UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-16873
SUMMIT INSURED EQUITY L.P. II
(Exact name of registrant as specified in its charter)
Delaware 13-3464704
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
625 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 421-5333
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Beneficial Unit Certificates
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's prospectus dated November 13, 1987 as supplemented May 12,
1988, September 27, 1988 and December 12, 1988, as filed with the Commission
pursuant to Rules 424(b) and 424(c) of the Securities Act of 1933, but only to
the extent expressly incorporated by reference in Parts I, II, III and IV.
Index to exhibits may be found on page 28
Page 1 of 35
<PAGE>
PART I
Item 1. Business.
General
Summit Insured Equity L.P. II (the "Registrant") is a limited partnership
which was formed under the laws of the State of Delaware on July 17, 1987. The
general partners of the Registrant (the "General Partners"), are RIDC II, L.P.,
a Delaware limited partnership (the "Related General Partner"), and
Prudential-Bache Properties, Inc., a Delaware corporation ("PBP"). The General
Partners manage and control the affairs of the Registrant. See Item 10,
Directors and Executive Officers of the Registrant.
On November 13, 1987 the Registrant commenced a public offering (the
"Offering") of Limited Partnership Interests and Beneficial Unit Certificates
("BUC$") managed by Prudential Securities Incorporated ("PSI"), an affiliate of
PBP, pursuant to a prospectus dated November 13, 1987 (the "Prospectus").
The Registrant received net proceeds of $22,375,000 from the offering from
2,103 investors. The Offering was completed on June 15, 1989, and no further
issuance of BUC$ is anticipated.
The Registrant's business is to purchase, on an all-cash basis, existing
income-producing shopping centers, and to improve, operate and hold such
properties for investment. As of December 31, 1996, the Registrant owned three
shopping centers and had completed the acquisition phase of its operations. See
Item 2, Properties for a description of each property.
The following list compares gross rental revenues for each of the
Registrant's investment properties as a percentage of the Registrant's total
gross revenues for each of the three years in the period ended December 31,
1996. In each year interest income accounted for the balance of gross revenues.
1996 1995 1994
---- ---- ----
Rolling Hills Square/Tucson, AZ 35% 32% 33%
Mountain Park Plaza/Atlanta, GA 28% 28% 27%
Applewood Centre/Omaha, NE 36% 39% 39%
There are two tenants in two of the shopping centers who paid rent in
excess of 10% of the Registrant's total revenue. The amounts received by the
Registrant in each of the years ended December 31, 1996, 1995 and 1994 were:
Rent
Tenant Received
------ --------
A&P Futurestore $269,496
Hy-Vee Food Stores 366,171
Insurance Policy
The Registrant has purchased an insurance policy (the "Policy") from
Continental Casualty Company ("CNA") which, in effect, will insure that the
cumulative amount of Insured Cash Available for Distribution (as defined in the
Prospectus), from all sources, as determined in accordance with the Policy and
related agreement, together with the Appraised Values of the real estate then
owned by the Registrant, will equal at least 100% of Original Contributions
allocated to investment in properties on the day on which the last property was
acquired by the Registrant (the "Final Acquisition Date"). The maximum liability
of CNA under the Policy will increase pursuant to a formula based upon the
length of time properties are held by the Registrant up to a maximum of 125%
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<PAGE>
of Original Contributions on the tenth anniversary of the Final Acquisition Date
(the "Guaranty Payment Date"). The Policy is intended to cover various economic
risks of the ownership of the properties, but does not apply to certain losses,
costs, penalties or expenses, including, among others, those arising out of any
physical loss, damage, loss of use or other physical injury to the properties.
Payment of any amount due under the Policy will be made to the Registrant
after the Guaranty Payment Date and the Policy is not a guaranty that holders of
Limited Partnership Interests will receive a return equal to 125% of their
Original Contributions to the Registrant or any lesser amount insured under the
Policy. During the acquisition phase, in order to minimize interest expense, the
Registrant utilized cash available for investment to pay the insurance premium.
On November 8, 1990, since the funds were then needed to purchase Applewood
Centre, the Registrant drew down $1,200,000 from its prearranged credit line of
$1,400,000 with Chemical Bank in order to replace the money used previously to
pay the insurance premiums. This loan was subsequently refinanced.
Competition
The real estate business is highly competitive and substantially all of the
properties acquired by the Registrant have active competition from similar
properties in their respective vicinities. See Item 2, Properties. In addition,
various other limited partnerships have been or may, in the future be, formed by
the General Partners and/or their affiliates to engage in businesses which may
be competitive with the Registrant or compete for the time and services of the
Registrant's General Partners.
Employees
The Registrant does not directly employ anyone. All services are performed
for the Registrant by its General Partners and their affiliates. The General
Partners receive compensation in connection with such activities as set forth in
Item 8, Financial Statements and Supplementary Data, Item 11, Executive
Compensation and Item 13, Certain Relationships and Related Transactions. In
addition, the Registrant reimburses the General Partners and certain of their
affiliates for expenses incurred in connection with the performance by their
employees of services for the Registrant in accordance with the Partnership
Agreement.
The Registrant has contracted with RCC Property Advisors, Inc. ("Manager"),
an affiliate of the Related General Partner, to manage all three shopping
centers. Pursuant to such arrangement, the Manager provides property management
services to the Registrant for a fee equal to 4.5% of the gross rental receipts
from the properties, which is competitive with fees paid in the areas in which
the properties are located. The Manager also receives standard leasing
commissions for space leased to new tenants and lease renewals and is reimbursed
for certain expenses. The amounts earned by the Manager during 1996, 1995 and
1994 were approximately $108,000, $114,000 and $105,000, respectively.
Four of the officers of the Related General Partner have an ownership
interest in Multi-Family Program Manager Inc., a company which provides
insurance services for the properties. The amounts earned by Multi-Family
Program Manager Inc. with respect to insurance services provided for the
properties were approximately $5,700, $5,700 and $2,500 during 1996, 1995 and
1994, respectively.
Other Events
On December 31, 1996, the United States District Court for the Southern
District of New York (the "Court") issued a preliminary approval order (the
"Order") with respect to settlement (the "Related Settlement") of the class
action litigation (the "Class Action") relating to the Registrant (In re
Prudential Securities Inc. Limited Partnership Litigation, MDL No. 1005) against
the Related General Partner and certain of its affiliates. See Note 9 to the
financial statements in Item 8. Pursuant to the stipulation of settlement
entered into with counsel for the class on December 24, 1996, the proposed
Related Settlement contemplates, among other matters, the reorganization (the
"Reorganization") of the Registrant and three other partnerships co-sponsored by
affiliates of the Related General Partner and PBP.
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<PAGE>
The proposed Related settlement and Reorganization are subject to
objections by the BUC$holders and limited partners of the Registrant as well as
each of the other concerned partnerships and final approval of the Court after
review of the proposals at a fairness hearing.
Under the proposed Reorganization plan, the BUC$holders of the Registrant
and Summit Insured Equity L.P., Summit Preferred Equity L.P. and Eagle Insured
L.P. will receive shares in a newly formed real estate investment trust. It is
anticipated that the shares will be allocated proportionately among the
partnerships and their respective investors based upon appraisals and other
factors as supported by a third party fairness opinion. Detailed information
about the proposed Related Settlement and Reorganization will be sent to
BUC$holders in the near future. The terms of the Reorganization include, among
other matters, the acquisition by affiliates of the Related Capital Company
("RCC") of PBP's general partner interest (the "PBP Interest"), transfer to the
BUC$holders of one-half of the PBP Interest, reducing fees currently payable to
the General Partners by 25%, filing an application to list the new company's
shares on an exchange and creating an infinite, as opposed to finite,
life-operating business.
In connection with the proposed Related Settlement and Reorganization, on
December 19, 1996, PBP and RCC entered into an agreement for the purchase by RCC
or its affiliates of the PBP Interest. The agreement is subject to numerous
conditions, including the effectiveness of the Related Settlement of the Class
Action and the approval of the sale and withdrawal of PBP as a general partner
of the Registrant by the Court.
