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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): August 30, 2000
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Massachusetts 0-17664 04-2969061
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(STATE OF (COMMISSION (IRS EMPLOYER
ORGANIZATION) FILE NO.) IDENTIFICATION NO.)
200 Clarendon Street
Boston, MA 02116 (800) 722-5457
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(ADDRESS OF PRINCIPAL EXECUTIVE (REGISTRANT'S TELEPHONE
OFFICES, INCLUDING ZIP CODE) NUMBER, INCLUDING AREA CODE)
Not Applicable
-------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Page 1 of 8
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JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
DISPOSITION OF THE PARK SQUARE SHOPPING CENTER
On August 30, 2000, the Partnership sold Park Square Shopping Center, (the
"property"), a 137,108 square foot community shopping center located in Brooklyn
Park, Minnesota, for a net sales price of approximately $6,310,000, after
deductions for commissions and selling expenses incurred in connection with the
sale of the property. The sale of the property resulted in a non-recurring loss
of approximately $539,000, which represents the difference between the net sales
price and the property's carrying value of approximately $6,849,000. Earlier in
the year, as a result of changes in the status of the supermarket anchor and in
general, the continued weakness in local real estate market conditions for
properties similar to Park Square Shopping Center, the General Partner
determined that the value of the property had declined and as reported in the
June 30, 2000 Quarterly Report, the General Partner wrote down the carrying
amount of the property by approximately $2,108,000.
Based upon the General Partner's analysis of comparable sales transactions and
its review of the offers received during the property's marketing period, the
General Partner accepted the offer from Mission Mountain, LLC (the "Buyer").
There is no relationship between the Buyer and the Partnership or any associate,
director or officer of the General Partner.
The sale was made pursuant to a Purchase and Sale Agreement dated June 9, 2000
and as finally amended on August 16, 2000, which is included as Exhibit 1 of
this report.
ITEM 7 - FINANCIAL STATEMENTS
(A) Financial Statements
Pro Forma Balance Sheet at June 30, 2000.............................. 3
Pro Forma Statement of Operations for the Six Months
Ended June 30, 2000.............................................. 4
Pro Forma Statement of Operations for the Year Ended
December 31, 1999................................................ 5
Notes to Pro Forma Financial Statements............................... 6
(B) Exhibits
1. Purchase and Sale Agreement (excluding exhibits) between
John Hancock Realty Income Fund-II Limited Partnership
and Mission Mountain LLC dated June 9, 2000 and amendments....... 9
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JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
On August 30, 2000, the Partnership sold the Park Square Shopping Center to the
Buyer for a net sales price of approximately $6,310,000. The Pro Forma Balance
Sheet reflects the financial position of the Partnership as if the Park Square
Shopping Center property had been sold on June 30, 2000. The Pro Forma Statement
of Operations for the six months ended June 30, 2000 reflects the continued
operations of the Partnership as if the Park Square Shopping Center property had
been sold on December 31, 1999. In addition, the Pro Forma Statement of
Operations for the year ended December 31, 1999 reflects the continued
operations of the Partnership as if the Park Square Shopping Center property had
been sold on December 31, 1998.
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
PRO FORMA BALANCE SHEET
JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustment for
Summary Park Square Pro Forma
June 30, Shopping June 30,
2000 Center 2000
----------- -------------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,768,011 $ 6,309,922 $ 9,077,933
Restricted cash 15,513 -- 15,513
Other current assets 10,320 -- 10,320
----------- ----------- -----------
Total current assets 2,793,844 9,103,766
Property held for sale 6,849,375 (6,849,375) --
Investment in joint venture 6,801,214 -- 6,801,214
Deferred expenses, net of accumulated
amortization of $1,076,827 in 2000 279,150 -- 279,150
----------- ----------- -----------
Total assets $16,723,583 $ (539,453) $16,184,130
=========== =========== ===========
Current liabilities:
Accounts payable and accrued expenses $ 57,654 $ -- $ 57,654
Accounts payable to affiliates 136,333 -- 136,333
----------- ----------- -----------
Total current liabilities 193,987 -- 193,987
Partners' equity/(deficit):
General Partner (164,656) (5,395) (170,051)
Limited Partners 16,694,252 (534,058) 16,160,194
----------- ----------- -----------
Total partners' equity 16,529,596 (539,453) 15,990,143
----------- ----------- -----------
Total liabilities and partners' equity $16,723,583 $ (539,453) $16,184,130
=========== =========== ===========
</TABLE>
See Notes to Pro Forma Financial Statements
3
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JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Historical
Summary Pro Forma Pro Forma
For the Six Adjustment for For the Six
Months Ended Park Square Months Ended
June 30, Shopping June 30,
