5
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 June 30, 1998
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
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY YIELD PLUS II, L.P.
BALANCE SHEETS
<CAPTION>
June 30, December
31,
1998 1997
<S> <C>
<C>
ASSETS
Investment in unconsolidated partnerships $13,061,701
$32,650,908
Real estate held for sale 5,994,079
- -
Building and improvements, net of accumulated
depreciation of $1,211,289 in 1997 -
6,093,337
Cash and cash equivalents 2,878,947
2,680,667
Deferred expenses, net 250,896
292,703
Other assets 201,619
610,473
$22,387,242
$42,328,088
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and other liabilities $ 208,113 $
193,555
Security deposits 97,919
97,919
306,032
291,474
Partners' capital:
General partners 3,411,467
3,539,365
Limited partners ($500 per Unit, 173,164 Units issued)
18,669,743 38,497,249
Total partners' capital 22,081,210
42,036,614
$22,387,242
$42,328,088
See accompanying notes to financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
INCOME STATEMENTS
Three and six months ended June 30, 1998 and 1997
<CAPTION>
Three months ended Six
months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C>
<C>
Revenues:
Rental $ 436,113 $403,228 $
914,443 $ 762,351
Equity in earnings of unconsolidated
partnerships 12,575,128 209,595
13,140,995 434,056
Interest on cash equivalents and
other revenues 165,740 43,749
214,010 83,735
Interest on participating mortgage
loan - 104,060 - 125,920
13,176,981 760,632
14,269,448 1,406,062
Expenses:
Property operating 228,187 240,982
426,614 452,404
Depreciation and amortization 58,116 103,506
122,441 207,013
General and administrative 42,931 96,041
116,421 173,596
329,234 440,529
665,476 833,013
Net income $12,847,747 $320,103
$13,603,972 $ 573,049
Net income allocated to:
Limited partners $12,831,158 $288,093
$13,511,760 $ 515,744
General partners 16,589 32,010
92,212 57,305
$12,847,747 $320,103
$13,603,972 $ 573,049
Net income per Unit of limited
partnership interest $ 74.10 $ 1.67 $
78.03 $ 2.98
See accompanying notes to financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
STATEMENT OF PARTNERS' CAPITAL
Six months ended June 30, 1998
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C>
<C>
Partners' capital at January 1, 1998 $ 38,497,249
$3,539,365 $ 42,036,614
Net income 13,511,760 92,212
13,603,972
Cash distributions (33,339,266)
(220,110) (33,559,376)
Partners' capital at June 30, 1998 $ 18,669,743 $3,411,467
$ 22,081,210
See accompanying notes to financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
STATEMENTS OF CASH FLOWS
Six months ended June 30, 1998 and 1997
<CAPTION>
1998 1997
<S> <C>
<C>
Cash flows from operating activities:
Net income $ 13,603,972 $
573,049
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in earnings of unconsolidated partnerships
(13,140,995) (434,056)
Depreciation and amortization 122,441
207,013
Decrease in deferred assets 18,624
- -
Decrease (increase) in other assets 408,854
(42,048)
Increase (decrease) in accounts payable and other
liabilities 14,558
(4,838)
Net cash provided by operating activities
1,027,454 299,120
Cash flows from investing activities:
Distributions from unconsolidated partnerships
32,901,416 924,269
Contributions to unconsolidated partnerships
(171,214) (162,474)
Net cash provided by investing activities
32,730,202 761,795
Net cash flows used in financing activities:
Cash distributions (33,559,376)
(1,202,528)
Increase (decrease) in cash and cash equivalents
198,280 (141,613)
Cash and cash equivalents at beginning of period
2,680,667 2,963,298
Cash and cash equivalents at end of period $ 2,878,947 $
2,821,685
Supplemental disclosure of non-cash investing activities:
Reclassification of real estate held for sale:
Decrease in real estate:
Building and improvements $ 7,304,626 $
- -
Accumulated depreciation (1,310,547)
- -
Increase in real estate held for sale $ 5,994,079 $
- -
See accompanying notes to financial statements.
</TABLE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
Notes to 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 ("DMA") and, effective October 27,
1997, GCGA Limited Partnership ("GCGA") 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 necessary to present fairly the
results for the interim periods. Except for the gain
on the sale of the Michelson property included in
equity in earnings of unconsolidated partnerships in
the second quarter of 1998 and reserves of uncollected
interest relating to the participating mortgage loan in
1997, such adjustments consist only of normal recurring
accruals.
