SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996
Commission File Number 0-17664
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2969061
(State or other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
200 Clarendon Street, Boston, MA 02116
(Address of Principal Executive Office) (Zip Code)
(800) 722-5457
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal
year, if changed since last report)
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>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements:
Balance Sheets at September 30, 1996 and
December 31, 1995 3
Statements of Operations for the Three and
Nine Months Ended September 30, 1996 and 1995 4
Statements of Partners' Equity for the
Nine Months Ended September 30, 1996 and
for the Year Ended December 31, 1995 5
Statements of Cash Flows for the Nine
Months Ended September 30, 1996 and 1995 6
Notes to Financial Statements 7-16
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 17-25
PART II: OTHER INFORMATION 26
2
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $5,047,640 $3,520,394
Restricted cash 39,907 26,240
Other current assets 207,156 107,596
----------- -----------
Total current assets 5,294,703 3,654,230
Real estate loans 5,794,587 6,557,159
Investment in property:
Land 5,560,000 5,560,000
Buildings and improvements 18,836,994 18,836,994
----------- -----------
24,396,994 24,396,994
Less: accumulated depreciation 4,995,238 4,524,369
----------- -----------
19,401,756 19,872,625
Investment in joint venture 7,656,986 7,842,586
Long-term restricted cash 109,258 106,027
Deferred expenses, net of accumulated
amortization of $1,210,715 in 1996
and $995,374 in 1995 1,138,637 1,316,753
----------- -----------
Total assets $39,395,927 $39,349,380
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $544,451 $239,566
Accounts payable to affiliates 39,208 35,735
----------- -----------
Total current liabilities 583,659 275,301
Partners' equity/(deficit):
General Partner's deficit (155,528) (152,910)
Limited Partners' equity 38,967,796 39,226,989
----------- -----------
Total partners' equity 38,812,268 39,074,079
----------- -----------
Total liabilities and partners' equity $39,395,927 $39,349,380
=========== ===========
</TABLE>
See Notes to Financial Statements
3
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Rental income $651,243 $608,739 $1,894,511 $1,779,294
Interest income 216,840 220,680 655,282 658,522
Income from joint venture 189,938 193,829 572,852 557,024
---------- --------- ---------- ----------
Total income 1,058,021 962,047 3,122,644 2,994,840
Expenses:
Depreciation 156,957 156,957 470,869 470,931
Property operating expenses 124,879 148,708 362,488 384,713
Amortization of deferred expenses 68,878 68,162 215,340 199,006
General and administrative expenses 63,736 53,524 180,937 163,336
---------- --------- ---------- ----------
Total expenses 414,450 386,090 1,229,634 1,217,986
---------- --------- ---------- ----------
Net income $643,571 $575,957 $1,893,010 $1,776,854
========== ========== ========== ==========
Allocation of net income:
General Partner $6,436 $5,959 $18,930 $17,769
John Hancock Limited Partner - - - -
Investors 637,134 589,938 1,874,080 1,759,085
---------- --------- ---------- ----------
$643,571 $575,957 $1,893,010 $1,776,854
========== ========== ========== ==========
Net income per Unit $0.24 $0.22 $0.72 $0.68
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
4
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
(Unaudited)
Nine Months Ended September 30, 1996 and
Year Ended December 31, 1995
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Partner's equity/(deficit) at January 1, 1995
(2,601,552 Units outstanding) ($151,822) $39,334,595 $39,182,773
Less: Cash distributions (25,228) (2,497,490) (2,522,718)
Add: Net income 24,140 2,389,884 2,414,024
-------- ----------- -----------
Partner's equity/(deficit) at December 31, 1995
(2,601,552 Units outstanding) (152,910) 39,226,989 39,074,079
Less: Cash distributions (21,548) (2,133,273) (2,154,821)
Add: Net income 18,930 1,874,080 1,893,010
-------- ----------- -----------
Partner's equity/(deficit) at September 30, 1996
(2,601,552 Units outstanding) ($155,528) $38,967,796 $38,812,268
========= =========== ===========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
---- ----
<S> <C> <C>
Operating activities:
Net income $1,893,010 $1,776,854
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 470,869 470,931
Amortization of deferred expenses 215,340 199,006
Cash distributions over/(under) equity
in income from joint venture 185,600 (13,183)
---------- ----------
2,764,819 2,433,608
Changes in operating assets and liabilities:
Decrease/(increase) in restricted cash (16,898) (32,965)
Increase in other current assets (99,560) (68,199)
Increase in accounts payable
and accrued expenses 304,885 328,462
Increase in accounts payable to
affiliates 3,473 3,309
---------- ----------
Net cash provided by operating activities 2,956,719 2,664,215
Investing activities:
Principal payments on real estate loans 762,572 196,918
Increase in deferred expenses and other assets (37,224) (123,284)
---------- ----------
Net cash provided by investing activities 725,348 73,634
Financing activities:
Cash distributed to Partners (2,154,821) (1,892,036)
---------- ----------
Net cash used in financing activities (2,154,821) (1,892,036)
---------- ----------
Net increase in cash and cash
equivalents 1,527,246 845,813
Cash and cash equivalents at beginning
of year 3,520,394 2,561,288
---------- ----------
Cash and cash equivalents at end
of period $5,047,640 $3,407,101
========== ==========
</TABLE>
See Notes to Financial Statements
6
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Organization of Partnership
---------------------------
John Hancock Realty Income Fund-II Limited Partnership (the
"Partnership") was formed under the Massachusetts Uniform Limited
Partnership Act on June 30, 1987. As of September 30, 1996, the
partners in the Partnership consisted of John Hancock Realty Equities,
Inc. (the "General Partner"), a wholly-owned, indirect subsidiary of
John Hancock Mutual Life Insurance Company; John Hancock Realty
Funding, Inc. (the "John Hancock Limited Partner"); John Hancock
Income Fund-II Assignor, Inc. (the "Assignor Limited Partner"); and
4,649 Unitholders (the "Investors"). The Assignor Limited Partner
holds 2,601,552 Assignee Units (the "Units"), representing economic
and certain other rights attributable to Investor Limited Partnership
Interests in the Partnership, for the benefit of the Investors. The
John Hancock Limited Partner, the Assignor Limited Partner and the
Investors are collectively referred to as the Limited Partners. The
General Partner and the Limited Partners are collectively referred to
as the Partners. The initial capital of the Partnership was $2,000,
representing capital contributions of $1,000 by the General Partner
and $1,000 from the John Hancock Limited Partner. The Amended
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement") authorized the issuance of up to 5,000,000 Assignee Units
at $20 per Unit. During the offering period, which terminated on
January 2, 1989, 2,601,552 Units were sold and the John Hancock
Limited Partner made additional capital contributions of $4,161,483.