Pending final approval of the Related Settlement, the Court's Order
prohibits class members (including the BUC$holders) from, among other matters,
(i) transferring their BUC$ unless the transferee agrees to be bound by the
Related Settlement; (ii) granting a proxy to object to the Reorganization; or
(iii) commencing a tender offer for the BUC$. In addition, the General Partners
are enjoined from (i) recording any transfers made in violation of the Order and
(ii) providing the list of investors in any of the partnerships which are the
subject of the Reorganization to any person conducting a tender offer.
There can be no assurance that the conditions to the closing of the
proposed Related Settlement and Reorganization will be satisfied nor that a
closing may occur in the projected time frame. In the event a settlement cannot
be reached, the Related General Partner believes it has meritorious defenses
to the consolidated complaint and intends to vigorously defend this action.
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<PAGE>
Item 2. Properties.
The Registrant owns three properties consisting of "neighborhood shopping
centers". The following is a description of these properties and locations:
<TABLE>
<CAPTION>
% Square
Feet Annualized Comparable
Name, Type Rentable Occupied Base Rent Competition
of Property Purchase Date Square at December December Anchor Within a Three-
and Location Price Purchased Feet 31, 1996 31, 1996 Tenant Mile Radius
------------ ----- --------- ---- -------- -------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rolling Hills Square $6,100,000 08/18/88 98,887 92% $536,000 Fry's Food 6 shopping
Shopping Center & Drug Store centers
Tuscon, Arizona
Mountain Park Plaza $6,650,000 12/14/89 77,686 94% $555,000 A&P 8 shopping
Shopping Center Futurestore centers
Atlanta, Georgia
Applewood Centre $7,700,000 11/08/90 101,130 93% $615,000 Hy-Vee 5 shopping
Shopping Center Food Store & centers
Omaha, Nebraska Walgreens
</TABLE>
Further information regarding the Registrant's properties may be found in
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations and in Item 14, Schedule III.
Item 3. Legal Proceedings.
See Item 1. Business - Other Events and Note 9 to the financial statements
in Item 8, Financial Statements and Supplementary Data which information is
incorporated herein by reference.
Item 4. Submission of Matters to a Vote of BUC$holders.
No matters were submitted to a vote of BUC$holders during the fourth
quarter of the fiscal year covered by this report through the solicitation of
proxies or otherwise.
PART II
Item 5. Market for the Registrant's BUC$ and Related BUC$holder Matters.
As of March 3, 1997, the Registrant had issued and has outstanding
1,005,623 Limited Partnership Interests, each representing a $25 capital
contribution to the Registrant, for aggregate gross proceeds of $25,140,575. All
of the issued and outstanding Limited Partnership Interests have been issued to
Related Insured BUC$ Associates, Inc. (the "Assignor Limited Partner"), which,
in turn, has issued BUC$ to the investors in the Registrant. Each BUC represents
all of the economic and virtually all of the ownership rights attributable to a
Limited Partnership Interest held by the Assignor Limited Partner. BUC$ may be
converted into Limited Partnership Interests at no cost to the holder, but
Limited Partnership Interests are not convertible back into BUC$. Neither the
BUC$ nor the Limited Partnership Interests are listed or quoted for trading on
an established securities exchange.
-5-
<PAGE>
The General Partners have established a policy of limited transfers of BUC$
in secondary market transactions unless, notwithstanding such transfers, the
Registrant will satisfy one or more applicable safe harbors prescribed by the
Internal Revenue Service to avoid having the Registrant classified as a publicly
traded partnership which could have adverse tax effects on investors. In order
to comply with the safe harbor provisions, the transfer of BUC$ may be
restricted. Furthermore, the Court's Order in connection with the proposed
Related Settlement of the Class Action imposes certain restrictions on the
transfer of BUC$. See Item 1. Business - Other Events.
At March 3, 1997, there were 1,895 registered holders of an aggregate of
1,005,623 BUC$.
There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Partnership Agreement. The Registrant expects that cash distributions will
continue to be paid in the future from Adjusted Cash Flows from Operations.
Distribution Information
Distributions per BUC which were paid out of the Adjusted Cash Flows from
Operations during 1996 and 1995 are set forth in the following table:
<TABLE>
<CAPTION>
Cash Distribution Approximate Total Amount Total Quarterly
for Quarter Ended Date Paid of Distribution Distribution Per BUC
- ----------------- --------- --------------- --------------------
<S> <C> <C> <C>
March 31, 1996 5/15/96 $ 232,501 $ 0.2312
June 30, 1996 8/14/96 232,501 0.2312
September 30, 1996 11/15/96 232,501 0.2312
December 31, 1996 2/14/97 232,501 0.2312
----------- --------
Total for 1996 $ 930,004 $ 0.9248
=========== ========
March 31, 1995 5/15/95 $ 232,501 $ 0.2312
June 30, 1995 8/14/95 232,501 0.2312
September 30, 1995 11/15/95 232,501 0.2312
December 31, 1995 2/14/96 232,400 0.2311
----------- --------
Total for 1995 $ 929,903 $ 0.9247
=========== ========
</TABLE>
Total Adjusted Cash from Operations is the excess of cash revenue from
operations of the Registrant's Properties over cash disbursements, without
deduction for depreciation and amortization but after a reasonable allowance for
cash reserves for repairs, replacements, contingencies, etc., as determined by
the General Partners. Total Adjusted Cash from Operations remaining after
payment of the Special Distribution to the General Partners (see Note 6 to the
Financial Statements in Item 8, below) is distributed 98% to the BUC$holders and
Limited Partners and 2% to the General Partners. Accordingly, in connection with
the distributions set forth in the table above, the General Partners received,
in payment of their 2% interest and Special Distributions, $129,052 and $129,053
during the years ended December 31, 1996 and 1995, respectively. Approximately
$401,000 of the $930,000 and $269,000 of the $930,000 paid to BUC$holders in
1996 and 1995, respectively, represent a return of capital under generally
accepted accounting principles (GAAP) basis (return of capital on a GAAP basis
is calculated as BUC$holder distributions less net income allocated to
BUC$holders.)
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<PAGE>
Item 6. Selected Financial Data.
The information set forth below presents selected financial data of the
Registrant. Additional financial information is set forth in the audited
financial statements and notes thereto contained in Item 8 hereof.
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------------------------------------------
OPERATIONS 1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 2,431,265 $ 2,478,388 $ 2,415,487 $ 2,298,576 $ 2,267,782
Total expenses (1,781,129) (1,693,479) (1,607,392) (1,549,349) (1,573,092)
------------ ------------ ------------ ------------ ------------
Net income $ 650,136 $ 784,909 $ 808,095 $ 749,227 $ 694,690
============ ============ ============ ============ ============
Net income per BUC $ 0.53 $ 0.66 $ 0.68 $ 0.62 $ 0.57
============ ============ ============ ============ ============
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------
FINANCIAL POSITION 1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total Assets $ 21,080,259 $ 21,464,518 $ 21,760,649 $ 21,978,009 $ 22,607,806
============ ============ ============ ============ ============
Note Payable $ 1,373,675 $ 1,389,944 $ 1,400,000 $ 1,400,000 $ 1,400,000
============ ============ ============ ============ ============
Total Liabilities $ 1,837,820 $ 1,813,260 $ 1,835,243 $ 1,801,641 $ 2,121,700
============ ============ ============ ============ ============
Total Partners' Capital $ 19,242,439 $ 19,651,258 $ 19,925,406 $ 20,176,368 $ 20,486,106
============ ============ ============ ============ ============
DISTRIBUTIONS
Distributions per BUC $ 0.9248 $ 0.9247 $ 0.9248 $ 0.9248 $ 0.9873
============ ============ ============ ============ ============
</TABLE>
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
The Registrant's current primary source of funds is from (i) cash flow from
operations of the shopping centers and (ii) interest earned on working capital
which is invested in money market instruments.
During the year ended December 31, 1996, cash and cash equivalents
decreased approximately $213,000 primarily as a result of capital expenditures
($182,000), leasing commisions ($141,000), an increase in deferred loan costs
($34,000) and distributions to partners ($1,059,000), which exceeded net cash
flows from operations ($1,220,000). Included in the adjustment to reconcile the
net income to net cash flows from operations is net depreciation and
amortization in the amount of approximately $598,000.
