UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the 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: 0-18149
DEAN WITTER REALTY YIELD PLUS II, L.P.
(Exact name of registrant as specified in governing instrument)
Delaware 13-3469111
(State of organization) (IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 392-1054
Former name, former address and former fiscal year, if changed since
last report: not applicable
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No <PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY YIELD PLUS II, L.P.
BALANCE SHEETS
<CAPTION>
September 30, December 31,
1995 1994
ASSETS
<S> <C> <C>
Investment in participating mortgage loan,
net of allowance of $9,787,750 at September
30, 1995 and December 31, 1994 $15,232,767 $15,232,767
Investment in unconsolidated partnership 19,263,108 19,833,854
Buildings at cost, net of accumulated
depreciation of $780,243 and $647,256 6,312,381 6,445,368
Cash and cash equivalents, at cost
which approximates market 1,953,693 2,057,891
Deferred expenses, net 715,840 626,495
Other assets 146,431 214,743
$43,624,220 $44,411,118
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and other liabilities $ 464,938 $ 537,451
Security deposits 100,668 100,668
565,606 638,119
Partners' capital:
General partners 3,641,567 3,713,005
Limited partners ($500 per Unit,
173,164 Units issued) 39,417,047 40,059,994
Total partners' capital 43,058,614 43,772,999
$43,624,220 $44,411,118
See accompanying notes to financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
STATEMENTS OF INCOME
Three and nine months ended September 30, 1995 and 1994
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Interest on participating mortgage loan $ 501,085 $ 506,797 $ 1,492,362 $1,509,374
Rental 431,941 283,668 1,031,088 1,104,791
Equity in earnings of unconsolidated
partnership 87,579 147,349 350,454 570,276
Interest and other 28,581 17,955 64,654 82,998
1,049,186 955,769 2,938,558 3,267,439
Expenses:
Property operating 220,680 219,116 605,530 959,157
Depreciation and amortization 88,084 93,501 282,990 280,503
General and administrative 77,855 95,021 239,143 254,473
386,619 407,638 1,127,663 1,494,133
Net income $ 662,567 $ 548,131 $1,810,895 $1,773,306
Net income allocated to:
Limited partners $ 596,310 $ 493,318 $1,629,805 $1,595,975
General partners 66,257 54,813 181,090 177,331
$ 662,567 $ 548,131 $1,810,895 $1,773,306
Net income per Unit of limited
partnership interest $3.44 $2.85 $ 9.41 $ 9.22
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
STATEMENT OF PARTNERS' CAPITAL
Nine months ended September 30, 1995
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C>
Partners' capital at
January 1, 1995 $40,059,994 $3,713,005 $43,772,999
Net income 1,629,805 181,090 1,810,895
Cash distributions (2,272,752) (252,528) (2,525,280)
Partners' capital at
September 30, 1995 $39,417,047 $3,641,567 $43,058,614
See accompanying notes to financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1995 and 1994
<CAPTION>
1995 1994
<C> <C> <C>
Cash flows from operating activities:
Net income $ 1,810,895 $1,773,306
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 282,990 280,503
Equity in earnings of unconsolidated partnership (350,454) (570,276)
(Increase) decrease in operating assets:
Deferred expenses (210,272) -
Other assets 39,236 (109,992)
Increase (decrease) in operating liabilities:
Accounts payable and other liabilities (72,513) 341,477
Due to affiliates - (5,626)
Security deposits - (42,000)
Net cash provided by operating activities 1,499,882 1,667,392
Cash flows from investing activities:
Contributions to unconsolidated partnership (482,543) (821,131)
Distributions from unconsolidated partnership 1,403,743 1,091,065
Net cash provided by investing activities 921,200 269,934
Net cash flows used in financing activities:
Cash distributions (2,525,280) (2,886,066)
Decrease in cash and cash equivalents (104,198) (948,740)
Cash and cash equivalents at beginning of period 2,057,891 3,455,663
Cash and cash equivalents at end of period $ 1,953,693 $ 2,506,923
See accompanying notes to financial statements.
/TABLE
<PAGE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
Notes to the Financial Statements
1. The Partnership
Dean Witter Realty Yield Plus II, L.P. (the "Partnership") is a
limited partnership organized under the laws of the State of
Delaware in 1988. The Managing General Partner of the Partnership
is Dean Witter Realty Yield Plus II Inc., which is wholly-owned by
Dean Witter Realty Inc. ("Realty").