There were no changes in the number of Units outstanding subsequent to
the termination of the offering period.
The Partnership is engaged solely in the business of (i) acquiring,
holding for investment and disposing of existing income-producing
retail, industrial and office properties on an all-cash basis, free
and clear of mortgage indebtedness, and (ii) making mortgage loans
consisting of conventional first mortgage loans and participating
mortgage loans secured by income-producing retail, industrial and
office properties. Although the Partnership's properties were
acquired and are held free and clear of mortgage indebtedness, the
Partnership may incur mortgage indebtedness on its properties under
certain circumstances as specified in the Partnership Agreement.
The latest date on which the Partnership is due to terminate is
December 31, 2017, unless it is sooner terminated in accordance with
the terms of the Partnership Agreement. It is expected that, in the
ordinary course of the Partnership's business, the investments of the
Partnership will be disposed of, and the Partnership terminated,
before December 31, 2017.
7
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
2. Significant Accounting Policies
-------------------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair representation have been included.
Operating results for the nine month period ended September 30, 1996
are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. For further information, refer to
the financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-K for the year ended December
31, 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results may differ
from those estimates.
Cash equivalents are highly liquid investments with maturities of
three months or less when purchased. These investments are recorded
at cost plus accrued interest, which approximates market value.
Restricted cash represents funds restricted for tenant security
deposits and has been designated as short or long-term based upon the
term of the related lease agreement.
Real estate loans are recorded at amortized cost unless it is
determined by the General Partner that in economic substance the loan
represents an investment in property or joint venture. In such
instances, these investments are accounted for using the equity
method.
Investments in property are recorded at cost. Cost includes the
initial purchase price of the property plus acquisition and legal
fees, other miscellaneous acquisition costs and the cost of
significant improvements.
Depreciation has been provided on a straight-line basis over the
estimated useful lives of the various assets: thirty years for the
buildings and five years for related improvements. Maintenance and
repairs are charged to operations as incurred.
8
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
2. Significant Accounting Policies (continued)
-------------------------------
Investment in joint venture is recorded using the equity method.
Fees paid to the General Partner for the acquisition of joint venture
and mortgage loan investments have been deferred and are being
amortized over the life of the investments to which they apply.
During 1993, the Partnership reduced the period over which its
remaining deferred acquisition fees are amortized from thirty years,
the estimated useful life of the buildings owned by the Partnership,
to eight and one-half years, the then estimated remaining life of the
Partnership. Capitalized tenant improvements and lease commissions
are being amortized on a straight-line basis over the terms of the
leases to which they relate.
The net income per Unit for the periods hereof was calculated by
dividing the Investors' share of net income by the number of Units
outstanding at the end of such period.
No provision for income taxes has been made in the Financial
Statements since such taxes are the responsibility of the individual
Partners and Investors and not of the Partnership.
3. The Partnership Agreement
-------------------------
Distributable Cash from Operations (defined in the Partnership
Agreement) is distributed 1% to the General Partner and the remaining
99% in the following order of priority: first, to the Investors until
they receive a 7% non-cumulative, non-compounded annual cash return on
their Invested Capital (defined in the Partnership Agreement); second,
to the General Partner to pay the Subordinated Allocation (defined in
the Partnership Agreement) equal to 3 1/2% of Distributable Cash from
Operations for managing the Partnership's activities; third, to the
John Hancock Limited Partner until it receives a 7% non-cumulative,
non-compounded annual cash return on its Invested Capital; fourth, to
the Investors and the John Hancock Limited Partner in proportion to
their respective Capital Contributions (defined in the Partnership
Agreement), until they have received a 10% non-cumulative,
non-compounded annual cash return on their Invested Capital; fifth, to
the General Partner to pay the Incentive Allocation (defined in the
Partnership Agreement) equal to 2 1/2% of Distributable Cash from
Operations; and sixth, to the Investors and the John Hancock Limited
Partner in proportion to their respective Capital Contributions. Any
Distributable Cash from Operations which is available as a result of a
reduction of working capital reserves funded by Capital Contributions
of the Investors, will be distributed 100% to the Investors.
