7
<PAGE>
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,
1999
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
December
30,
31,
1999
1998
<S> <C>
<C>
ASSETS
Investment in unconsolidated $14,346,4 $13,923,4
partnership 60 31
Cash and cash equivalents
2,761,872 2,062,767
Other assets
16,318 10,050
$17,124,6 $15,996,2
50 48
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and other liabilities $ $
52,567 81,320
Partners' capital:
General partners
Limited partners ($500 per Unit, 3,559,940
3,444,225
173,164 Units issued)
13,512,14
12,470,70
3 3
Total partners' capital
17,072,08
15,914,92
3 8
$17,124,6 $
50
15,996,24
8
See accompanying notes to financial
statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
INCOME STATEMENTS
Three and nine months ended September
30, 1999 and
1998
<CAPTION>
Three
months ended Nine months ended
September 30, September 30,
1999
1998
1999 1998
<S> <C> <C>
<C>
<C>
Revenues:
Equity in earnings of
unconsolidated $ $
$
$13,338,
partnerships 512,679
197,012
1,151,688 007
Gain on sale of real -
- -
estate -
2,722,277
- - 2,722,27
Rental 7
Interest and other (2,351) 203,940 72,828
1,118,38 54,133 3
268,143
510,328 3,177,362
1,224,516 17,446,8
10
Expenses:
Property operating -
- -
Depreciation and - 77,058
- - 503,672
amortization
General and 22,359 3,767 67,361
126,208
administrative
61,033
177,454
22,359 141,858 67,361
807,334
Net income $ $3,035,50 $
$16,639,
487,969 4
1,157,155 476
Net income allocated to:
Limited partners $ $3,004,18 $
$16,515,
General partners 439,172 1
1,041,440 941
48,797 31,323 115,715
123,535
$ $3,035,50 $
$16,639,
487,969 4
1,157,155 476
Net income per Unit of
limited partnership $ $ $
$ $
interest 2.53 17.35 6.01
95.38
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, 1999
<CAPTION>
Limited General
Partners
Partners Total
<S>
<C> <C>
<C>
Partners' capital at January 1, 1999
$12,470,703 $
3,444,225 $15,914,928
Net income 1,041,440
115,715
1,157,155
Partners' capital at September 30,
1999 $13,512,143 $
3,559,940
$17,072,083
See accompanying notes to financial
statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
STATEMENTS OF CASH FLOWS
<CAPTION>
Nine months ended September 30, 1999
and 1998
1999 1998 <S>
<C>
<C>
Cash flows from operating activities:
Net income
$
1,157,155
$16,639,476
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Equity in earnings of
unconsolidated
partnerships (1,151,688)
(13,338,007)
Gain on sale of real estate
- -
(2,722,277)
Depreciation and amortization
- -
126,208
Decrease in deferred expenses
18,624
(Increase) decrease in other assets
(6,268)
404,543
Decrease in accounts payable and other
liabilities
(28,753)
(28,709)
Decrease in security deposits payable
-
(97,919)
Net cash (used in) provided by
operating activities (29,554)
1,001,939
Cash flows from investing activities:
Distributions from
unconsolidated
partnerships 1,837,119
32,897,180
Contributions to
unconsolidated partnerships
(1,108,460)
(600,210)
Proceeds from sale of
real
estat
e -
9,163,908
Net cash provided by investing
activities
728,659
41,460,878
Net cash flows used in financing
activities:
Cash distributions
(42,934,281)
Increase (decrease)in cash and cash
equivalents
699,105
(471,464)
Cash and cash equivalents at beginning
of
period
2,062,767
2,680,667
Cash and cash equivalents at end of
period $ 2,761,872 $ 2,209,203
See accompanying notes to financial
statements.
</TABLE>
<PAGE>
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's interests in GCGA Limited Partnership
("GCGA"), the partnership which owns the the One Congress
Street property, and DW Michelson Associates, the
partnership which owned the Michelson property (sold April
1998), are accounted for on 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 Century Alameda
Distribution Center in the third quarter of 1998 and
the gain on the sale of the Michelson
property included in equity in earnings
of unconsolidated partnerships in the
second quarter of 1998, such
adjustment consists only of normal
recurring accruals.
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, 1998. Operating results of interim
periods may not be indicative of the
operating results for the entire year.
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
Notes to Financial Statements
2. Investment in Unconsolidated
Partnership
Summarized financial information of GCGA
is as
follows:
<CAPTION>
Three months ended
Nine months ended
September 30,
September 30,
1999
1998
1999 1998
<S> <C> <C> <C> <C>
Revenue $ $ $11,809,
$
4,135,79 3,141,144 008
8,294,913
5
Expenses:
Interest on second
mortgage loan 2,121,39 1,946,877
6,213,11 5,522,127
Other interest 6 6
Property operating 948,068
2,845,186
Depreciation and 946,272 2,840,20
amortization 1,521,155 2 4,468,924
1,595,19
4 459,082
5,038,60
1,377,246
9
618,551
1,873,52
1
5,281,41 4,875,182
15,965,4
14,213,48 3
48 3
Net loss $(1,145, $(1,734,0
$(4,156,
$(5,918,5
618) 38)
440) 70)
GCGA's second mortgage loan is a participating
mortgage loan from the Partnership (42%)
and Dean Witter Realty Yield Plus L.P.,
an affiliated public partnership (58%).