The Partnership's records are maintained on the accrual basis of
accounting for financial and tax reporting purposes.
The Partnership accounts for its investment in DW Michelson
Associates under the equity method.
Net income per Unit amounts were calculated by dividing net income
allocated to Limited Partners, in accordance with the Partnership
Agreement, by the weighted average number of Units outstanding.
In the opinion of management, the accompanying financial statements,
which have not been audited, include all adjustments, consisting
only of normal recurring accruals, necessary to present fairly the
results for the interim periods.
The Partnership does not expect that adoption of SFAS 114, SFAS 118
and SFAS 121 regarding impairment of the Partnership's assets will
have a significant impact on the Partnership's financial statements.
2. Related Party Transactions
An affiliate of Realty performs administrative functions, processes
investor transactions and prepares tax information for the
Partnership. During each of the nine-month periods ended September
30, 1995 and 1994, the Partnership incurred approximately $159,000
for these services.
An affiliate of Realty provided property management services for two
properties during 1995 and 1994. The affiliate received property
management fees of $78,658 and $79,418 for the nine months ended
September 30, 1995 and 1994, respectively, for these services.
As of September 30, 1995, the affiliates were owed a total of
approximately $26,000 for these services.
3. Subsequent Event
On October 30, 1995 the Partnership paid a cash distribution of
$3.125 per Unit to Limited Partners. The cash distribution
aggregated $601,236 with $541,112 distributed to the Limited
Partners and $60,124 distributed to the General Partners.
<PAGE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Partnership raised $86,582,000 through a public offering which
was terminated in 1990. The Partnership has no plans to raise
additional capital.
The Partnership committed the gross proceeds raised in the offering
to three investments. No additional investments are planned.
Many real estate markets are stabilizing. Continued space
absorption and restrained construction have reduced vacancy levels
of office properties in certain markets. With the substantial
amount of office space still available however, office rental rates
are improving only modestly and in select regions. At current
rental rates, significant office construction activity is considered
unlikely in the near-term in all but a few markets.
Real estate markets are generally divided into sub-markets by
geographic location and property type. Not all sub-markets have
been affected equally by the above factors.
Partnership cash from operations is primarily dependent upon the
cash generated by the Partnership's real estate investments and
interest on the participating mortgage loan. During the nine and
three-month periods ended September 30, 1995, both the Century
Alameda property and the Michelson joint venture generated positive
cash flow from operations, and it is anticipated that they will
continue to do so. However, during the nine months ended September
30, 1995, cash distributions to investors, capital expenditures and
contributions to DW Michelson Associates exceeded cash flow from
operations and distributions from DW Michelson Associates. As a
result, the Partnership's cash reserves continued to decline since
the beginning of 1994.
The Partnership expects to expend funds for tenant improvements and
leasing commissions in connection with the leasing or re-leasing of
space at the Century Alameda Distribution Center and 2600 Michelson
Drive properties. As of September 30, 1995, the Partnership has
commitments to contribute to DW Michelson Associates approximately
$1,076,000 primarily for lease-related capital expenditures at 2600
Michelson Drive. The Partnership also has commitments to fund
approximately $282,000 of the remaining capital expenditures in
connection with the leasing of the remaining vacant space at the
Century Alameda property.
The Partnership's participating mortgage loan is secured by the One
Congress Street property. The office space there is 100% leased to
a federal agency, the General Services Administration ("GSA") under
a lease that is cancellable by the GSA for some or all of their
space in August 1995 or thereafter and terminates in 1997. To date,
GSA has not exercised its option to terminate some or all of its
space; however, if GSA elects to exercise its option in the future,
property cash flow will be reduced, and the owner/borrower of the
One Congress Street property may not be able to meet its minimum
debt service obligation.
Since existing cash reserves were projected not be sufficient to
fund all of the anticipated costs of the properties owned by the
Partnership, and to accumulate reserves for future contingencies,
the Partnership reduced its cash distribution from a 4% annual rate
to 2.5% beginning with the second quarter 1995 distribution, which
was paid in July.
The Partnership does not expect that adoption of SFAS 114, SFAS 118
and SFAS 121 regarding impairment of the Partnership's assets will
have a significant impact on the Partnership's financial statements.