The Partnership adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive
Income" and Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information"
during the first quarter of 1998. Adoption of these
standards had no impact on the Partnership's
computation or presentation of net income per Unit of
Limited Partnership interest or other disclosures.
DEAN WITTER REALTY YIELD PLUS II, L.P.
Notes to Financial Statements
These financial statements should be read in
conjunction with the annual financial statements and
notes thereto included in the Partnership's annual
report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31,
1997. Operating results of interim periods may not be
indicative of the operating results for the entire
year.
2. Real Estate Held for Sale
On August 11, 1998, the Partnership sold the Century
Alameda Distribution Center property for $9.35 million.
At closing the Partnership received sale proceeds, net
of closing costs and other deductions, of approximately
$9.1 million. The net carrying value of the property
has been reclassified to real estate held for sale as
of June 30, 1998.
3. Investments in Unconsolidated Partnerships
Pursuant to a Purchase and Sale Agreement dated as of
December 26, 1997, DMA agreed to sell to SC Enterprises
("SCE") DMA's 90% general partnership interest in
Michelson Company Limited Partnership (the "Company"),
owner of the Michelson property, and two promissory
notes (totaling approximately $1.2 million) due from
SCE for a negotiated aggregate sale price of $64
million. SCE, an affiliate of the developer of the
property, owns the remaining 10% limited partnership
interest in the Company. SCE assigned its right to
purchase the interest in the Company to Spieker
Properties, L.P., which is not affiliated with the
Partnership, its affiliated partnerships or SCE.
The sale price was received in cash at closing on April
3, 1998. The Partnership's 49.19% share of proceeds
from the sale, net of closing costs, were approximately
$31.1 million; such proceeds were distributed 100% to
the Limited Partners ($181.09 per Unit) on April 28,
1998. The Partnership's share of gain on sale of the
property was approximately $12.7 million; such gain was
allocated
DEAN WITTER REALTY YIELD PLUS II, L.P.
Notes to Financial Statements
100% to the Limited Partners in accordance with the
Partnership Agreement.
Summarized financial information of DMA is as follows:
<TABLE>
<CAPTION>
Three months ended Six
months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating revenue $ 120,569 $1,718,468 $
1,910,365 $3,332,579
Gain on sale of property 25,251,899 -
25,251,899 -
Expense 67,511
1,292,375 778,649 2,450,172
Net income $25,304,957 $ 426,093
$26,383,615 $ 882,407
</TABLE>
In 1998, DMA accounted for its investment in the
property as real estate held for sale. Accordingly,
DMA did not record depreciation expense on the property
and related improvements in 1998 (such expense was
approximately $474,000 and $944,000 during the three-
and six-month periods ended June 30, 1997).
DEAN WITTER REALTY YIELD PLUS II, L.P.
Notes to Financial Statements
Summarized financial information of GCGA is as follows:
<TABLE>
<CAPTION>
Three months ended Six
months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenue $ 2,657,868 $
2,847,959 $ 5,153,769 $ 5,736,257
Expenses:
Interest on second
mortgage loan 1,787,625 2,051,443
3,575,250 4,080,343
Other interest 948,215 886,181
1,897,118 1,772,362
Property operating 1,755,334
1,126,109 2,947,769 2,259,722
Depreciation and
amortization 459,082 485,036
918,164 970,072
4,950,256 4,548,769
9,338,301 9,082,499
Net loss $(2,292,388) $(1,700,810)
$(4,184,532) $(3,346,242)
</TABLE>
GCGA's second mortgage loan is the participating
mortgage loan from the Partnership (42%) and Dean
Witter Realty Yield Plus L.P., an affiliated public
partnership (58%). Prior to October 27, 1997, the
Partnership recognized interest income on this loan and
reserved any interest not paid by GCGA (during the
first six months of 1997, GCGA paid to the Partnership
$125,920 of $985,830 total interest due). Effective
October 27, 1997, the Partnership began recognizing its
share of GCGA's earnings (losses) exclusive of GCGA's
interest expense on the second mortgage loan.
4. Related Party Transactions
An affiliate of Realty provided property management
services for the Michelson and Century Alameda
properties during 1998 and 1997. The affiliate received
property management fees of $33,255 and $62,238 for the
six months ended June 30, 1998 and 1997, respectively,
for these services. These amounts are included in
property operating expenses.