9
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
3. The Partnership Agreement (continued)
-------------------------
Cash from a Sale, Financing or Repayment (defined in the Partnership
Agreement) of a Partnership Investment, is first used to pay all debts
and liabilities of the Partnership then due and then to fund any
reserves for contingent liabilities. Cash from Sales, Financings or
Repayments is distributed and paid in the following order of priority:
first, to the Investors and the John Hancock Limited Partner, with the
distribution allocated to Investors and the John Hancock Limited
Partner in proportion to their respective Capital Contributions, until
the Investors and the John Hancock Limited Partner have received an
amount equal to their Invested Capital; second, to the Investors until
they have received, after giving effect to all previous distributions
of Distributable Cash from Operations and any previous distributions
of Cash from Sales, Financings or Repayments after the return of their
Invested Capital, the Cumulative Return on Investment (defined in the
Partnership Agreement); third, to the John Hancock Limited Partner
until it has received, after giving effect to all previous
distributions of Distributable Cash from Operations and any previous
distributions of Cash from Sales, Financings or Repayments after the
return of its Invested Capital, the Cumulative Return on Investment;
fourth, to the General Partner to pay any Subordinated Disposition
Fees then payable pursuant to Section 6.4(c) of the Partnership
Agreement; and fifth, 99% to the Investors and the John Hancock
Limited Partner and 1% to the General Partner, with the distribution
allocated to the Investors and the John Hancock Limited Partner in
proportion to their respective Capital Contributions.
Cash from the sale or repayment of the last of the Partnership's
properties or mortgage loans is distributed in the same manner as Cash
from Sales, Financings or Repayments, except that before any other
distribution is made to the Partners, each Partner shall first receive
from such cash, an amount equal to the then positive balance, if any,
in such Partner's Capital Account after crediting or charging to such
account the profits or losses for tax purposes from such sale. To the
extent, if any, that a Partner is entitled to receive a distribution
of cash based upon a positive balance in its capital account prior to
such distribution, such distribution will be credited against the
amount of such cash the Partner would have been entitled to receive
based upon the manner of distribution of Cash from Sales, Financings
or Repayments, as specified in the previous paragraph.
10
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
3. The Partnership Agreement (continued)
-------------------------
Profits for tax purposes from the normal operations of the Partnership
for each fiscal year are allocated to the Partners in the same amounts
as Distributable Cash from Operations for that year. If such profits
are less than Distributable Cash from Operations for any year, then
they are allocated in proportion to the amounts of Distributable Cash
from Operations allocated for that year. If such profits are greater
than Distributable Cash from Operations for any year, they are
allocated 1% to the General Partner and 99% to the John Hancock
Limited Partner and the Investors, with the allocation made between
the John Hancock Limited Partner and the Investors in proportion to
their respective Capital Contributions. Losses for tax purposes from
the normal operations of the Partnership are allocated 1% to the
General Partner and 99% to the John Hancock Limited Partner and the
Investors, with the allocation made between the John Hancock Limited
Partner and the Investors in proportion to their respective Capital
Contributions.
Profits and Losses from Sales, Financings or Repayments are generally
allocated 99% to the Limited Partners and 1% to the General Partners,
subject to the provisions of the Partnership Agreement.
4. Transactions with the General Partner and Affiliates
----------------------------------------------------
Fees and expenses incurred and/or paid by the General Partner or its
affiliates on behalf of the Partnership during the nine months ended
September 30, 1996 and 1995 and to which the General Partner or its
affiliates are entitled to reimbursement from the Partnership were
$125,128 and $99,897, respectively. These expenses are included in
expenses on the Statements of Operations.
Accounts payable to affiliates represents amounts due to the General
Partner and its affiliates for various services provided to the
Partnership.
The General Partner serves in a similar capacity for three other
affiliated real estate limited partnerships.
11
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Investment in Property
----------------------
Investment in property at cost consists of managed, fully-operating,
commercial real estate as follows:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
Park Square Shopping Center $12,886,230 $12,886,230
Fulton Business Park 5,138,786 5,138,786
Miami International Distribution Center 6,371,978 6,371,978
----------- -----------
$24,396,994 $24,396,994
=========== ===========
</TABLE>
The real estate market is cyclical in nature and is materially
affected by general economic trends and economic conditions in the
market where a property is located. As a result, determination of
real estate values involves subjective judgments. These judgments are
based on current market conditions and assumptions related to future
market conditions. These assumptions involve, among other things, the
availability of capital, occupancy rates, rental rates, interest rates
and inflation rates. Amounts ultimately realized from each property
may vary significantly from the values presented and the differences
could be material. Actual market values of real estate can be
determined only by negotiation between the parties in a sales
transaction.
6. Real Estate Loans
-----------------
On March 10, 1988, the Partnership made a $1,700,000 participating non-
recourse mortgage loan to a non-affiliated borrower, secured by a
first mortgage on commercial real estate known as 205 Newbury Street,
located in Boston, Massachusetts. Under the terms of the loan
agreement, the borrower is required to pay interest only monthly at an
annual rate of 9.5% with the entire outstanding principal balance due
on April 1, 1998. In addition to these amounts, the borrower is
obligated to pay the Partnership 25% of the net cash flow derived from
the operations of the property during the term of the loan and a
specified portion of the net sales price or mutually agreed upon fair
market value of the property upon its sale or refinancing. Contingent
interest payments, based on the net cash flow from the property, were
not received from 1990 through 1995 because the property did not
generate any cash flow in excess of the required minimum debt service
payments. During the nine months ended September 30, 1996, the
Partnership received two contingent interest payments, the sum of
which is rather insignificant.
