UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995
or
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 0-17094
USAA Real Estate Income Investments II Limited Partnership
(Exact name of registrant as specified in its charter)
Texas 74-2473951
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 Robert F. McDermott Fwy., IH 10 West, Suite 600
San Antonio, Texas 78230-3884
(Address of principal executive offices) (Zip Code)
(210) 498-7391
(Registrant's telephone number, including area code)
N/A
(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.
[X] Yes [ ] No
1
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
USAA REAL ESTATE INCOME INVESTMENTS II LIMITED PARTNERSHIP
Condensed Balance Sheets
<CAPTION>
September 30,
1995 June 30,
(Unaudited) 1995
<S> <C> <C>
Assets
Rental properties, net $ 8,122,598 8,059,941
Investment in joint venture 2,172,212 2,190,057
Temporary investments, at cost
which approximates market value -
Money market fund 1,942,195 1,958,789
Cash 18,991 48,582
Cash and cash equivalents 1,961,186 2,007,371
Accounts receivable -- 6,000
Deferred charges and other assets 218,700 231,117
$ 12,474,696 12,494,486
Liabilities and Partners' Equity
Accounts payable, including amounts due
to affiliates of $5,422 and $7,290 $ 15,983 9,904
Accrued expenses and other liabilities 120,153 164,480
Total liabilities 136,136 174,384
Partners' equity
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 605,744 582,789
Cumulative distributions (647,614) (626,505)
(40,870) (42,716)
Limited Partners (27,141 interests):
Capital contributions, net of offering
costs 12,756,270 12,756,270
Cumulative net income 5,451,688 5,245,089
Cumulative distributions (5,828,528) (5,638,541)
12,379,430 12,362,818
Total Partners' equity 12,338,560 12,320,102
Commitment (note 3)
$ 12,474,696 12,494,486
See accompanying notes to condensed financial statements.
</TABLE>
2
<PAGE>
<TABLE>
USAA REAL ESTATE INCOME INVESTMENTS II LIMITED PARTNERSHIP
Condensed Statements of Income
Three months ended September 30, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Income
Rental income $ 260,375 257,042
Equity in earnings of joint venture 40,355 39,425
Less direct expenses, including depreciation
of $59,760 and $59,759 (63,689) (62,734)
Net operating income 237,041 233,733
Interest income (note 1) 27,869 20,261
Total income 264,910 253,994
Expenses
General and administrative (note 1) 35,356 37,121
Net income $ 229,554 216,873
Net income per limited partnership interest $ 7.61 7.19
See accompanying notes to condensed financial statements.
</TABLE>
3
<PAGE>
<TABLE>
USAA REAL ESTATE INCOME INVESTMENTS II LIMITED PARTNERSHIP
Condensed Statements of Cash Flows
Three months ended September 30, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 229,554 216,873
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 59,760 59,759
Amortization 632 632
Earnings from joint venture (40,355) (39,425)
Distributions from joint venture 58,200 50,925
Decrease in accounts receivable 6,000 7,900
Decrease in deferred charges and
other assets 11,785 13,304
Increase (decrease) in accounts payable and
other liabilities (38,248) 64,230
Cash provided by operating activities 287,328 374,198
Cash flows used in investing activities -
Additions to rental properties (122,417) --
Cash flows used in financing activities -
Payment of distributions (211,096) (263,871)
Net increase (decrease) in cash and cash equivalents (46,185) 110,327
Cash and cash equivalents at beginning of period 2,007,371 1,824,154
Cash and cash equivalents at end of period $ 1,961,186 1,934,481
See accompanying notes to condensed financial statements.
</TABLE>
4
<PAGE>
Notes to Condensed Financial Statements
September 30, 1995
(Unaudited)
1. Transactions with Affiliates
A summary of transactions with affiliates follows for the three
months ended September 30, 1995:
Quorum
USAA Real Estate
Real Estate Services
Company Corporation
Reimbursement
of expenses (a)$ 15,056 622
Management fees -- 2,435
Total $ 15,056 3,057
(a) Reimbursement of expenses represents amounts paid or
accrued as reimbursement of expenses incurred on behalf
of the Partnership at actual cost and does not include
any mark-up or items normally considered as overhead.
2. Other
Reference is made to the financial statements in the Annual
Report filed as part of the Form 10-K for the year ended June
30, 1995 with respect to significant accounting and financial
reporting policies as well as to other pertinent information
concerning the Partnership. Information furnished in this
report reflects all normal recurring adjustments which are, in
the opinion of management, necessary to a fair presentation of
the results for the periods presented. Further, the operating
results presented for these interim periods are not
necessarily indicative of the results which may occur for the
remaining nine months of this fiscal year or any other future
period.
The financial information included in this interim report as
of September 30, 1995 and for the three months ended September
30, 1995 and 1994 has been prepared by management without
audit by independent certified public accountants who do not
express an opinion thereon. The Partnership's annual report
includes audited financial statements.