The Registrant had a loan with Principal Mutual Life Insurance Company
("Principal Mutual") which matured on December 1, 1995. On July 29, 1996, the
Registrant completed a refinancing with Principal Mutual of its mortgage in the
amount of $1,400,000 and, on that date, the existing outstanding mortgage in the
amount of $1,383,661 was paid off. The new loan with a final maturity of January
1, 2010 and a principal amount of $1,400,000, has an initial term of five years
at a fixed interest rate of 7.03% per annum. Under the terms of the loan,
principal and interest is payable in equal monthly installments of $13,405 based
on a 13.5 year amortization schedule with the unpaid principal balance becoming
fully due and payable at maturity. At the end of the initial five year term and
again at the end of year ten, there is a renewal/call option; the interest rate
will be adjusted based on an index pursuant to the loan document. This loan is
prepayable without penalty only at those times. Costs incurred in connection
with this loan will be amortized over the life of the loan. Between December 1,
1995 and the refinancing date, the Registrant made the required payments
pursuant to the terms of the matured loan.
In February 1997, a distribution of $232,501 was paid to the BUC$holders
and $4,746 to the General Partner in payment of their 2% interest from Adjusted
Cash From Operations for the quarter ended December 31, 1996.
In July 1994, A&P closed its store in the Mountain Park Plaza Shopping
Center due to reduced sales and increased competition. The Registrant continues
to receive rental revenue from the vacated tenant pursuant to the terms of the
lease and both the tenant and the Registrant are actively pursuing potential
sub-tenants or replacement tenants. As of March 15, 1997, this space has not
been re-leased.
The Registrant's investment in the shopping centers is subject to the risks
arising from ownership of commercial properties. The Registrant has invested in
shopping centers with substantial anchor tenants. Anchor tenants usually provide
stability to a shopping center and a steady source of rental payments. A
shopping center's revenues from all of its tenants can be adversely affected by
the loss of its anchor tenant. If the rental income from the shopping center
decreases, it could adversely affect distributions to BUC$holders and could
affect the price the Registrant is able to receive upon sale of the properties.
Future liquidity is expected to result from cash generated from the
operations of the properties, interest earned on funds invested in short-term
money market instruments and ultimately through the sale or refinancing of the
properties. The Registrant anticipates that future tenant and capital
improvements will be funded from cash generated from operations will be
sufficient to fund in future years the Registrant's operating expenditures, debt
service, future tenant and capital improvements and distributions.
For a discussion of the proposed settlement of the Class Action relating to
the Registrant, see Other Events in Item 1. Business above.
Management is not aware of any trends or events, commitments or
uncertainties, which have not otherwise been disclosed that will or are likely
to impact liquidity in a material way. The Registrant's investments in
properties are diversified by location so that if one area of the country is
experiencing downturns in the economy,
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<PAGE>
the remaining properties may be experiencing upswings. However, the geographic
diversification of the portfolio may not protect against a general downturn in
the national economy.
Results of Operations
The primary components of the Registrant's results of operations for the
year ended December 31, 1996 are the results of the Registrant's investments in
three shopping centers. (See Item 2 and Item 14 Schedule III)
The Registrant reviews each of its property investments for possible
impairment at least annually, and more frequently if circumstances warrant.
Impairment of properties to be held and used is determined to exist when
estimated amounts recoverable through future operations on an undiscounted basis
are below the properties' carrying value. If a property is determined to be
impaired, it is written down to its estimated fair value.
The determination of impairment is based, not only upon future cash flows,
which rely upon estimates and assumptions including expense growth, occupancy
and rental rates, but also upon market capitalization and discount rates as well
as other market indicators. The General Partners believe that the estimates and
assumptions used are appropriate in evaluating the carrying amount of the
Registrant's properties. However, changes in market conditions and circumstances
may occur in the near term which would cause these estimates and assumptions to
change, which, in turn, could cause the amounts ultimately realized upon the
sale or other disposition of the properties to differ materially from their
estimated fair value. Such changes may also require write-downs in future years.
No write-downs for impairments have been recorded as of December 31, 1996.
1996 vs. 1995
Net income per BUC was $.53 for the year ended December 31, 1996. This
decrease of $.13 or $135,000 from 1995 to 1996 was primarily attributable to the
following reasons.
Rental income decreased approximately $75,000 or 3.9% from 1995 to 1996
primarily attributable to a decrease in occupancy at Applewood Centre.
Recovery of common area maintenance charges increased approximately $45,000
from 1995 to 1996 primarily due to reimbursements for improvements at Rolling
Hills Square.
Operating expenses decreased approximately $7,000 from 1995 to 1996
primarily due to the payment by Applewood Centre of the gas and electric
expenses for one of the tenants in 1995 for which the reimbursement in November
1995 was included in rental income.
Repairs and maintenance increased approximately $73,000 from 1995 to 1996
primarily due to an increase in landscaping, painting and parking lot repairs at
Rolling Hills Square.
Bad debt expense decreased approximately $15,000 from 1995 to 1996
primarily due to a decrease in direct write-offs in 1996.
1995 vs. 1994
Net income per BUC was $.66 for the year ended December 31, 1995. This
decrease of $.02 or $23,000 from 1994 to 1995 was primarily attributable to the
reasons below.
Rental income increased approximately $80,000 or 4.3% from 1994 to 1995.
This increase was primarily attributable to an increase in occupancy at
Applewood Centre from 95% as of December 31, 1994 to 97% as of December 31,
1995. Rolling Hills Square and Mountain Park Plaza, with occupancy rates of 88%
and 97% at December 31, 1995, respectively, had increases in rental income due
to fewer rental concessions in 1995.
-9-
<PAGE>
Interest income increased approximately $7,000 from 1994 to 1995 primarily
due to higher interest rates and invested balances in 1995.
General and administrative expenses increased approximately $20,000 from
1994 to 1995 primarily due to the timing of certain accruals recorded in the
respective periods.
Operating expenses increased approximately $8,000 from 1994 to 1995
primarily due to the payment by Applewood Centre of the gas and electric
expenses for one of the tenants in 1995 for which the reimbursement in November
1995, included in rental income.
Repairs and maintenance increased approximately $34,000 from 1994 to 1995
primarily due to increased snow removal at Applewood Centre and landscaping
performed at Rolling Hills Square, of which a portion is expected to be
recovered through common area maintenance charges in subsequent quarters.
Bad debt expense increased approximately $35,000 from 1994 to 1995
primarily due to an increase in direct write-offs in 1995.