12
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
6. Real Estate Loans (continued)
-----------------
On June 30, 1989, the Partnership made a $5,500,000 mortgage loan to a
non-affiliated borrower, secured by a first mortgage on commercial
real estate known as the General Camera Corporation Building, located
in New York, New York. In addition, the loan is personally guaranteed
by the principal stockholders of General Camera Corporation ("GCC").
Under the original terms of the loan agreement, GCC was required to
pay interest only monthly at an annual rate of 11%.
Effective June 1, 1994, the loan agreement was amended i) to require
GCC to make a one-time payment of $250,000 towards the outstanding
balance of the loan and ii) to require that all future monthly
payments include amounts to amortize the then outstanding loan
balance. GCC was required to make payments of $60,416 per month on
the first day of each month commencing on July 1, 1994 and ending on
June 1, 1995. Commencing on July 1, 1995 and ending on June 1, 1996,
payments of $85,416 per month were required on the first day of each
month. The entire unamortized principal balance of $4,606,110 and all
accrued but unpaid interest came due on July 1, 1996.
During the second quarter of 1996, GCC requested a three month
extension of time in which to satisfy the loan while it continued to
pursue alternate financing. The General Partner granted GCC this
extension in consideration of GCC making an additional one-time
payment of $250,000 to reduce the outstanding principal balance of the
loan. In addition, GCC was required to make monthly loan payments of
$85,416 from July 1, 1996 through September 1, 1996. On July 1, 1996,
GCC made the $250,000 payment as required by the extension agreement.
During August 1996, GCC made an additional payment of $125,000 to
further reduce the outstanding principal balance of the loan. The
entire unamortized principal balance and all accrued but unpaid
interest came due on October 1, 1996.
During the third quarter of 1996, GCC requested an additional three
month extension of time in which to satisfy the loan while it
continues to pursue alternate financing. The General Partner granted
GCC this extension in consideration of GCC making an additional
payment in the aggregate amount of $400,000 to reduce the outstanding
principal balance of the loan. In addition, GCC will continue to make
monthly loan payments of $85,416 from October 1, 1996 through December
1, 1996. On October 11, 1996, and November 8, 1996, GCC made
additional payments of $200,000 each as required by the extension
agreement. The entire unamortized principal balance and all accrued
but unpaid interest will be due on January 1, 1997.
13
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
6. Real Estate Loans (continued)
-----------------
Based upon current information and events, the General Partner
believes it is possible that GCC may not be able to pay the entire
outstanding principal balance of the loan, as extended, upon its
maturity date (January 1, 1997). Should GCC fail to pay the entire
outstanding balance of the loan, the General Partner will pursue all
available remedies, including foreclosing on the property and pursuing
the personal guaranty of GCC's principal stockholders, in order to
collect upon all amounts due. The General Partner believes that the
entire principal balance of the loan will ultimately be collectible.
Real estate loans are evaluated for collectibility on an on-going
basis.
7. Investment in Joint Venture
---------------------------
On December 28, 1988, the Partnership acquired a 99.5% interest in JH
Quince Orchard Partners (the "Affiliated Joint Venture"), a joint
venture between the Partnership and John Hancock Realty Income
Fund-III Limited Partnership ("Income Fund-III"). The Partnership had
an initial 99.5% interest and Income Fund-III had an initial 0.5%
interest in the Affiliated Joint Venture. Pursuant to the partnership
agreement of the Affiliated Joint Venture, Income Fund-III had the
option, exercisable prior to December 31, 1990, to increase its
investment and interest in the Affiliated Joint Venture to 50%.
During the second quarter of 1989, Income Fund-III exercised its
option and the Partnership sold a 49.5% interest in the Affiliated
Joint Venture to Income Fund-III. The Partnership has held a 50%
interest in the Affiliated Joint Venture since the second quarter of
1989.
On December 28, 1988, the Affiliated Joint Venture contributed 98% of
the invested capital of, and acquired a 75% interest in, QOCC-1
Associates, an existing partnership which owns and operates the Quince
Orchard Corporate Center, a three-story office building and related
land and improvements located in Gaithersburg, Maryland. During the
years ended December 31, 1994 and 1993, the partners in QOCC-1
Associates were required to make additional capital contributions
towards the funding of leasing costs incurred at the property. In
accordance with the terms of the partnership agreement of QOCC-1
Associates, the Affiliated Joint Venture contributed 95% of such
additional capital. Of the cumulative total invested capital in QOCC-
1 Associates at September 30, 1996, 97.55% has been contributed by the
Affiliated Joint Venture. The Affiliated Joint Venture continues to
hold a 75% interest in QOCC-1 Associates.
14
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
7. Investment in Joint Venture (continued)
---------------------------
Net cash flow from QOCC-1 Associates is distributed in the following
order of priority: first, to the payment of all debts and liabilities
of QOCC-1 Associates and to fund reserves deemed reasonably necessary;
second, to the partners in proportion to their respective invested
capital until each has received a 9% return on invested capital;
third, the balance, if any, to the partners in proportion to their
interests. Since its inception, QOCC-1 Associates has not provided
the partners with a return that exceeds 9% of their invested capital.