2000 Center 2000
------------ -------------- ------------
<S> <C> <C> <C>
Income:
Rental income $ 527,381 $ (527,381) $ --
Interest income 77,823 -- 77,823
Income from joint venture 483,187 -- 483,187
----------- ----------- --------
Total income 1,088,391 (527,381) 561,010
Expenses:
Depreciation 87,302 (87,302) --
Property operating expenses 56,834 (56,834) --
Amortization of deferred expenses 68,475 (5,421) 63,054
Property write-downs 2,017,976 (2,017,976) --
General and administrative 123,715 -- 123,715
----------- ----------- --------
Total expenses 2,354,302 (2,167,533) 186,769
----------- ----------- --------
Net income $(1,265,911) $ 1,640,152 $374,241
=========== =========== ========
Allocation of net income:
General Partner $ (12,659) $ 16,402 $ 3,743
John Hancock Limited Partner -- -- --
Investors (1,253,252) 1,623,750 370,498
----------- ----------- --------
$(1,265,911) $ 1,640,152 $374,241
=========== =========== ========
Net income per Unit $ (0.48) $ 0.62 $ 0.14
=========== =========== ========
</TABLE>
See Notes to Pro Forma Financial Statements
4
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JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Historical Pro Forma Pro Forma
Summary For Adjustment for For the
the Year Ended Park Square Year Ended
December 31, Shopping December 31,
1999 Center 1999
-------------- -------------- -----------
(Audited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Income:
Rental income $1,849,088 $(1,099,518) $ 749,570
Interest income 303,698 -- 303,698
Income from joint venture 730,711 -- 730,711
Gain on sale of property 5,284,579 -- 5,284,579
---------- ----------- ----------
Total income 8,168,076 (1,099,518) 7,068,558
Expenses:
Depreciation 380,391 (349,212) 31,179
Property operating expenses 382,703 (156,969) 225,734
General and administrative 316,885 -- 316,885
Amortization of deferred expenses 165,496 (22,083) 143,413
---------- ----------- ----------
Total expenses 1,245,475 (528,264) 717,211
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Net income $6,922,601 $ (571,254) $6,351,347
========== =========== ==========
Allocation of net income:
General Partner $ 64,457 $ (5,713) $ 58,744
John Hancock Limited Partner 196,372 -- 196,372
Investors 6,661,772 (565,541) 6,096,231
---------- ----------- ----------
$6,922,601 $ (571,254) $6,351,347
========== =========== ==========
Net income per Unit $ 2.56 $ (0.22) $ 2.34
========== =========== ==========
</TABLE>
See Notes to Pro Forma Financial Statements
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JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Pro Forma Financial Statements
(Unaudited)
NOTE 1 - PARK SQUARE SHOPPING CENTER
On August 30, 2000, the Partnership sold the Park Square Shopping Center
property in Brooklyn Park, Minnesota (the "property"), for a net sales price of
approximately $6,310,000, after deductions for commissions and selling expenses
incurred in connection with the sale of the property. The sale of the property
resulted in a non-recurring loss of approximately $539,000 which represents the
difference between the net sales price and the property's carrying value of
approximately $6,849,000. Earlier in the year, as a result of changes in the
status of the supermarket anchor and in general, the continued weakness in local
real estate market conditions for properties similar to Park Square Shopping
center, the General Partner determined that the value of the property had
declined and as reported in the June 30, 2000 Quarterly Report, the General
Partner wrote down the carrying amount of the property by approximately
$2,108,000.
The historical financial statements are adjusted to show the effects resulting
from the sale of the Park Square Shopping Center property on the Partnership's
operations, assets and liabilities. The Pro Forma Balance Sheet at June 30, 2000
reflects the financial position of the Partnership as if the property had been
sold on June 30, 2000. The Pro Forma Statement of Operations for the six months
ended June 30, 2000 reflects the continued operations of the Partnership as if
the property had been sold on December 31, 1999. In addition, the Pro Forma
Statement of Operations for the year ended December 31, 1999 reflects the
continued operations of the Partnership as if the property had been sold on
December 31, 1998.
NOTE 2 - DISTRIBUTIONS AND ALLOCATIONS
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.
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.
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JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Pro Forma Financial Statements (continued)
(Unaudited)
NOTE 2 - DISTRIBUTIONS AND ALLOCATIONS (CONTINUED)
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.
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.
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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 on Form 8-K to be signed on its behalf by
the undersigned, hereunto duly authorized, on the 27th day of September, 2000.
John Hancock Realty Income Fund-II
Limited Partnership
By: John Hancock Realty Equities, Inc.,
General Partner
By: /s/ John M. Garrison
-----------------------------------
John M. Garrison, President
By: /s/ Virginia H. Lomasney
-----------------------------------
Virginia H. Lomasney, Treasurer
(Chief Accounting Officer)
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