Item 8. Financial Statements and Supplementary Data
(a)1. Financial Statements
<TABLE>
<S> <C>
Independent Auditors' Report 11
Statements of Financial Condition as of December 31, 1996 and 1995 12
Statements of Income for the years ended December 31, 1996, 1995 and
1994 13
Statements of Changes in Partners' Capital (Deficit) for the three
years ended December 31, 1996, 1995 and 1994 14
Statements of Cash Flows for the years ended December 31, 1996, 1995,
and 1994 15
Notes to Financial Statements 16
</TABLE>
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[Letterhead of Deloitte & Touche LLP]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Summit Insured Equity L.P. II
New York, New York
We have audited the accompanying statements of financial condition of
Summit Insured Equity L.P. II (a Delaware Limited Partnership) as of December
31, 1996 and 1995, and the related statements of income, changes in partners'
capital (deficit) and cash flows for each of the three years in the period ended
December 31, 1996. Our audits also included the financial statement schedules
listed in Item 14(a)2. These financial statements and financial statement
schedules are the responsibility of the General Partners. Our responsibility is
to express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Summit Insured Equity L.P. II as of December
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/DELOITTE & TOUCHE LLP
New York, New York
March 20, 1997
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SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
ASSETS
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Property and equipment, net of accumulated depreciation of
$2,564,790 and $2,180,124, respectively (Note 4) $ 18,530,554 $ 18,742,999
Cash and cash equivalents 1,517,177 1,729,819
Accounts receivable-tenants, net of allowance for doubtful
accounts of $8,000 and $10,000, respectively 199,988 173,846
Deferred insurance costs, net of accumulated amortization
of $922,416 and $772,835, respectively (Note 3) 573,395 722,976
Deferred loan costs, net of accumulated amortization of
$42,713 and $31,892, respectively (Note 3) 31,312 7,974
Deferred leasing commissions, net of accumulated amortization
of $68,525 and $46,703, respectively (Note 3) 178,766 80,360
Other assets 49,067 6,544
------------ ------------
Total Assets $ 21,080,259 $ 21,464,518
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Note payable (Note 8) $ 1,373,675 $ 1,389,944
Accounts payable and other liabilities 166,258 131,085
Accrued real estate taxes 143,186 142,806
Due to General Partners and affiliates (Note 5) 154,701 149,425
------------ ------------
Total Liabilities 1,837,820 1,813,260
------------ ------------
Contingencies (Note 9)
Partners' Capital (Deficit):
Limited Partners (1,005,623 BUC$ issued and outstanding) 19,318,933 19,719,573
General Partners (76,494) (68,315)
------------ ------------
Total Partners' Capital 19,242,439 19,651,258
------------ ------------
Total Liabilities and Partners' Capital $ 21,080,259 $ 21,464,518
============ ============
</TABLE>
See notes to financial statements
-12-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Rental income $1,866,910 $1,942,339 $1,862,043
Recovery of common area maintenancce charges 243,455 198,906 215,928
Real estate tax reimbursements 278,576 294,912 306,417
Interest income 31,527 29,092 21,849
Other 10,797 13,139 9,250
---------- ---------- ----------
Total revenues 2,431,265 2,478,388 2,415,487
---------- ---------- ----------
Expenses:
General and administrative 119,002 131,093 111,588
General and administrative - related parties (Note 5) 197,186 203,184 205,904
Operating 34,160 41,569 33,585
Repairs and maintenance 282,516 209,154 175,335
Real estate taxes 370,488 357,516 353,742
Insurance 48,377 48,175 53,476
Interest 111,458 112,700 122,500
Bad debt 20,428 35,649 222
Depreciation and amortization 597,514 554,439 551,040
---------- ---------- ----------
Total expenses 1,781,129 1,693,479 1,607,392
---------- ---------- ----------
Net income $ 650,136 $ 784,909 $ 808,095
========== ========== ==========
Allocation of Net Income:
Limited Partners $ 529,263 $ 661,340 $ 684,063
========== ========== ==========
General Partners $ 10,801 $ 13,497 $ 13,960
========== ========== ==========
Special Distributions to General Partners (Note 6) $ 110,072 $ 110,072 $ 110,072
========== ========== ==========
Net income per BUC $ .53 $ .66 $ .68
========== ========== ==========
</TABLE>
See notes to financial statements
-13-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Total Limited Partners General Partners
------------ ---------------- ----------------
<S> <C> <C> <C>
Partners' capital (deficit) - January 1, 1994 $ 20,176,368 $ 20,234,178 $ (57,810)
Net income 808,095 684,063 124,032
Distributions (1,059,057) (930,004) (129,053)
------------ ------------ ------------
Partners' capital (deficit) - December 31, 1994 19,925,406 19,988,237 (62,831)
Net income 784,909 661,340 123,569
Distributions (1,059,057) (930,004) (129,053)
------------ ------------ ------------
Partners' capital (deficit) - December 31, 1995 19,651,258 19,719,573 (68,315)
Net income 650,136 529,263 120,873
Distributions (1,058,955) (929,903) (129,052)
------------ ------------ ------------
Partners' capital (deficit) - December 31, 1996 $ 19,242,439 $ 19,318,933 $ (76,494)
============ ============ ============
</TABLE>
See notes to financial statements
-14-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 650,136 $ 784,909 $ 808,095
----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 597,514 554,439 551,040
(Increase) decrease in accounts receivable-tenants (24,142) 62,111 (135,195)
Decrease in allowance for doubtful accounts (2,000) (6,000) (23,000)
Decrease (increase) in other assets (42,523) 2 34,020
Increase (decrease) in due to General Partners and affiliates 5,276 30,565 (5,945)
Increase in accrued real estate taxes 380 748 4,983
Increase (decrease) in accounts payable and other liabilities 35,173 (43,240) 34,564
----------- ----------- -----------
Total adjustments 569,678 598,625 460,467
----------- ----------- -----------
Net cash provided by operating activities 1,219,814 1,383,534 1,268,562
----------- ----------- -----------
Cash flows from investing activities:
Improvements of property and equipment (181,655) (21) (12,097)
Leasing commissions paid (141,418) (41,608) (26,671)
----------- ----------- -----------
Net cash used in investing activities (323,073) (41,629) (38,768)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from note payable 1,400,000 0 0
Principal repayments on notes payable (1,416,269) (10,056) 0
Increase in deferred loan costs (34,159) 0 0
Distributions paid (1,058,955) (1,059,057) (1,059,057)
----------- ----------- -----------
Net cash used in financing activities (1,109,383) (1,069,113) (1,059,057)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (212,642) 272,792 170,737
Cash and cash equivalents at beginning of year 1,729,819 1,457,027 1,286,290
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,517,177 $ 1,729,819 $ 1,457,027
=========== =========== ===========
Supplemental information:
Interest paid $ 111,458 $ 112,700 $ 122,500
=========== =========== ===========
</TABLE>
See notes to financial statements
-15-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - General
Summit Insured Equity L.P. II (the "Partnership") is a limited partnership
which was formed under the laws of the State of Delaware on July 17, 1987. The
general partners of the Partnership (the "General Partners") are RIDC II, L.P.,
a Delaware limited partnership (the "Related General Partner"), and
Prudential-Bache Properties, Inc., a Delaware corporation ("PBP"). The General
Partners manage and control the affairs of the Partnership.
The Partnership's fiscal year ends on December 31.
The Partnership owns three shopping centers: Rolling Hills Square located
in Tucson, Arizona; Mountain Park Plaza located in Atlanta, Georgia; and
Applewood Centre located in Omaha, Nebraska.
The Partnership has purchased an insurance policy (the "Policy") which
insures, but does not guarantee, that the cumulative amount of Insured Cash
Available for Distribution from all sources, as determined in accordance with
the Policy and related agreement, together with the appraised values of the real
estate then owned by the Partnership, will equal at least 100% and up to a
maximum of 125% of Original Contributions on the tenth anniversary of the final
property acquisition date. The Policy is intended to cover various economic
risks of the ownership of the properties, but does not apply to certain losses,
costs, penalties or expenses, including, among others, those arising out of any
physical loss, damage, loss of use or other physical injury to the properties.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting
The books and records of the Partnership are maintained on the accrual
basis of accounting in accordance with generally accepted accounting principles
("GAAP"). The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partners to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The difference between tax basis net income and GAAP basis net income was
not significant for the years ended December 31, 1996 and 1994. The GAAP basis
net income was greater than tax basis net income by approximately $67,000 for
the year ended December 31, 1995 primarily due to a non-recurring tax adjustment
to amortization expense relating to prior years.
b) Property and Equipment
The carrying amount includes the purchase price, acquisition fees and
expenses, and any other costs incurred in acquiring the properties, less amounts
received from sellers' rental guarantees. Buildings are depreciated on the
straight line basis over their estimated useful lives of 40 years. Maintenance
and repairs are charged to expense as incurred. Renewals and betterments that
significantly extend the useful life of a property are capitalized.
The Partnership reviews each of its property investments for possible
impairment at least annually, and more frequently if circumstances warrant.
Impairment of properties to be held and used is determined to exist
-16-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 2 - Summary of Significant Accounting Policies (continued)
when estimated amounts recoverable through future operations on an undiscounted
basis are below the properties' carrying value. If a property is determined to
be impaired, it is written down to its estimated fair value.
The determination of impairment value is based, not only upon future cash
flows, which rely upon estimates and assumptions including expense growth,
occupancy and rental rates, but also upon market capitalization and discount
rates as well as other market indicators. The General Partners believe that the
estimates and assumptions used are appropriate in evaluating the carrying amount
of the Partnership's properties. However, changes in market conditions and
circumstances may occur in the near term which would cause these estimates and
assumptions to change, which, in turn, could cause the amounts ultimately
realized upon the sale or other disposition of the properties to differ
materially from their estimated fair value. Such changes may also require
write-downs in future years. No write-downs for impairment have been recorded as
of December 31, 1996.
c) Rental Income
Rental income includes amounts received and accrued from operating leases
as well as amounts related to the reimbursement of common area maintenance
charges, real estate taxes and insurance.
d) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, and
investments in short-term instruments with an original maturity of three months
or less whose cost approximates market value.
e) Income Taxes
The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
individual partners and is required to be reported by them. The Partnership may
be subject to state and local taxes in jurisdictions in which it operates.