However, the General Partner believes that QOCC-1 Associates will
provide the partners with a return exceeding 9% of their invested
capital during the year ending December 31, 1996.
8. Deferred Expenses
-----------------
Deferred expenses consist of the following:
<TABLE>
<CAPTION>
Unamortized Balance Unamortized Balance
Description at September 30,1996 at December 31,1995
----------- -------------------- ----------------------
<S> <C> <C>
$35,072 acquisition fee for 205 Newbury St.
loan. This amount is amortized over the term
of the loan agreement. $5,687 $8,531
$113,468 acquisition fee for GCC mortgage loan.
This amount was amortized over the original term
of the loan agreement. - 8,105
$152,880 acquisition fee for investment in the
Affiliated Joint Venture. This amount is amortized
over a period of 31.5 years. 115,469 119,108
$1,203,097 acquisition fees paid to the General
Partner. Prior to June 30, 1993, this amount was
amortized over a period of 30 years. Subsequent
to June 30, 1993, the unamortized balance is
amortized over a period of 8.5 years. 636,584 727,523
</TABLE>
15
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
8. Deferred Expenses (continued)
-----------------
<TABLE>
<CAPTION>
Unamortized Balance Unamortized Balance
Description at September 30,1996 at December 31,1995
----------- -------------------- ----------------------
<S> <C> <C>
$260,132 of tenant improvements. These amounts
are amortized over the terms of the leases to which
they relate. 125,769 156,298
$584,703 of lease commissions. These amounts
are amortized over the terms of the leases to which
they relate. 255,128 297,188
---------- ----------
$1,138,637 $1,316,753
========== ==========
</TABLE>
9. Federal Income Taxes
--------------------
A reconciliation of the net income reported in the Statements of
Operations to the net income reported for federal income tax
purposes is as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
---- ----
<S> <C> <C>
Net income per Statements of Operations $1,893,010 $1,776,854
Add/(deduct): Excess of book depreciation
over tax depreciation 77,546 80,117
Excess of book amortization
over tax amortization 77,410 66,239
Other income (119,377) (214,403)
---------- ----------
Net income for federal income tax purposes $1,928,589 $1,708,807
========== ==========
</TABLE>
16
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
- -------
During the offering period, from October 2, 1987 to January 2, 1989, the
Partnership sold 2,601,552 Units representing gross proceeds (exclusive of
the John Hancock Limited Partners' contribution, which was used to pay
sales commissions) of $52,031,040. The proceeds of the offering were used
to acquire investments, fund reserves, and pay acquisition fees and
organizational and offering expenses. These investments are described more
fully in Notes 5, 6 and 7 to the Financial Statements included in Item 1 of
this Report.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1996 the Partnership had $5,047,640 in cash and cash
equivalents, $39,907 in restricted cash and $109,258 in long-term
restricted cash.
The Partnership has a working capital reserve with a current balance of
approximately 8% of the offering proceeds. Based upon the current balance
of the working capital reserve as well as the projected level of cash flows
from the Partnership's investments during the remainder of 1996, the
Partnership increased cash distributions to Investors, effective with the
May 15, 1996 distribution, from an annualized rate of 5% to an annualized
rate of 6%. Liquidity would, however, be materially adversely affected if
there were a significant reduction in revenues or significant unanticipated
operating costs, unanticipated leasing costs or unanticipated capital
expenditures. If any or all of these events were to occur, to the extent
that the working capital reserve would be insufficient to satisfy the cash
requirements of the Partnership, it is anticipated that additional funds
would be obtained through a reduction of cash distributions to Investors,
bank loans, short-term loans from the General Partner or its affiliates, or
the sale or financing of Partnership investments.
The Partnership incurred approximately $37,000 of leasing costs at the
Miami International Distribution Center and Park Square Shopping Center
properties during the nine months ended September 30, 1996. The General
Partner anticipates that the Partnership will incur an aggregate of
approximately $110,000 of leasing costs at the Park Square Shopping Center
and Miami International Distribution Center properties during the remainder
of 1996. The current balance in the working capital reserve should be
sufficient to pay such costs.
17
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
- -------------------------------
During the nine months ended September 30, 1996, approximately $4,000 of
cash generated from the Partnership's operations was used to fund non-
recurring repair and maintenance expenses incurred primarily at the Miami
International Distribution Center. The General Partner anticipates that
the Partnership will incur additional non-recurring repair and maintenance
expenses in the aggregate amount of approximately $61,000 at the Park
Square Shopping Center and Miami International Distribution Center
properties during the remainder of 1996. These additional expenses will be
funded from the operations of the Partnership's properties and are not
expected to have a significant impact on the Partnership's liquidity.
Cash in the amount of $2,154,821, generated from the Partnership's
operations, was distributed to the General Partner and the Investors during
the nine months ended September 30, 1996. Effective with the May 15, 1996
distribution, the Partnership increased quarterly cash distributions to
Investors from approximately $624,000 to approximately $755,000.
The following table summarizes the leasing activity at each of the
Partnership's equity investments during the nine months ended September 30,
1996 and scheduled leasing activity for each investment during the
remainder of 1996:
<TABLE>
<CAPTION>
Miami International Fulton Park Square Quince Orchard
Distribution Ctr. Business Park Shopping Ctr. Corporate Ctr.
