Board of Supervisors tentatively approved a
compromise forty-six unit project. On May 7, 1996, the Venture obtained from
the County of Los Angeles approvals to create forty-six single family lots.
These approvals are specified in Los Angeles County CUP No. 91-315(3), Oak Tree
Permit No. 91-315(3) and Tentative Tract No. 46277 (revised), approved May 7,
1996. On June 17, 1996 a neighboring homeowners association filed an action
entitled La Chusa Highlands Property Owners Association, Inc. v. Los Angeles
County, et al., Los Angeles County Superior Court Case No. BS039789 (the "La
Chusa Litigation"), challenging the aforesaid approvals. The defendants have
not yet answered the petition.
The Venture challenged the General Plan and the Environmental Impact
Report associated with it adopted by the City of Malibu on Nov. 20, 1995 in an
action entitled BMIF/BSLFII Rancho Malibu Limited Partnership v. City of Malibu,
Los Angeles County Superior Court Case No. SS006374. On July 31, 1996, the
Venture and the City of Malibu executed and delivered a settlement agreement
which, among other things, resulted in a dismissal of the lawsuit challenging
the city's General Plan and precludes the city from challenging the Venture's
entitlements before any public body (in the absence of a significant requested
change). The city is also precluded by the settlement agreement from
participating in the La Chusa Litigation.
During the six months ended June 30, 1996, the Fund expended approximately
$500,000 on Rancho Malibu relating to entitlement activities, holding costs and
litigation. These costs were included in total expenses from property operating
activities on the Fund's consolidated statements of income and expenses. As of
June 30, 1996 and December 31, 1995, the Fund's carrying value for its interest
in the Venture was $9,961,991.
On February 15, 1996, the Fund sold the remaining 11 single family home
lots comprising the Lake Rogers property to an unaffiliated third party for
approximately $165,400. After prorations for closing costs of approximately
$19,400, the Fund received net proceeds of approximately $146,000 and recognized
a loss of approximately $77,300 which was reflected in the consolidated
statements of income and expenses for the year ended December 31, 1995. The
Fund had obtained ownership of the Lake Rogers property pursuant to a deed in
lieu of foreclosure settlement on its Westholme loans.
Hemet Phase III is an approximately 19-acre land parcel zoned for the
development of 75 single family home lots located in Hemet, California. On
April 18, 1996, the Fund sold its interest in the Hemet Phase III property to an
unaffiliated third party (the "Purchaser") in exchange for cash proceeds of
approximately $125,000 and a $248,000 collateralized promissory note (the
"Note"). After prorations for closing costs of approximately $14,700, the Fund
recognized a gain on disposition of approximately $31,100. The Note bears
interest at a fixed rate of 10% per annum and requires monthly payments of
interest. Upon the sale of each lot by the Purchaser, the Purchaser is required
to apply such payments to the Fund first to any fees due, second to accrued and
unpaid interest and finally to the outstanding principal. Final payment of any
accrued and unpaid interest and outstanding principal balance of the Note is due
and payable upon its maturity date of April 18, 1997. The Fund obtained
ownership of the Hemet Phase III property pursuant to a deed in lieu of
foreclosure settlement on its Westholme loans.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Trust held its 1995 Annual Meeting of Stockholders on June 27, 1996.
There were two proposals considered at the Meeting.
Proposal #1 was to elect three Independent Directors to hold office for
one year or otherwise as provided in the Fund's By-laws.
Proposal #2 was to concur in the selection of Ernst & Young LLP as the
Fund's independent public accountants for the fiscal year ended December 31,
1996.
The following votes were cast or abstained from voting in connection with
the proposals in the manner as set forth:
PROPOSAL #1
SLATE OF TRUSTEES ELECTED FOR WITHHELD
Walter E. Auch, Sr. 4,933,708 297,888
Gerald L. Nudo 4,945,783 285,813
Robert M. Ungerleider 4,945,583 286,013
PROPOSAL #2
FOR AGAINST ABSTAIN
4,987,727 101,992 141,877
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are incorporated by reference from the Fund's
Annual Report on Form 10-K for the year ended December 31, 1995:
Exhibit Number Description
(10) Material Contracts
(i) Second Amendment of Leonard G. Levine's
Employment Contract dated December 31, 1992
(ii) First Amendment to Second Amended and
Restated Employment Agreement for Leonard G.
Levine dated December 31, 1992
(iii) Directors Stock Option Agreement dated July
15, 1994
(iv) Executive Stock Option Agreements dated July
1, 1994 and July 11, 1995
(21) Subsidiaries of the Fund
The following exhibits are incorporated by reference from the Registrant's
Registration Statement on Form S-11 (file number 33-13585), referencing
the exhibit number used in such Registration Statement.
Exhibit Number Description
(3)(a) Certificate of Incorporation
(3)(b) By-Laws
(b) No Reports on Form 8-K were filed during the quarter ended June 30, 1996.
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.
BANYAN STRATEGIC LAND FUND II
By: /s/ Leonard G. Levine Date: August 13, 1996
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: August 13, 1996
Joel L. Teglia, Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial
information extracted from Banyan Strategic
Land Fund II Form 10-QSB for the period
ended June 30, 1996 and is qualified in its
entirety by reference to such 10-QSB."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 290,182
<SECURITIES> 0
<RECEIVABLES> 1,118,334
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,267,123
<CURRENT-LIABILITIES> 408,767
<BONDS> 0
0
0
<COMMON> 19,858,356
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,267,123
<SALES> 0
<TOTAL-REVENUES> 32,896
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,214,260
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,181,364)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,181,364)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,181,364)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
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