NOTE 3 - Costs, Fees and Expenses
a) Public Offering Costs
Costs incurred to organize the Partnership, including but not limited to
legal, accounting and registration fees, are considered deferred organization
costs. These costs were capitalized and amortized over a 60-month period. Costs
incurred to sell Partnership units (BUC$) including brokerage and underwriting
commissions (7% of the Gross Proceeds), certain printing costs, and
non-accountable expense allowances were considered selling and offering expenses
and charged to Limited Partners' capital.
b) Acquisition Fees
At investor closings, the General Partners were paid a property acquisition
fee (equal to 5% of the Gross Proceeds) for evaluating real property to be
acquired. This fee, along with acquisition expenses incurred by the Partnership,
was allocated to the properties based on the cost of shopping centers acquired.
-17-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 3 - Costs, Fees and Expenses (continued)
c) Deferred Insurance Costs
Costs related to the insurance policy purchased for the benefit of the
Limited Partners are being amortized over a 10 year period ( the life of the
insurance policy) which commenced with the date of the Partnership's final
acquisition of Applewood Centre on November 8, 1990.
d) Deferred Loan Costs
Costs incurred with the refinancing of the note payable in 1991 were
capitalized and were amortized over the life of the note. Costs incurred in
connection with the refinancing of the note payable which matured in 1995 and
was extended to 2010 during 1996, are being capitalized and will be amortized
over the life of the note (see Note 8).
e) Deferred Leasing Commissions
Costs incurred in connection with the lease-up of vacant space and lease
renewals have been capitalized and are being amortized over the term of the
underlying leases.
Amortization related to the deferred costs described above is included in
depreciation and amortization expense.
f) Other Expenses
In addition to the costs, fees, and expenses discussed above, the
Partnership reimburses the General Partners and their affiliates for actual
Partnership operating expenses payable by or allocable to the Partnership. The
amount of reimbursement from the Partnership is limited by the provisions of the
Partnership Agreement.
g) Reclassifications
Certain reclassifications have been made to prior year amounts to conform
with current year's presentation.
-18-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 4 - Property and Equipment
The components of Property and Equipment are as follows:
December 31,
------------------------------
1996 1995
----------- -----------
Land $ 6,445,794 $ 6,445,794
Buildings and improvements 14,649,550 14,477,329
----------- -----------
21,095,344 20,923,123
Less: Accumulated depreciation 2,564,790 2,180,124
----------- -----------
$18,530,554 $18,742,999
=========== ===========
Amounts estimated to be recoverable from future operations and ultimate
sales were greater than the carrying value of each property owned at December
31, 1996 and 1995. However, the carrying value of certain properties may be in
excess of their appraised values as of such dates.
The following list compares gross rental revenues for each of the
Partnership's investment properties as a percentage of the Partnership's total
gross revenues for each of the three years in the period ended December 31,
1996. In each year interest income accounted for the balance of gross revenues.
1996 1995 1994
---- ---- ----
Rolling Hills Square/Tucson, AZ 35% 32% 33%
Mountain Park Plaza/Atlanta, GA 28% 28% 27%
Applewood Centre/Omaha, NE 36% 39% 39%
NOTE 5 - Related Party Transactions
The costs and expenses incurred to related parties for the years ended
December 31, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Expense reimbursement (a) $ 83,714 $ 83,425 $ 97,913
Property management fees (b) 104,943 109,324 108,405
Leasing costs (c) 2,809 4,735 (2,914)
Insurance services (d) 5,720 5,700 2,500
--------- --------- ---------
$ 197,186 $ 203,184 $ 205,904
========= ========= =========
</TABLE>
(a) The General Partners and their affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; asset
-19-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 5 - Related Party Transactions (continued)
management; investor communications; printing and other administrative services.
The amount of reimbursement from the Partnership is limited by the provisions of
the Partnership Agreement.
(b) The Partnership's three properties are being managed by RCC Property
Advisors, Inc. (the "Manager"), an affiliate of the Related General Partner.
(c) Leasing costs, representing travel and other reimbursable expenses
incurred, are paid to RCC in connection with the lease-up of vacant space and
lease renewals. In addition, capitalized leasing commissions paid to the Manager
for the years ended December 31, 1996 and 1995 were $141,000 and $13,000,
respectively.
(d) Four of the officers of the Related General Partner have ownership
interest in Multi-Family Program Manager Inc., a company which has provided
insurance services for the properties.
The distributions earned by the General Partners for the years ended
December 31, 1996, 1995 and 1994 were as follows:
Year Ended December 31,
---------------------------------
1996 1995 1994
-------- -------- --------
Special Distributions $110,072 $110,072 $110,072
Regular Distributions of
Cash from Operations 18,980 18,981 18,981
-------- -------- --------
$129,052 $129,053 $129,053
======== ======== ========
As of December 31, 1996, Prudential Securities Incorporated ("PSI"), an
affiliate of PBP, owns 1,980 BUC$.
NOTE 6 - Profit and Loss Allocations/Distributions
For financial reporting purposes, net profits or losses, after Special
Distributions to the General Partners, are allocated 98% to the Limited Partners
and BUC$holders and 2% to the General Partners.
Net income per BUC is computed based on the net income for the period
allocated to the Limited Partners divided by the number of BUC$ outstanding for
the period.
The General Partners are paid a Special Distribution of Adjusted Cash from
Operations equal to 0.5% of Invested Assets per annum (as defined in the
Partnership Agreement) for managing the affairs of the Partnership.
Distributions of cash are based on Adjusted Cash from Operations after
payment of Special Distributions as defined in the Partnership Agreement are
allocated 98% to the Limited Partners and BUC$holders and 2% to the General
Partners.
-20-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - Leases
Future minimum base rentals due from tenants under non-cancellable
operating leases as of December 31, 1996 are as follows:
Year Ending December 31 Amount
----------------------- ------
1997 $ 1,711,216
1998 1,575,574
1999 1,438,855
2000 1,370,076
2001 1,270,784
Thereafter 9,610,806
-----------
Total $16,977,311
===========
Certain leases require the lessees to reimburse the Partnership for real
estate taxes, insurance costs and certain other reimbursable expenses.
There are two tenants in two of the shopping centers who paid rent in
excess of 10% of the Partnership's total revenue. The amounts received by the
Partnership in each of the years ended December 31, 1996, 1995 and 1994 were:
Rent
Tenant Received
------ --------
A&P Futurestore $269,496
Hy-Vee Food Stores 366,171
There were two tenants in two shopping centers who received free rent
during 1996 and it is not anticipated that any tenants will receive free rent in
1997. The total amount of free rent was less than 1% of net rental income.
NOTE 8 - Note Payable
The Partnership had a loan with Principal Mutual Life Insurance Company
("Principal Mutual") which matured on December 1, 1995. On July 29, 1996, the
Partnership completed a refinancing with Principal Mutual of its mortgage in the
amount of $1,400,000 and, on that date, the existing outstanding mortgage in the
amount of $1,383,661 was paid off. The new loan, with a final maturity of
January 1, 2010 and a principal amount of $1,400,000, has an initial term of
five years at a fixed interest rate of 7.03% per annum. Under the terms of the
loan, principal and interest are payable in equal monthly installments of
$13,405 based on a 13.5 year amortization schedule with the unpaid principal
balance becoming fully due and payable at maturity. At the end of the initial
five year term and again at the end of year ten, there is a renewal/call option;
the interest rate will be adjusted based on an index pursuant to the loan
document. This loan is prepayable without penalty only at those times. Costs
incurred in connection with this loan will be amortized over the life of the
loan. Between December 1, 1995 and the refinancing date, the Partnership made
the required payments pursuant to the terms of the matured loan.