----------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Square Footage 215,019 150,535 137,108 99,782
Occupancy January 1, 1996 87% 100% 86% 100%
=== ==== === ====
New Leases 0% 0% 2% 0%
Lease Renewals 23% 0% 3% 0%
Leases Expired 0% 9% 4% 0%
Occupancy September 30, 1996 87% 91% 84% 100%
=== ==== === ====
Leases Scheduled to Expire
Balance of 1996 0% 3% 2% 0%
=== ==== === ====
Leases Scheduled to Commence
Balance of 1996 0% 0% 0% 0%
=== ==== === ====
</TABLE>
18
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
- -------------------------------
A former tenant at the Miami International Distribution Center that had
occupied approximately 70,000 square feet, or 33% of the property, had been
delinquent in rental payments and expense reimbursements since July 1993
and vacated the property in September 1993. The former tenant's lease
obligations expired in December 1994. The General Partner brought an
action against the former tenant to obtain full collection of all
delinquent amounts and other amounts due under the lease agreement in the
aggregate amount of approximately $550,000. The General Partner expects
this matter to be heard by the court within the near term. Should the
Partnership prevail in the action, there can be no assurance that the
Partnership will be able to collect all, or any, of this amount. The
General Partner will continue to pursue all available legal remedies in an
effort to obtain collection from this former tenant.
The General Partner subsequently secured two replacement tenants for this
space. However, one of these tenants, leasing approximately 28,000 square
feet, or 13% of the property, and whose lease is scheduled to expire in
September 2004, vacated its space and has been delinquent in its rental
payments and expense reimbursements due since November 1994. The General
Partner filed a complaint against this tenant demanding payment for
delinquent rental amounts as well as all future obligations due under the
lease agreement. The Partnership received a final judgment in the amount
of approximately $2,010,000 on January 31, 1996. Based upon the financial
condition of the tenant, there can be no assurance that the Partnership
will be able to collect all, if any, of the judgment amount. The General
Partner continues to pursue all available legal remedies in an effort to
obtain collection from this former tenant. The General Partner also
continues to seek a replacement tenant for this space.
During October 1996, one tenant occupying approximately 50,000 square feet,
or 23% of the space at the Miami International Distribution Center, and
whose lease was scheduled to expire in November 1996, renewed its lease for
a ten-year term. Pursuant to the lease, the tenant will receive free rent
during January and February 1997. The General Partner estimates that the
Partnership will incur approximately $91,000 in leasing costs in connection
with this lease renewal during the remainder of 1996.
The Miami International Distribution Center is located in an area that the
Miami Airport Authority has targeted for future expansion of the Airport.
The Miami Airport Authority has contacted the General Partner concerning a
potential sale of the property. It is possible that, under certain
circumstances, the Miami Airport Authority could obtain this property
through its powers of eminent domain, although at this time no such plans
have been announced or otherwise communicated to the General Partner.
During May 1996, the Miami Airport Authority made an offer to purchase this
property. The General Partner is currently negotiating with the Miami
Airport Authority towards a mutually acceptable sale of the property. The
General Partner believes that the Miami Airport Authority's desire to
acquire the Miami International Distribution Center has hampered its
ability to lease the available space at the property.
19
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
- -------------------------------
Demand for available industrial space in Atlanta, Georgia, where the Fulton
Business Park is located, has increased during the past two years and
rental rates are increasing. The General Partner believes that, given
current real estate market conditions for industrial space in Atlanta, the
property will be able to retain existing tenants as well as secure a new
tenant, or tenants, for the available space at the property. Due to these
favorable real estate market conditions the General Partner listed the
Fulton Business Park for sale during May 1996.
On November 7, 1996 the board of directors of the General Partner approved
the sale of Fulton Business Park to a non-affiliated buyer for a gross
sales price of $3,450,000, subject to the successful negotiation of a
written agreement. The proposed transaction would likely close on or
before November 30, 1996. After deductions for commissions and selling
expenses incurred in connection with the sale of the property, this sale
would generate net proceeds of approximately $3,305,000 and generate a non-
recurring loss of approximately $692,000, representing the difference
between the net sales price and the property's net book value of
approximately $3,997,000 (including unamortized leasing costs of
approximately $122,000). There can be no assurance, however, that this
transaction will be successfully completed. If this transaction does not
result in the sale of the property, then the General Partner will resume
its efforts to locate another buyer for the Fulton Business Park.
The Brooklyn Park, Minnesota real estate market, including the Park Square
Shopping Center, has experienced increasing vacancy rates as well as
competitive pricing for available space in recent years. The General
Partner expects market conditions in Brooklyn Park to remain competitive
during 1996 and, therefore, no increase in market rental rates is
anticipated. The General Partner will continue to offer aggressive rental
packages in an effort to retain existing tenants as well as to secure new
tenants for the vacant space at the property.
205 Newbury Associates remained current on its minimum required debt
service payments as of September 30, 1996 and as of the date hereof. The
General Partner has no reason to believe, based upon current information
and events, that the minimum required debt service payments will not
continue to be met or that the outstanding principal balance of the loan
will not be repaid. However, should 205 Newbury Associates fail to make
the minimum required debt service payments, there would be a material
adverse effect on the Partnership's liquidity and on the carrying value of
the mortgage loan. In addition, should there be an unfavorable change in
the financial status of the borrower, there could be a material adverse
affect on the carrying value of the mortgage loan. The General Partner
will continue to monitor the operations of the property and the financial
condition of the borrower.