DEAN WITTER REALTY YIELD PLUS II, L.P.
Notes to Financial Statements
Realty performs administrative functions, processes
investor transactions and prepares tax information for
the Partnership. During the six-month periods ended
June 30, 1998 and 1997, the Partnership incurred
approximately $86,000 and $105,000, respectively, for
these services. These amounts are included in general
and administrative expenses.
As of June 30, 1998, Realty and its affiliate were owed
a total of approximately $15,000 for these services.
5. Litigation
Various public partnerships sponsored by Realty
(including the Partnership and its Managing General
Partner) were defendants in a class action lawsuit. On
July 17, 1998, the Delaware Chancery Court granted the
defendants' motion to dismiss the complaint in the
lawsuit. The Plaintiffs have thirty days during which
to file a notice of appeal from the Court's order; the
Partnership does not know whether they intend to do so.
6. Subsequent Event
On July 28, 1998, the Partnership paid a cash
distribution of $1.25 per Unit to Limited Partners.
The cash distribution aggregated $240,506 with $216,455
distributed to the Limited Partners and $24,051
distributed to the General Partners.
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 completed a $86,582,000 public offering
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.
The partnership which owns the Michelson property (in
which the Partnership is a 49.19% general partner) sold
the property on April 3, 1998 (see Note 3 to the
financial statements). On April 28, 1998, the
Partnership distributed approximately $31.4 million
($181.09 per Unit), its share of the net proceeds from
the sale, 100% to Limited Partners.
The Partnership's share of 1998 operating cash flow
from the Michelson property was approximately $562,000.
The Partnership stopped receiving cash flow from
operations from the Michelson property once the
property was sold; as a result, Partnership cash flow
from operations decreased during the second quarter of
1998. Therefore, the Partnership decreased its
quarterly cash distribution from $3.125 per Unit to
$1.25 per Unit for the second quarter distribution paid
in July 1998.
On August 11, 1998, the Partnership sold the Century
Alameda property (see Note 2 to the financial
statements). Operating cash flow from the Century
Alameda property for the six months ended June 30, 1998
was approximately $508,000.
Effective August 11, 1998, the Partnership's interest
in the partnership which owns the One Congress Street
property ("GCGA") is the Partnership's sole property
interest. GCGA plans to market its property for sale
later in 1998; however, there can be no assurance that
the One Congress Street property will be sold.
DEAN WITTER REALTY YIELD PLUS II, L.P.
The Partnership's liquidity is primarily affected by
sales of the Partnership's properties; when properties
are sold, the Partnership will have fewer income-
producing investments, Partnership cash from operations
will decrease and Partnership distributions will
decline. The Partnership will also require less cash
reserves to fund capital expenditures and leasing
commissions. Generally, cash distributions after July
1998 will be paid from proceeds from the sales of the
Partnership's remaining two property interests and cash
reserves.
During the six months ended June 30, 1998, all of the
Partnership's property interests generated positive
cash flow from property operations, and it is
anticipated that GCGA will continue to do so during the
period the Partnership continues to own its interest in
GCGA.
On May 8, 1998, the Partnership distributed $5.19 per
Unit from cash reserves to the Limited Partners. This
cash distribution aggregated $998,579, with $898,721
distributed to the Limited Partners and $99,858
distributed to the General Partners.
During the six months ended June 30, 1998, Partnership
cash flows from operations and distributions from the
Michelson partnership (excluding the distribution of
sale proceeds) and GCGA exceeded distributions to
investors (excluding the distribution of sale proceeds)
and contributions to the Michelson partnership.
The current lease between GCGA and the Government
Services Administration ("GSA"), the sole tenant of the
office space at the One Congress Street property,
requires GCGA to fund tenant improvements aggregating
between $1,110,000 and $1,935,000; any amount funded
over $1,110,000 will be repaid monthly by GSA over five
years plus interest at 8%. In addition, GCGA is
required to fund leasing commissions of up to
$1,475,000. The maximum amount of the Partnership's
share of the above-mentioned tenant-related
expenditures (42%) is approximately $1,432,000 (of
which $346,500 would be repaid by GSA, as described
above); the Partnership has not paid any of these
expenditures through June 30, 1998.
DEAN WITTER REALTY YIELD PLUS II, L.P.