-21-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 8 - Note Payable (continued)
Annual principal payment requirements as of December 31, 1996 for each of
the next five fiscal years and thereafter are as follows:
Year Ending Amount
----------- ------
1997 $ 66,408
1998 71,230
1999 76,402
2000 81,950
2001 87,900
Thereafter 989,785
------------
$ 1,373,675
============
The Partnership has determined that the carrying value of the note payable
approximates its fair value at December 31, 1996 and 1995.
NOTE 9 - Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes et
al. v. Prudential Securities Group, Inc. et al. (CV-93-654), was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership, against the Partnership, PBP, PSI and a number
of other defendants.
By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, the Kinnes case, together with a number of other actions not involving the
Partnership, were transferred to a single judge of the United States District
Court for the Southern District of New York (the "Court") and consolidated for
pretrial proceedings under the caption In re Prudential Securities Incorporated
Limited Partnerships Litigation (MDL Docket 1005) (the "Class Action"). On June
8, 1994, plaintiffs in the transferred cases filed a complaint that consolidated
the previously filed complaints and named as defendants, among others, PSI,
certain of its present and former employees and the General Partners. The
Partnership was not named a defendant in the consolidated complaint, but the
name of the Partnership was listed as being among the limited partnerships at
issue in the case.
On August 9, 1995, PBP, PSI and other Prudential defendants entered into a
Stipulation and Agreement of Partial Compromise and Settlement with legal
counsel representing plaintiffs in the consolidated actions. The Court
preliminarily approved the settlement agreement by order dated August 29, 1995
and, following a hearing held November 17, 1995, found that the agreement was
fair, reasonable, adequate and in the best interests of the plaintiff class. The
Court gave final approval to the settlement, certified a class of purchasers of
specific limited partnerships, including the Partnership, released all settled
claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing or
prosecuting any settled claim against the released parties. The full amount due
under the settlement agreement has been paid by PSI. The consolidated action
remains pending against the Related General Partner and certain of its
affiliates.
On December 31, 1996, the Court issued a preliminary approval order (the
"Order") with respect to settlement (the "Related Settlement") of the Class
Action against the Related General Partner and certain of its affiliates.
Pursuant to the stipulation of settlement entered into with counsel for the
class on December 24, 1996, the proposed Related Settlement contemplates, among
other matters, the reorganization (the "Reorganization") of the Partnership and
three other partnerships co-sponsored by affiliates of the Related General
Partner and PBP.
-22-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 9 - Contingencies (continued)
The proposed Related Settlement and Reorganization are subject to
objections by the BUC$holders and limited partners of the Partnership as well as
each of the other concerned partnerships and final approval of the Court after
review of the proposals at a fairness hearing.
Under the proposed Reorganization plan, the BUC$holders of the Partnership
and Summit Insured Equity L.P., Summit Preferred Equity L.P. and Eagle Insured
L.P. will receive shares in a newly formed real estate investment trust. It is
anticipated that the shares will be allocated proportionately among the
partnerships and their respective investors based upon appraisals and other
factors as supported by a third party fairness opinion. Detailed information
about the proposed Related Settlement and Reorganization will be sent to
BUC$holders in the near future. The terms of the Reorganization include, among
other matters, the acquisition by affiliates of the Related Capital Company
("RCC") of PBP's general partner interest (the "PBP Interest"), transfer to the
BUC$holders of one-half of the PBP Interest, reduction of fees currently payable
to the General Partners by 25%, filing an application to list the new company's
shares on an exchange and the creation of an infinite, as opposed to finite,
life-operating business.
In connection with the proposed Related Settlement and Reorganization, on
December 19, 1996, PBP and RCC entered into an agreement for the purchase by RCC
or its affiliates of the PBP Interest. The agreement is subject to numerous
conditions, including the effectiveness of the Related Settlement of the Class
Action and the approval of the sale and withdrawal of PBP as a general partner
of the Partnership by the Court.
Pending final approval of the Related Settlement, the Court's Order
prohibits class members (including the BUC$holders) from, among other matters,
(i) transferring their BUC$ unless the transferee agrees to be bound by the
Related Settlement; (ii) granting a proxy to object to the Reorganization; or
(iii) commencing a tender offer for the BUC$. In addition, the General Partners
are enjoined from (i) recording any transfers made in violation of the Order and
(ii) providing the list of investors in any of the partnerships which are the
subject of the Reorganization to any person conducting a tender offer.
There can be no assurance that the conditions to the closing of the
proposed Related Settlement and Reorganization will be satisfied nor that a
closing may occur in the projected time frame. In the event a settlement cannot
be reached, the Related General Partner believes it has meritorious defenses to
the consolidated complaint and intends to vigorously defend this action.
NOTE 10 - Subsequent Event
In February 1997, a distribution of $232,501 was paid to the BUC$holders
and $4,746 to the General Partner in payment of their 2% interest from Adjusted
Cash From Operations for the quarter ended December 31, 1996.
-23-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Registrant has no directors or executive officers. The Registrant's
affairs are managed and controlled by the General Partners. Certain information
concerning the directors and officers of the General Partners are set forth
below.
The Registrant, the Registrant's General Partners and their directors and
executive officers, and any persons holding more than ten percent of the
Registrant's BUC$ are required to report their initial ownership of such BUC$
and any subsequent changes in that ownership to the Securities and Exchange
Commission on Forms 3, 4 and 5. Such executive officers, directors and persons
who own greater than ten percent of the Registrant's BUC$ are required by
Securities and Exchange Commission regulations to furnish the Registrant with
copies of all Forms 3, 4 or 5 they file. All of these filing requirements were
satisfied on a timely basis for the current year. In making these disclosures,
the Registrant has relied solely on written representations of the General
Partners' directors and executive officers and persons who own greater than ten
percent of the Registrant's BUC$ or copies of the reports they have filed with
the Securities and Exchange Commission during and with respect to its most
recent fiscal year.
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP with regard to managing the
Registrant are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Thomas F. Lynch, III President, Chief Executive Officer, Chairman of the
Board of Directors and Director
Barbara J. Brooks Vice President-Finance and Chief Financial Officer
Eugene D. Burak Vice President
Chester A. Piskorowski Senior Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
</TABLE>
THOMAS F. LYNCH, III, age 38, is the President, Chief Executive Officer,
Chairman of the Board of Directors, and a Director of PBP. He is a Senior Vice
President of PSI, an affiliate of PBP. Mr. Lynch also serves in various
capacities for other affiliated companies. Mr. Lynch joined PSI in November
1989.
BARBARA J. BROOKS, age 48, is the Vice President-Finance and Chief
Financial Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also
serves in various capacities for other affiliated companies. She has held
several positions within PSI since 1983. Ms. Brooks is a certified public
accountant.
EUGENE D. BURAK, age 51, is a Vice President of PBP. He is a First Vice
President of PSI. Prior to joining PSI in September 1995, he was a management
consultant for three years and was with Equitable Capital Management Corporation
from March 1990 to May 1992. Mr. Burak is a certified public accountant.
-24-
<PAGE>
CHESTER A. PISKOROWSKI, age 53, is a Senior Vice President of PBP. He is a
Senior Vice President of PSI and is the Senior Manager of the Specialty Finance
Asset Management area. Mr. Piskorowski has held several positions within PSI
since April 1972. Mr. Piskorowski is a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 54, is a Director of PBP. He is a Senior Vice
President of PSI and an Executive Vice President and General Counsel of
Prudential Mutual Fund Management, LLC, an affiliate of PSI. Mr. Giordano also
serves in various capacities for other affiliated companies. He has been with
PSI since July 1967.
NATHALIE P. MAIO, age 46, is a Director of PBP. Ms. Maio is a Senior Vice
President and Deputy General Counsel of PSI and supervises non-litigation legal
work. She joined the Law Department of PSI in 1983; presently, she also serves
in various capacities for other affiliated companies.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and executive officers have
indefinite terms.