On October 30, 1995, the Partnership paid the third quarter cash
distribution of $3.125 per Unit to the Limited Partners. The cash
distribution aggregated $601,236 with $541,112 distributed to the
Limited Partners and $60,124 distributed to the General Partners.
Operations
Fluctuations in the Partnership's operating results for the nine and
three-month periods ended September 30, 1995 compared to 1994 are
primarily attributable to the following:
The increase in rental income for the three months ended September
30, 1995 is due to higher occupancy at the Century Alameda property
resulting from the expansion of Goldenberg Plywood into the
remaining vacant space at the property. (This tenant now occupies
approximately 65% of the property's space). The decrease in rental
income for the nine months ended September 30, 1995 is attributable
to lower occupancy at the Century Alameda property before the
Goldenberg Plywood expansion.
The decreases in equity in earnings of unconsolidated partnership
are due to lower income from 2600 Michelson Drive. These decreases
result from higher depreciation and amortization on expenditures for
tenant improvements and leasing commissions, partially offset by
increased rental income at the property.
The decreases in property operating expenses for the nine months
period ended September 30, 1995 are primarily due to provisions
made in 1994 for uncollectible rents from a large tenant that was
evicted from the Century Alameda Distribution Center in April 1994.
A summary of the office, retail and industrial building markets
where the Partnership's properties and the property underlying the
Partnerships' investment in a participating loan are located, and
the performance of each property, is as follows:
There has been no significant new construction in the industrial
building market in Lynwood, California, the location of the Century
Alameda Distribution Center. As a result, space in this market is
being absorbed at a slow and steady pace, and the current vacancy
rate in this market is 10%. Additionally, the number of tenants
seeking larger space in this market has increased from a year ago,
and the recent completion of the Century Freeway is anticipated to
increase demand. During the third quarter of 1995, occupancy at the
property increased from 72% to 100%. No significant leases are
scheduled to expire before 1997.
Favorable lease rates are attracting tenants to the office market in
Irvine, California, the location of 2600 Michelson Drive, where the
market vacancy rate is approximately 15%. The steady absorption of
space and the lack of new construction are leading to a tightening
of available quality office space in this sub-market. At September
30, 1995, occupancy at the property was 92%. No significant leases
are scheduled to expire before 1998.
Because the office space at One Congress Street, located in Boston,
Massachusetts, is fully leased, the property has not been affected
by the recent strengthening of the Boston office market. However,
some or all of the space covered by the GSA lease is cancelable
beginning in August 1995 and terminates in 1997. The retail space
has been difficult to lease. During the third quarter of 1995,
occupancy at the office and garage space remained at 100% and the
retail space, which is not a significant portion of the overall
space, is substantially vacant.
Inflation
Inflation has been consistently low during the periods presented in
the financial statements and, as a result, has not had a significant
effect on the operations of the Partnership or its properties.
PART II - OTHER INFORMATION
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DEAN WITTER REALTY YIELD PLUS II, L.P.
By: Dean Witter Realty Yield Plus II Inc.
Managing General Partner
Date: November 14, 1995 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: November 14, 1995 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate,
participating mortgage loans,and real estate joint ventures. In accordance
with industry practice, its balance sheet is unclassified. For full
information, refer to the accompanying financial statements.
</LEGEND>
<NAME> DEAN WITTER REALTY YIELD PLUS II, LP
<CIK> 0000830340
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,953,693
<SECURITIES> 0
<RECEIVABLES> 35,255
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 43,624,220<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 43,058,614<F2>
<TOTAL-LIABILITY-AND-EQUITY> 43,624,220<F3>
<SALES> 0
<TOTAL-REVENUES> 2,938,558<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,127,663
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,810,895
<INCOME-PRETAX> 1,810,895
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,810,895
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,810,895
<EPS-PRIMARY> 9.41<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $6,312,381, investment in unconsolidated partnership of
$19,263,108, net investments in participating mortgage loan of $15,232,767,
net deferred expenses of $715,840 and other assets of $111,176.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and other liabilities of $464,938
and security deposits of $100,668.
<F4>Total revenue includes rent of $1,031,088, interest on participating
mortgage loans of $1,492,362, equity in earnings of unconsolidated part-
nership of $350,454 and interest and other revenue of $64,654.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