The Partnership does not recognize
interest income on its share of the
second mortgage loan; instead, the
Partnership recognizes its share of
GCGA's earnings exclusive of GCGA's
interest expense on the second mortgage
loan.
</TABLE>
<PAGE>
DEAN WITTER REALTY YIELD PLUS
II, L.P. Notes to Financial
Statements
3. Related Party Transactions
Realty performs administrative
functions, processes investor
transactions and prepares tax
information for the Partnership.
Effective January 1, 1999, Realty reduced
fees for these services because of the
greatly decreased level of Partnership
activity. For the nine-month periods ended
September 30, 1999 and 1998, the
Partnership incurred approximately
$26,000 and $117,000, respectively,
for these services. These amounts are
included in general and administrative
expenses.
An affiliate of Realty provided property
management services for the two
properties sold during 1998. The
affiliate received property management
fees of $40,115 for the nine months
ended September 30, 1998 for these
services. This amount is included in
property operating expenses.
4. Subsequent Distribution
On October 27, 1999, the Partnership
distributed $10.44 per Unit from cash
reserves to the Limited Partners.
The cash distribution aggregated
$2,008,702, with $1,807,832 distributed
to the Limited Partners and $200,870
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 completed a $86,582,000
public offering in 1990.
The Partnership has no plans to raise
additional capital.
As a result of property sales in 1998,
Partnership cash flow from operations
decreased during the nine months ended
September 30, 1999 compared to 1998. The
Partnership's interest in the partnership
which owns the One Congress Street
property ("GCGA") is the Partnership's
sole property interest. GCGA is currently
marketing the property for sale.
However, there can be no assurance that
the property will be sold.
Currently, the vacancy rate in the
downtown Boston office market, the
location of One Congress Street, is
approximately 7% and rental rates in
this market are stable. There is no
new significant construction in this
market. During the nine months ended
September 30, 1999, occupancy at both the
parking garage and the office space at
the property remained at 100%. The retail
space, which is not a significant portion
of the overall space, remained
substantially vacant. No significant
leases expire before 2003.
In 1989, the Partnership and Dean Witter
Realty Yield Plus, L.P., an affiliate,
(collectively, the "New GP") made a
participating second mortgage loan to
GCGA. On October 27, 1997, the loan was
restructured and the New GP became the
general partner of GCGA. Subsequently,
the New GP identified several areas of the
parking garage at the One Congress Street
property which were in need of repair. In
1998, the New GP had GCGA fund repairs for
several of the problems at the garage
that the New GP believed required
immediate attention, and hired an
engineering firm to investigate the
overall garage space to determine what
additional repairs are required. During
the first quarter of 1999, the engineering
firm issued its preliminary report to
GCGA, and during the second quarter of
1999, a second engineering firm reviewed
the
<PAGE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
first firm's work for reasonableness and
completeness. The New GP is currently
working with the engineering firms to
determine and plan the necessary repair
work. Based on the engineers' reports,
the New GP believes that the cost of
such repairs could be significant.
However, the New GP does not expect to
begin any repair work until 2000. GCGA
will fund any repair costs by borrowing
additional funds from the New GP.
The Partnership will fund its 42% share
of any additional GCGA loan from its
cash reserves. However, if the property is
sold, any costs which have not been
funded by the time of the closing of the
sale may, instead, be deducted from the
property's sale price.
During the three and nine months ended
Septebmer 30, 1999, the One Congress
Street property generated positive cash
flow from operations, and it is
anticipated that the property will
continue to do so during the period the
Partnership continues to own its interest
in the property.
During the three and nine months ended
September 30, 1999, distributions from
GCGA exceeded the Partnership's
contributions to GCGA to fund its share
of tenant improvements and leasing
commissions at the One Congress
Street property and the
Partnership's cash used in operations.
The Partnership did not pay any cash
distributions during the nine months
ended September 30, 1999. In October
1999, the Partnership made cash
distributions out of cash reserves (see
Note 4 to the Financial Statements).
Generally, future cash distributions
will be paid from proceeds received
from the sale of the One Congress
Street property and any remaining 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 threeand nine-
month periods ended September 30, 1999
compared to 1998 are primarily
attributable to the following:
<PAGE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
Equity in earnings of unconsolidated
partnerships decreased during the nine
months ended September 30, 1999 compared
to 1998 due to the sale of the Michelson
property in April 1998.
During the three and nine months ended
September 30, 1999, equity in earnings
of GCGA was approximately $513,000 and
$1,152,000, respectively. During the
three and nine months ended September 30,
1998, equity in earnings of GCGA was
approximately $201,000 and $104,000,
respectively. The increases in earnings
of GCGA is primarily due to an increase in
occupancy at the office space at the One
Congress Street property from 70% in 1998
to 100% in 1999.