The Related General Partner
The directors and executive officers of the general partner of the Related
General Partner with respect to the Registrant and their positions with the
general partner of the Related General Partner are as follows:
Name Position
---- --------
J. Michael Fried President and Director
Stephen M. Ross Director
Stuart J. Boesky Vice President
Alan P. Hirmes Vice President
Richard A. Palermo Treasurer
Lynn A. McMahon Secretary
J. MICHAEL FRIED, 52, is President and a Director of the general partner of
the Related General Partner. Mr. Fried is President, a Director and a principal
shareholder of Related Capital Company ("Capital"), a real estate finance and
acquisition affiliate of the Related General Partner. In that capacity, he is
the chief executive officer of Capital, and is responsible for initiating and
directing all of Capital's syndication, finance, acquisition and investor
reporting activities. Mr. Fried practiced corporate law in New York City with
the law firm of Proskauer Rose Goetz & Mendelsohn from 1974 until he joined
Capital in 1979. Mr. Fried graduated from Brooklyn Law School with a Juris
Doctor degree, magna cum laude; from Long Island University Graduate School with
a Master of Science degree in Psychology; and from Michigan State University
with a Bachelor of Arts degree in History.
STEPHEN M. ROSS, 56, is a Director of the Related General Partner, and is
also President of The Related Companies, L.P. ("Related"). He graduated from The
University of Michigan with a Bachelor of Business Administration and from Wayne
State University School of Law. Mr. Ross then received a Master of Law degree in
taxation from New York University School of Law. He joined the accounting firm
of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York,
where he worked for two large Wall Street investment banking firms in their real
estate and corporate finance departments. Mr. Ross formed The Related Companies,
Inc. in 1972, to develop, manage, finance and acquire subsidized and
conventional apartment developments. To date, Related has developed multi-family
properties totaling in excess of 25,000 units, all of which it manages.
-25-
<PAGE>
STUART J. BOESKY, 40, is a Vice President of the general partner of the
Related General Partner. Mr. Boesky practiced real estate and tax law in New
York City with the law firm of Shipley & Rothstein from 1984 until February 1986
when he joined Capital, where he presently serves as Managing Director. From
1983 to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow,
Richard & Rothstein (which subsequently merged with Strook & Strook & Lavan) and
from 1978 to 1980 was a consultant specializing in real estate at the accounting
firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State University
with a Bachelor of Arts degree and from Wayne State University School of Law
with a Juris Doctor degree. He then received a Master of Law degree in Taxation
from Boston University School of Law.
ALAN P. HIRMES, 42, is a Vice President of the general partner of the
Related General Partner. Mr. Hirmes has been a Certified Public Accountant in
New York since 1978. Prior to joining Capital in October 1983, Mr. Hirmes was
employed by Weiner & Co., certified public accountants. Mr. Hirmes is also a
Managing Director of Capital. Mr. Hirmes graduated from Hofstra University with
a Bachelor of Arts degree.
RICHARD A. PALERMO, 36, is Treasurer of the general partner of the Related
General Partner. Mr. Palermo has been a Certified Public Accountant in New York
since 1985. Prior to joining Related in September 1993, Mr. Palermo was employed
by Sterling Grace Capital Management from October 1990 to September 1993,
Integrated Resources, Inc. from October 1988 to October 1990 and E.F. Hutton &
Company, Inc. from June 1986 to October 1988. From October 1982 to June 1986,
Mr. Palermo was employed by Marks Shron & Company and Mann Judd Landau,
certified public accountants. Mr. Palermo graduated from Adelphi University with
a Bachelor of Business Administration degree.
LYNN A. McMAHON, 41, is Secretary of the general partner of the Related
General Partner. Since 1983, she has served as Assistant to the President of
Capital. From 1978 to 1983, she was employed at Sony Corporation of America in
the Government Relations Department.
There are no family relationships among any of the foregoing directors or
officers. All of the foregoing officers and/or directors have indefinite terms.
-26-
<PAGE>
Item 11. Executive Compensation.
The Registrant has no officers or directors. The Registrant does not pay or
accrue any fees, salaries or other forms of compensation to directors or
officers of the General Partners for their services. However, under the terms of
the Partnership Agreement, the Registrant has entered into certain arrangements
with the General Partners and their affiliates, which provide for compensation
to be paid to the General Partners and their affiliates. Such arrangements
include (but are not limited to) Special Distributions of Adjusted Cash from
Operations and accountable expense reimbursements. In addition, the General
Partners are entitled to a subordinated interest in Cash from Sales or
Financings and a 2% interest in Net Income, Net Loss, Distributions of Adjusted
Cash from Operations and Cash from Sales or Financings. Certain directors and
officers of the General Partners receive compensation from the General Partners
and their affiliates for services performed for various affiliated entities
which may include services performed for the Registrant. See Note 5 to the
Financial Statements in Item 8 above, for a discussion of the amounts paid to
the General Partners and their affiliates during the year ended December 31,
1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 3, 1997, no person was known by the Registrant to be the
beneficial owner of more than five percent of the limited partnership interests
and/or BUC$.
As of March 3, 1997, the directors and officers of the Related General
Partner as a group own directly or indirectly in the aggregate 93.9% of the
shares of common stock of the general partner of the Related General Partner. No
director or officer of either General Partner owns any interest in PBP.
As of March 3, 1997, no director or officer of either General Partner owns
any BUC$ or limited partnership interests in the Registrant.
Item 13. Certain Relationships and Related Transactions.
The Registrant has and will continue to have certain relationships with the
General Partners and their affiliates, as discussed in Item 11 and as set forth
below. See Note 5 to the Financial Statements in Item 8 above. However, there
have been no direct financial transactions between the Registrant and the
directors and officers of the General Partners.
Rolling Hills Square, Mountain Park Plaza and Applewood Centre are managed
by RCC Property Advisors, Inc. (the "Manager"), an affiliate of the Related
General Partner. Management fees earned by and leasing costs reimbursed to the
Manager, and included in the statement of income, for the years ended December
31, 1996, 1995 and 1994, respectively, were approximately $108,000, $114,000 and
$105,000, respectively. Management fees are calculated as 4.5% of gross rental
receipts from the properties. In addition, capitalized leasing commissions paid
to the Manager for the years ended December 31, 1996 and 1995 were $141,000 and
$13,000, respectively.
Four of the officers of the Related General Partner have an ownership
interest in Multi-Family Program Manager Inc., a company which provides
insurance services to the properties. The amounts earned by Multi-Family Program
Manager Inc. were approximately $5,700, $5,700 and $2,500 during 1996, 1995 and
1994, respectively.
-27-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
<TABLE>
<CAPTION>
Sequential
Page
----------
<S> <C> <C>
(a) 1. Financial Statements
Independent Auditors' Report 11
Statements of Financial Condition - December 31, 1996 and 1995 12
Statements of Income - three years ended December 31, 1996 13
Statements of Changes in Partners' Capital (Deficit) - three years
ended December 31, 1996 14
Statements of Cash Flows - three years ended December 31, 1996 15
Notes to Financial Statements 16
(a) 2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and Reserves -
Three Years Ended December 31, 1996 32
Schedule III - Real Estate and Accumulated Depreciation and Notes
to Schedule - Three Years Ended December 31, 1996 33
All other schedules have been omitted because they are not
required or because the required information is contained in the
financial statements or notes hereto.
(a) 3. Exhibits
(3A) The Partnership's Certificate of Limited Partnership as filed with the
Secretary of State of the State of Delaware, incorporated by reference to
Exhibit 4 to the Partnership's Registration Statement on Form S-11, File
No. 33-16697, as amended
(3B) The Partnership's Amended and Restated Agreement of Limited
Partnership, incorporated by reference to Exhibit A to the
Partnership's Prospectus, dated November 13, 1987 (the
"Prospectus"), filed, pursuant to Rule 424(b) under the Securities
Act of 1933, as part of the Partnership's Registration Statement
on Form S-11, File No. 33-16697, as amended
(3C) Amendment No. 1, dated February 1, 1988, to the Partnership's Amended and
Restated Agreement of Limited Partnership, incorporated by reference to
Exhibit 3C to the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1987
</TABLE>
-28-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
<TABLE>
<CAPTION>
Sequential
Page
----------
<S> <C> <C>
(3D) Amendment No. 2, dated March 25, 1988, to the Partnership's Amended and
Restated Agreement of Limited Partnership, incorporated by reference to
Exhibit 3D to the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1987
(10A) Continental Casualty Company Insurance Policy issued to the
Partnership, incorporated by reference to Exhibit 10A to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1987
(10B) Indemnity Agreement among Continental Casualty Company, the
Partnership and the General Partners, incorporated by reference to
Exhibit 10B to the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1987
(10C) Amendment to the Indemnity agreement among Continental Casualty Company,
the Partnership and the General Partners dated November 5, 1991
(10D) Management Agreement between RCC Property Advisors and the
Partnership, dated May 1992. Incorporated by reference to Exhibit
10E to the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1992
(10E) Secured Promissory Note between Principal Mutual Life Insurance Company
and the Partnership dated December 11, 1992. Incorporated by reference
to Exhibit 10F to the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1992
(99A) Settlement Agreement between Mountain Park Plaza Limited Partnership and
the Partnership dated October 16, 1992. Incorporated by reference to the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1992
(27) Financial Data Schedule (filed herewith) 35
(99B) Settlement Agreement between Rolling Hills Devco and the Partnership
dated August 6, 1992. Incorporated by reference to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1992
(b) Reports on Form 8-K
Report on Form 8-K dated December 31, 1996 was filed on January
10, 1997 relating to a preliminary approval order with respect to
the settlement of current class action litigation.