20
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
- -------------------------------
The mortgage loan to the General Camera Corporation ("GCC") came due on
July 1, 1996. At that time, GCC did not have sufficient cash to pay the
entire outstanding principal balance of the loan in the amount of
$4,606,110. GCC requested a three month extension of time in which to
satisfy the loan while it continued to pursue alternate financing. The
General Partner granted GCC this extension in consideration of GCC making
an additional one-time payment of $250,000 on July 1, 1996 to further
reduce the principal balance of the loan. In addition, GCC was required to
make the minimum monthly payment of $85,416 from July 1, 1996 through
September 1, 1996, which obligations it has met. On July 1, 1996, GCC made
the $250,000 payment as required by the extension agreement. During August
1996, GCC made an additional payment of $125,000 to further reduce the
outstanding principal balance of the loan. The entire outstanding
principal balance of the loan, as extended, plus any accrued but unpaid
interest came due on October 1, 1996.
During the third quarter of 1996, GCC requested an additional three month
extension of time in which to satisfy the loan while it continues to pursue
alternate financing. The General Partner granted GCC this extension in
consideration of GCC making an additional payment in the aggregate amount
of $400,000 to reduce the outstanding principal balance of the loan. In
addition, GCC will continue to make monthly loan payments of $85,416 from
October 1, 1996 through December 1, 1996. On October 11, 1996, and
November 8, 1996, GCC made additional payments of $200,000 each, as
required by the extension agreement. The entire unamortized principal
balance of $3,545,361 and all accrued but unpaid interest will be due on
January 1, 1997.
The General Partner believes, based upon current information and events,
that GCC may not be able to pay the entire outstanding principal balance of
the loan, as extended, on January 1, 1997. Should GCC fail to pay the
entire outstanding balance of the loan, the General Partner will pursue all
available remedies, including, but not limited to, foreclosing on the
property and pursuing the personal guaranties of GCC's principal
stockholders, in order to collect upon all amounts due. The General
Partner believes that the entire principal balance of the loan will
ultimately be collectible. Should the General Partner fail in its efforts
to collect upon amounts due through foreclosure or collection on the
personal guaranties, there could be a material adverse affect on the
carrying value of the mortgage loan. The General Partner will continue to
monitor the operations of GCC and the financial condition of both GCC and
the guarantors of the loan.
21
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
- -------------------------------
The General Partner had the Park Square Shopping Center property
independently appraised during the first quarter of 1996. Based upon the
appraiser's investigation and analysis, the property's market value is
estimated to be approximately $9,000,000. The net book value of the Park
Square Shopping center property of approximately $10,023,000 at September
30, 1996 was evaluated in comparison to its estimated future undiscounted
cash flows and the recent independent appraisal and, based upon such
evaluation, the General Partner determined that no permanent impairment in
value exists and that a write-down in value was not required. The
Partnership's cumulative investment in the property before accumulated
depreciation is approximately $12,886,000.
The General Partner evaluated the carrying value of each of the
Partnership's properties and its joint venture investment as of December
31, 1995 by comparing each such carrying value to the related property's
future undiscounted cash flows and the then most recent internal appraisal
in order to determine whether any permanent impairment in values existed.
In addition, the General Partner evaluated the status of its mortgage
investments and their ultimate collectibility as of December 31, 1995.
Based upon such evaluations, the General Partner determined that no
permanent impairment in values existed and, therefore, no write-downs were
recorded.
The General Partner will continue to conduct property valuations, using
internal or independent appraisals, in order to determine whether a
permanent impairment in value exists on any of the Partnership's
properties.
Results of Operations
- ---------------------
Net income for the nine months ended September 30, 1996 was $1,893,010, as
compared to net income of $1,776,854 for the same period in 1995. This
increase in net income of approximately 7% is primarily due to an increase
in rental income collected at the Partnership's equity real estate
investments.
22
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
- ---------------------
Average occupancy for the Partnership's equity real estate investments was
as follows:
Nine Months Ended September 30,
1996 1995
---- ----
Miami International Distribution Center 87% 87%
Fulton Business Park 91% 86%
Park Square Shopping Center 85% 85%
Quince Orchard Corporate Center
(Affiliated Joint Venture) 100% 100%
Rental income for the nine months ended September 30 1996 increased by
$115,217, or 6%, as compared to the same period in 1995. Rental income
increased by 8% between periods at the Fulton Business Park property
primarily due to increases in average occupancy. Rental income increased
by 6% between periods at the Miami International Distribution Center
property primarily due to increases in the rental rates paid by certain
tenants at the property. Rental income increased by 6% at the Park Square
Shopping Center property due to increases in the rental rates paid by
certain tenants at the property as well as a difference in the timing of
the anchor tenant's payment of its annual reconciliation of percentage
rental payments.
The Partnership's share of property operating expenses for the nine months
ended September 30, 1996 decreased by $22,225, or 6%, as compared to the
same period in 1995. The Partnership's share of property operating
expenses at the Fulton Business Park declined by 14% between periods
primarily due to the fact that a refund of a portion of a prior year's real
estate taxes is included in the 1996 results. Excluding this amount,
property operating expenses were consistent between periods. The
Partnership's share of property operating expenses at the Miami
International Distribution Center decreased by 8% between periods primarily
due to non-recurring repair and maintenance expenses incurred at the
property during the period in 1995. This decline was partially offset by
legal costs incurred during 1996 in connection with the collection of past
due rents from certain former tenants at the property. The Partnership's
share of property operating expenses was consistent between periods at the
Park Square Shopping Center.