The office space at the One Congress Street property
currently has a vacancy rate of 30%; as a result, GCGA
may incur significant capital expenditures and leasing
commissions to fill the vacant space. The Partnership
will be required to fund its 42% share of GCGA's
capital expenditures.
On July 28, 1998, the Partnership paid the second
quarter cash distribution of $1.25 per Unit to the
Limited Partners. The cash distribution aggregated
$240,506, with $216,455 distributed to the Limited
Partners and $24,051 distributed to the General
Partners.
During the remainder of 1998, the Partnership expects
fund its share of the lease-related capital
expenditures at the One Congress Street property and
other cash requirements from cash reserves.
Except as discussed above and in the financial
statements, the Managing General Partner is not aware
of any trends or events, commitments or uncertainties
that may have a material impact on liquidity.
Operations
Fluctuations in the Partnership's operating results for
the three- and six-month periods ended June 30, 1998
compared to 1997 were primarily attributable to the
following:
Equity in earnings of unconsolidated partnerships
increased in 1998 as a result of the Partnership's
share of the gain from the sale of the Michelson
property in April 1998. See Note 3 to the financial
statements. Equity in earnings from the Michelson
property also increased by approximately $230,000
during the six-months ended June 30, 1998 because no
depreciation expense was recorded at the property
during the first quarter of 1998 (because the
partnership which owned the property reclassified it to
real estate held for sale as of December 31, 1997).
These increases in equity in earnings were offset by
the Partnership's share of losses from GCGA; these
losses were approximately $133,000 and $98,000 during
the three- and six-month periods ended June 30, 1998.
DEAN WITTER REALTY YIELD PLUS II, L.P.
During the three- and six-month periods ended June 30,
1998, interest on cash equivalents and other income
increased by approximately $110,000 due to interest
earned on the proceeds from the Michelson sale before
such proceeds were distributed to Limited Partners.
In 1998, there was no interest income recorded on the
Partnership's participating mortgage loan to GCGA
because, effective October 27, 1997, the Partnership
began recognizing its share of earnings from the
property using the equity method of accounting.
There were no other individually significant factors
which caused changes in revenues or expenses.
Currently, the vacancy rate in the downtown Boston
office market, the location of One Congress Street, is
less than 7% and rental rates are still increasing but
at a slower pace. There is no significant new
construction in this market. The lease with GSA (for
approximately 70% of the office space) is scheduled to
expire no earlier than July 31, 2002. The remaining
30% of the office space remained vacant. The lease for
100% of the parking lot space at the property with
Kinney Systems, Inc. expires in 2003. In 1998, the
retail space, which is not a significant portion of the
overall space, remained 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.
DEAN WITTER REALTY YIELD PLUS II, L.P.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On July 17, 1998, the Delaware Chancery Court
granted the defendants' motion to dismiss the
complaint in the Consolidated Action.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
An exhibit index has been filed as part of
this Report on Page E1.
b) Reports on Form 8-K.
Report dated April 3, 1998 regarding the
sale of the Michelson property.
DEAN WITTER REALTY YIELD PLUS II, L.P.
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: August 13, 1998 By: /s/E. Davisson
Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: August 13, 1998 By: /s/Charles M.
Charrow
Charles M. Charrow
Controller
(Principal Financial and
Accounting Officer)
DEAN WITTER REALTY YIELD PLUS II, L.P.
Quarter Ended June 30, 1998
Exhibit Index
Exhibit No. Description
27 Financial Data Schedule
E1
<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 unaudited financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,878,947
<SECURITIES> 0
<RECEIVABLES> 201,619
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,387,242<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 22,081,210<F2>
<TOTAL-LIABILITY-AND-EQUITY> 22,387,242<F3>
<SALES> 0
<TOTAL-REVENUES> 14,269,448<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 665,476<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,603,972
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,603,972
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,603,972
<EPS-PRIMARY> 78.03<F6>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include real estate
held for sale of $5,994,079, investment in unconsolidated partnerships of
$13,061,701 and net deferred expenses of $250,896.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and other liabilities of $208,113
and security deposits of $97,919.
<F4>Total revenue includes rent of $914,443, equity in earnings of
unconsolidated partnerships of $13,140,995 and other revenue of $214,010.
<F5>Other expenses include property operating expenses of $426,614,
depreciation and amortization of $122,441 and general and administrative
expenses of $116,421.
<F6>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