</TABLE>
-29-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SUMMIT INSURED EQUITY L.P. II
By: RIDC II, L.P.
A Delaware Limited Partnership, General
Partner
By: RELATED INSURED EQUITY ASSOCIATES II, INC.
A Delaware Corporation, as the General
Partner of the Related General Partner
Date: March 27, 1997
By: /s/ J. Michael Fried
--------------------------------------
J. Michael Fried
President and Director
and
By: PRUDENTIAL-BACHE PROPERTIES, INC.
A Delaware Corporation, as General Partner
Date: March 27, 1997
By: /s/ Thomas F. Lynch, III
--------------------------------------
Thomas F. Lynch, III
President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
-30-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
report has been signed below by the following persons on behalf by the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
President (principal executive officer)
/s/ J. Michael Fried and Director of Related Insured Equity
- -------------------------------- Associates II, Inc. (as General Partner of the
J. Michael Fried General Partner of the Partnership) March 27, 1997
/s/ Alan P. Hirmes Vice President (principal financial officer)
- -------------------------------- of Related Insured Equity Associates II,
Alan P. Hirmes Inc. March 27, 1997
/s/ Richard A. Palermo Treasurer (principal accounting officer)
- -------------------------------- of Related Insured Equity
Richard A. Palermo Associates II, Inc. March 27, 1997
/s/ Stephen M. Ross
- -------------------------------- Director of Related Insured Equity
Stephen M. Ross Associates II, Inc. March 27, 1997
Chairman of the Board, President,
/s/ Thomas F. Lynch, III (principal executive officer)
- -------------------------------- and Director of Prudential-Bache Properties,
Thomas F. Lynch, III Inc. (a General Partner of the Partnership) March 27, 1997
/s/ Barbara J. Brooks Vice President - Finance and Chief Financial
- -------------------------------- Officer (principal financial officer) of
Barbara J. Brooks Prudential-Bache Properties, Inc. March 27, 1997
/s/ Nathalie P. Maio
- -------------------------------- Director of Prudential-Bache Properties, Inc. March 27, 1997
Nathalie P. Maio
/s/ Eugene D. Burak Vice President of
- -------------------------------- Prudential-Bache Properties, Inc. March 27, 1997
Eugene D. Burak
/s/ Frank W. Giordano
- --------------------------------
Frank W. Giordano Director of Prudential-Bache Properties, Inc. March 27, 1997
</TABLE>
-31-
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(A LIMITED PARTNERSHIP)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions-
Balance at Amounts
Year Ended Beginning Reserved Deduction- Balance at
December 31 Name of Period During Year Write-offs End of Period
- ----------- ---- --------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1996 Allowance for Doubtful Accounts $10,000 $21,000 $(23,000) $ 8,000
1995 Allowance for Doubtful Accounts $16,000 $36,000 $(42,000) $10,000
1994 Allowance for Doubtful Accounts $39,000 $ 0 $(23,000) $16,000
</TABLE>
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(A LIMITED PARTNERSHIP)
ITEM 14, SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost to Partnership (A) Subsequent to Purchase Price Adjustments (B)
------------------------------- Acquisition -----------------------------------
Buildings and ----------------- Buildings and
Land Improvements Improvements Land Improvements
---- ------------ ------------ ---- ------------
<S> <C> <C> <C> <C> <C>
Shopping Centers:
Rolling Hills Square $ 3,110,216 $ 3,369,403 $ 223,284 $ (282,634) $ (304,006)
Tucson, AZ
Mountain Park Plaza 1,760,758 5,290,190 27,049 (74,822)(C) (82,276)
Atlanta, GA
Applewood Centre 2,031,678 6,433,640 7,037 (99,402) (314,771)
Omaha, NE ----------- ----------- ----------- ----------- -----------
$ 6,902,652 $15,093,233 $ 257,370 $ (456,858) $ (701,053)
=========== =========== =========== =========== ===========
<CAPTION>
Gross Amount at which
Carried At Close of Period (D)
-------------------------------------------------------
Buildings and Accumulated
Land Improvements Total Depreciation
---- ------------ ----- ------------
<S> <C> <C> <C> <C>
Shopping Centers:
Rolling Hills Square $ 2,827,582 $ 3,288,681 $ 6,116,263 $ 700,323
Tucson, AZ
Mountain Park Plaza 1,685,936 5,234,963 6,920,899 920,600
Atlanta, GA
Applewood Centre 1,932,276 6,125,906 8,058,182 943,867
Omaha, NE ----------- ----------- ----------- -----------
$ 6,445,794 $14,649,550 $21,095,344 $ 2,564,790
=========== =========== =========== ===========
<CAPTION>
Life on which
Depreciation in
Latest Income
Year of Date Statement is
Construction Acquired Computed
------------ -------- --------
<S> <C> <C> <C>
Shopping Centers:
Rolling Hills Square 1980 Aug. 1988 40 years
Tucson, AZ
Mountain Park Plaza 1988 Dec. 1989 40 years
Atlanta, GA
Applewood Centre 1989 Nov. 1990 40 years
Omaha, NE
</TABLE>
<PAGE>
SUMMIT INSURED EQUITY L.P. II
(A LIMITED PARTNERSHIP)
ITEM 14, SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(A) Included in buildings and improvements are acquisition fees of $1,508,435
as well as the reserve for repairs of $100,000 for Rolling Hills Square.
(B) Amounts received and accrued from sellers' rental guarantees from the
sellers of the properties purchased by the Registrant.
(C) Includes $55,900 received from condemnation award.
(D) Aggregate cost for federal income tax purposes is $21,198,161
Reconciliation of Real Estate Owned:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period: $20,923,123 $20,926,756 $20,914,659
Improvements 181,655 21 12,097
Write-off fully amortized improvements (9,434) (3,654) 0
----------- ----------- -----------
Balance at close of period: $21,095,344 $20,923,123 $20,926,756
=========== =========== ===========
Reconciliation of Accumulated Depreciation:
Balance at beginning of period: $ 2,180,124 $ 1,811,739 $ 1,438,668
Depreciation Expense 394,100 372,039 373,071
Write-off fully amortized improvements (9,434) (3,654) 0
----------- ----------- -----------
Balance at close of period: $ 2,564,790 $ 2,180,124 $ 1,811,739
=========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the
financial statements for Summit Insured Equity L.P. II and is qualified in
its entirety by reference to such financial statements
</LEGEND>
<CIK> 0000820590
<NAME> Summit Insured Equity L.P. II.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,517,177
<SECURITIES> 0
<RECEIVABLES> 207,988
<ALLOWANCES> 8,000
<INVENTORY> 0
<CURRENT-ASSETS> 49,067
<PP&E> 21,095,344
<DEPRECIATION> 2,564,790
<TOTAL-ASSETS> 21,080,259
<CURRENT-LIABILITIES> 464,145
<BONDS> 1,373,675
0
0
<COMMON> 0
<OTHER-SE> 19,242,439
<TOTAL-LIABILITY-AND-EQUITY> 21,080,259
<SALES> 0
<TOTAL-REVENUES> 2,431,265
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,669,671
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 111,458
<INCOME-PRETAX> 650,136
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 650,136
<EPS-PRIMARY> .53
<EPS-DILUTED> 0
</TABLE>