The 1998 gain on sale of real estate
resulted from the August 1998 sale of the
Century Alameda Distribution Center.
Rental revenue, property operating
expenses and depreciation and
amortization expenses decreased in
1999 compared to 1998
primarily as a result of the 1998 property
sale.
In 1999, interest and other revenues
decreased primarily due to interest
earned in 1998 on the proceeds from the
sales of the Michelson and Century
Alameda properties before such proceeds
were distributed to the Limited Partners
General and administrative expenses
decreased in 1999 compared to 1998
primarily due to the sales of the
Michelson and Century Alameda
properties.
There were no other individually
significant factors which caused changes
in revenues or expenses.
<PAGE>
Year 2000 Readiness
Many of the world's computer systems
(including those in noninformation
technology equipment and systems)
currently record years in a two-digit
format. If not addressed, such computer
systems may be unable to properly
interpret dates beyond the year 1999,
which could lead to business disruptions
in the U.S. and internationally (the
"Year 2000" issue).
The potential costs and uncertainties
associated with the Year 2000 issue may
depend on a number of factors, including
software, hardware and the nature of the
industry in which a company
operates. Additionally, companies must
coordinate with other entities with which
they
electronically interact. The Partnership
and the Managing General Partner
recognize the importance of insuring that
its business operations are not
disrupted as a result of the Year 2000
issue and
have taken a number of steps to insure that Year
2000 issues are identified and remediated.
The Managing General Partner has assessed its
internal computer information systems and is
taking steps to remediate its mission-critical
systems (at no cost to the Partnership). The
Managing General Partner is also surveying and
communicating with vendors (primarily property
managers and banks)
with whom it
has
important financial and operating
relationships, to determine the extent to
which they are vulnerable to
Year 2000 issues, in order either to insure
compliance or develop contingency plans to
mitigate the risk associated with a non-
compliant vendor. This process is expected to be
completed during the fourth quarter of 1999.
In addition, the Managing General Partner and
these vendors are currently evaluating and
assessing those mission-critical computer
systems in the Partnership's properties not
related to information technology. These
systems, which generally operate in a
building include, without limitation,
telecommunication, security (such as card-
access door lock systems), energy management
and
elevator systems. As a result of the technology
used in this type of equipment, it is
possible that this equipment may not be
repairable and accordingly may require
complete replacement by the Partnership.
Because this assessment is ongoing, the total
cost of bringing all systems and equipment into
Year 2000 compliance has not been fully
quantified. Based upon
<PAGE>
available information, the General Partner does
not believe that these costs will have a
material
adverse effect on
the Partnership's business, financial
condition or results. However, it is possible
that
there could be adverse consequences to the
Partnership as a result of Year 2000 issues
that
are outside the Partnership's control.
The General Partner is evaluating these
issues and developing contingency plans where
appropriate.
There are many risks associated with the
Year
2000 issue, including the possibility of a
failure of computer and noninformation
technology systems. Such failures could cause
system malfunctions which may have a material
adverse effect on the Partnership or its
properties. In addition, even if the General
Partner successfully remediates its
Year 2000 issues,
the Partnership can be materially and adversely
affected
by failures of third parties to remediate their
own
Year 2000 issues.
The Partnership recognizes the uncertainty of
such external dependencies since it can not
directly control the
remediation efforts of third parties.
The failure of third parties with which
the Partnership has financial or
operational relationships such as banks,
tenants, vendors, property managers and
utilities, to remediate their computer
and non-information technology systems
issues in a timely manner could result
in a material financial risk to the
Partnership.
If the above mentioned risks are not
remedied, the Partnership may experience
business interruption or shutdown,
financial loss, or regulatory actions.
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.
<PAGE>
DEAN WITTER REALTY YIELD PLUS II, L.P.
PART II - OTHER INFORMATION
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.
None.
<PAGE>
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: November 15, 1999 By: /s/E.
Davisson
Hardman, Jr.
E. Davisson
Hardman, Jr.
President
Date: November 15, 1999 By:
/s/Charles M.
Charrow
Charles M.
Charrow
Controller
(Principal
Financial and Accounting Officer)
<PAGE>
DEAN WITTER REALTY YIELD PLUS
II, L.P.
Quarter Ended
September
30, 1999
Exhibit
Index
Exhibit No.
Description
27
Financial
Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in a real estate joint
venture. 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,761,872
<SECURITIES> 0
<RECEIVABLES> 16,318
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,124,650<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,072,083<F2>
<TOTAL-LIABILITY-AND-EQUITY> 17,124,650<F3>
<SALES> 0
<TOTAL-REVENUES> 1,224,516<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 67,361<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,157,155
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,157,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,157,155
<EPS-BASIC> 6.01<F6>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include an investment
in unconsolidated partnership of $14,346,460.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and other liabilities of $52,567.
<F4>Total revenue includes equity in earnings of unconsolidated partnership
of $1,151,688 and other revenue of $72,828.
<F5>Other expenses consist of general and administrative expenses.
<F6>Represnet net income per Unit of limited partnership interest.
</FN>
</TABLE>