Amortization of deferred expenses for the nine months ended September 30,
1996 increased by $16,334, or 8%, as compared to the same period in 1995.
This increase is primarily due to leasing costs incurred at the Fulton
Business Park during 1995 and the subsequent amortization of such costs.
23
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
- ---------------------
General and administrative expenses for the nine months ended September 30,
1996 increased by $17,601, or 11%, as compared to the same period in 1995.
This increase is primarily due to an increase in the time required to be
expended by the General Partner in connection with managing the
Partnership's properties, including focusing on increasing their
occupancies and on negotiating the potential sale of one of the properties.
The General Partner believes that inflation has had no significant impact
on income from operations during the nine months ended September 30, 1996,
and the General Partner anticipates that inflation will not have a
significant impact during the remainder of 1996.
24
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Cash Flow
- ---------
The following table provides the calculations of Cash from Operations and
Distributable Cash from Operations which are calculated in accordance with
Section 17 of the Partnership Agreement:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
---- ----
<S> <C> <C>
Net cash provided by operating
activities (a) $2,956,719 $2,664,215
Net change in operating assets and liabilities (a) (191,900) (230,607)
---------- ----------
Net cash provided by operations (a) 2,764,819 2,433,608
Increase in working capital reserves (478,607) (541,570)
---------- ----------
Cash from operations (b) 2,286,212 1,892,038
Decrease in working capital reserves - -
---------- ----------
Distributable cash from operations (b) $2,286,212 $1,892,038
Allocation to General Partner $22,862 $18,920
Allocation to Investors 2,263,350 1,873,118
Allocation to John Hancock Limited Partner - -
---------- ----------
$2,286,212 $1,892,038
========== ==========
</TABLE>
(a) Net cash provided by operating activities, net change in
operating assets and liabilities, and net cash provided by
operations are as calculated in the Statements of Cash Flows
included in Item 1 of this Report.
(b) As defined in the Partnership Agreement. Distributable Cash
from Operations should not be considered as an alternative to
net income (i.e. not an indicator of performance) or to
reflect cash flows or availability of discretionary funds.
During the fourth quarter of 1996, the Partnership will make a cash
distribution in the amount of $754,450 to the Investors, representing a 6%
annualized return to all Investors of record at September 30, 1996, based
on Distributable Cash from Operations for the quarter then ended.
The source of future cash distributions is dependent upon cash generated by
the Partnership's properties and the use of working capital reserves. The
General Partner currently anticipates that the Partnership's Distributable
Cash from Operations during the fourth quarter of 1996 will be comparable
to that generated during each of the first three quarters of 1996.
25
<PAGE>
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
In February 1996, a putative class action complaint was filed in
the Superior Court in Essex County, New Jersey by a single
investor in the Partnership. The complaint named as defendants
the Partnership, the General Partner, two limited partnerships
affiliated with the Partnership, certain other affiliates of the
General Partner, and certain unnamed officers, directors,
employees and agents of the named defendants.
The plaintiff sought unspecified damages stemming from alleged
misrepresentations and omissions in the marketing and offering
materials associated with the Partnership and two limited
partnerships affiliated with the Partnership. The complaint
alleged, among other things, that the marketing materials for the
Partnership and the affiliated limited partnerships did not
contain adequate risk disclosures.
The General Partner believes the allegations are totally without
merit and intends to vigorously contest the action.
There are no other material pending legal proceedings, other than
ordinary routine litigation incidental to the business of the
Partnership, to which the Partnership is a party or to which any
of its properties is subject.
Item 2. Changes in Securities
There were no changes in securities during the third quarter of
1996.
Item 3. Defaults upon Senior Securities
There were no defaults upon senior securities during the third
quarter of 1996.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders of
the Partnership during the third quarter of 1996.
Item 5. Other information
On September 30, 1996 the Partnership filed Form 10-K/A to amend
the Report on Form 10-K dated December 31, 1995. This amendment
included the audited financial statements for the year ended
December 31, 1995, of QOCC-1 Associates, the entity in which the
Partnership holds its joint venture investment.
Item 6. Exhibits and Reports on form 8-K
(a) There are no exhibits to this report
(b) There were no Reports on Form 8-K filed during the third
quarter of 1996.
26
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
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, on the 14th day of November, 1996.
John Hancock Realty Income Fund-II
Limited Partnership
By: John Hancock Realty Equities, Inc.,
General Partner
By: WILLIAM M. FITZGERALD
-------------------------------
William M. Fitzgerald, President
By: RICHARD E. FRANK
-------------------------------
Richard E. Frank, Treasurer
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000818257
<NAME> JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,196,805
<SECURITIES> 0
<RECEIVABLES> 6,001,743
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,294,703
<PP&E> 24,396,994
<DEPRECIATION> 4,995,238
<TOTAL-ASSETS> 39,395,927
<CURRENT-LIABILITIES> 583,659
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 38,812,268
<TOTAL-LIABILITY-AND-EQUITY> 39,395,927
<SALES> 0
<TOTAL-REVENUES> 3,122,644
<CGS> 0
<TOTAL-COSTS> 543,425
<OTHER-EXPENSES> 686,209
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,893,010
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,893,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,893,010
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.72
</TABLE>