3. Commitment
In 1995, the Partnership completed negotiations with a tenant
to expand the facilities under lease and to extend the term of
the lease. The original lease has been extended from April
1998 to July 2010. The Partnership has committed to funding
approximately $1.7 million to provide approximately 45,200
square feet of additional area. The expansion is expected to
be completed in January 1996, utilizing existing working
capital to fund the construction.
5
<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At September 30, 1995, the Partnership had cash of $18,991 and
temporary investments of $1,942,195. Included in the Partnership's
cash and cash equivalents was the working capital reserve.
Deferred charges and other assets included an acquisition fee paid
to USAA Investors II, Inc. on the joint venture interest, deferred
rent resulting from recognition of income as required by generally
accepted accounting principles and prepaid insurance. Accounts
payable included amounts due to affiliates for reimbursable
expenses and to third parties for expenses incurred for operations.
Accrued expenses and other liabilities consisted primarily of a
security deposit, prepaid rent and accrued property taxes.
During the quarter ended September 30, 1995, the Partnership
distributed $189,987 to Limited Partners and $21,109 to the General
Partner for a total of $211,096.
In March 1995, the Partnership completed negotiations with
Continental Plastic Containers, Inc. to expand the facilities under
lease and to extend the term of the lease at the Continental
Plastic Buildings. The original lease expiration has been extended
from April 1998 to July 2010. The Partnership has committed to
funding approximately $1.7 million to provide approximately 45,200
square feet of additional area. Approximately $200,000 has been
spent through September 30, 1995. This expansion is expected to be
completed in January 1996, utilizing existing working capital to
fund the construction.
Future liquidity is expected to result from cash generated from
operations of the properties and ultimately through the sale of
such properties, equity in earnings of the joint venture, temporary
investment of funds, and the possible participation in the profits
from the sale of the underlying assets of the joint venture.
Results of Operations
For the three months ended September 30, 1995 and 1994, income was
generated from rental income from the income-producing properties,
earnings from the joint venture investment and interest income
earned on the funds invested in temporary investments.
Expenses incurred during the same periods were associated with
operation of the Partnership's properties and various other costs
required for administration of the Partnership.
6
<PAGE>
Rental properties at September 30, 1995 increased from June 30,
1995 due to building addition costs at Continental Plastic offset
by depreciation. The investment in the joint venture decreased by
the amount of distributions received from the joint venture offset
by increases as a result of equity in earnings of the joint venture
which was derived from the net income of the Sequoia Plaza -
Building I property. Accounts receivable decreased due to payment
of reimbursable expenses by a tenant. Accrued expenses and other
liabilities at September 30, 1995 decreased from June 30, 1995
primarily due to a decrease in prepaid rent.
Rental income for the three months ended September 30, 1995 was
higher than the three months ended September 30, 1994 as a result
of a rent increase based on the Consumer Price Index (CPI) at
Bowater.
A higher cash balance and an increase in interest rates resulted in
an increase in interest income for the three months ended September
30, 1995 as compared to the three months ended September 30, 1994.
General and administrative expenses for the three months ended
September 30, 1995 decreased as compared to the three months ended
September 30, 1994 due to a decrease in state filing fees.
7
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Sequentially
Exhibit Numbered
No. Description Page
4 Amended and Restated Agreement of
Limited Partnership dated as of February
11, 1988, attached as Exhibit A to
the Partnership's Prospectus dated
February 11, 1988, filed pursuant to
Rule 424(b), Registration No. 33-16479
and incorporated herein by this reference.
--
27 Financial Data Schedule 10
(b) During the quarter ended September 30, 1995, there were no
Current Reports on Form 8-K filed.
8
<PAGE>
FORM 10-Q
SIGNATURES
USAA REAL ESTATE INCOME INVESTMENTS II LIMITED PARTNERSHIP
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.
USAA REAL ESTATE INCOME INVESTMENTS II
LIMITED PARTNERSHIP (Registrant)
BY: USAA Investors II, Inc.,
General Partner
November 9, 1995 BY: /s/Edward B. Kelley
Edward B. Kelley
Chairman, President and
Chief Executive Officer
November 9, 1995 BY: /s/Martha J. Barrow
Martha J. Barrow
Vice President -
Administration and
Finance/Treasurer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,961,186
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,122,598
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,474,696
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 12,338,560
<TOTAL-LIABILITY-AND-EQUITY> 12,474,696
<SALES> 0
<TOTAL-REVENUES> 300,730
<CGS> 0
<TOTAL-COSTS> 63,689
<OTHER-EXPENSES> 35,356
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 229,554
<INCOME-TAX> 0
<INCOME-CONTINUING> 229,554
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229,554
<EPS-PRIMARY> 7.61
<EPS-DILUTED> 0
</TABLE>
