Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended |
Mar. 31, 2014 | |
Document and Entity Information: | ' |
Entity Registrant Name | 'REAL ESTATE ASSOCIATES LTD II |
Document Type | '10-Q |
Document Period End Date | 31-Mar-14 |
Amendment Flag | 'false |
Entity Central Index Key | '0000314237 |
Current Fiscal Year End Date | '--12-31 |
Entity Common Stock, Shares Outstanding | 10,514 |
Entity Filer Category | 'Smaller Reporting Company |
Entity Current Reporting Status | 'Yes |
Entity Voluntary Filers | 'No |
Entity Well-known Seasoned Issuer | 'No |
Document Fiscal Year Focus | '2014 |
Document Fiscal Period Focus | 'Q1 |
Balance_Sheets_Unaudited
Balance Sheets (Unaudited) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
ASSETS | ' | ' |
Cash and cash equivalents | $735 | $766 |
Accounts Receivable | 25 | 25 |
Total assets | 760 | 791 |
Liabilities: | ' | ' |
Accounts payable and accrued expenses | 9 | 22 |
Partners' capital (deficiency) | ' | ' |
General partners | -134 | -134 |
Limited partners | 885 | 903 |
Total partners' capital (deficiency) | 751 | 769 |
Total liabilities and partners' capital (deficiency) | $760 | $791 |
Statements_of_Operations_Unaud
Statements of Operations (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Operating Expenses: | ' | ' |
Management fees - General Partner | $2 | $5 |
Administrative | 4 | 3 |
Legal and accounting | 12 | 11 |
Total operating expenses | 18 | 19 |
Loss from partnership operations | -18 | -19 |
Net income (loss) | -18 | -19 |
Net income (loss) allocated to limited partners (99%) | ($18) | ($19) |
Net Income (Loss) per limited partnership interest | ($1.71) | ($1.80) |
Distribution per limited partnership interest | $0 | $142 |
Statement_of_Changes_in_Partne
Statement of Changes in Partners' Capital (Deficiency) (Unaudited) (USD $) | General Partners | Limited Partners | Total |
In Thousands | |||
Partners' capital (deficiency), beginning balance at Dec. 31, 2013 | ($134) | $903 | $769 |
Net loss | 0 | -18 | -18 |
Partners' capital (deficiency), ending balance at Mar. 31, 2014 | ($134) | $885 | $751 |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Cash flows from operating activities: | ' | ' |
Net income (loss) | ($18) | ($19) |
Change in accounts: | ' | ' |
Change in Accounts payable and accrued expenses | -13 | 12 |
Net cash provided by (used in) operating activities | -31 | 7 |
Cash flows provided by (used) in financing activities: | ' | ' |
Distribution to limited partners | 0 | -1,500 |
Net decrease in cash and cash equivalents | -31 | -1,507 |
Cash and cash equivalents, beginning of period | 766 | 2,329 |
Cash and cash equivalents, end of period | $735 | $822 |
Note_1_Organization_and_Summar
Note 1 - Organization and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 1 - Organization and Summary of Significant Accounting Policies | ' |
Note 1 - Organization And Summary Of Significant Accounting Policies | |
General | |
The information contained in the following notes to the unaudited financial statements is condensed from that which would appear in the annual audited financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the annual report for the fiscal year ended December 31, 2013 prepared by Real Estate Associates Limited II (the "Partnership"). Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year. | |
In the opinion of the Partnership’s management, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring items) considered necessary for a fair presentation. The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. | |
The general partners share a one percent interest in profits and losses of the Partnership. The limited partners share the remaining 99 percent interest which is allocated in proportion to their respective individual investments. The general partners of the Partnership are National Partnership Investments Associates, a California limited partnership, and National Partnership Investments, LLC, a California limited liability company (“NAPICO” or the “General Partner”). The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”). | |
At March 31, 2014 and December 31, 2013, there were 10,514 limited partnership interests outstanding. | |
Basis of Presentation | |
The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States. | |
Method of Accounting for Investments in Local Limited Partnerships | |
The investments in local limited partnerships (the “Local Limited Partnerships”) are accounted for using the equity method. | |
Net Income (Loss) Per Limited Partnership Interest | |
Net income (loss) per limited partnership interest was computed by dividing the limited partners’ share of net income (loss) by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 10,514 for the three months ended March 31, 2014 and 10,530 for the three months ended March 31, 2013. | |
Variable Interest Entities | |
The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of | |
the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. | |
In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. | |
At March 31, 2014 and December 31, 2013, the Partnership held variable interests in one VIE for which the Partnership was not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in the Local Limited Partnership, that the general partner of the Local Limited Partnership is the primary beneficiary of the respective Local Limited Partnership. In making this determination, the Partnership considered the following factors: | |
· the general partner conducts and manages the business of the Local Limited Partnership; | |
· the general partner has the responsibility for and sole discretion over selecting a property management agent for the Local Limited Partnership's underlying real estate properties; | |
· the general partner is responsible for approving operating and capital budgets for the properties owned by the Local Limited Partnership; | |
· the general partner is obligated to fund any recourse obligations of the Local Limited Partnership; | |
· the general partner is authorized to borrow funds on behalf of the Local Limited Partnership; and | |
· the Partnership, as a limited partner in the Local Limited Partnership, does not have the ability to direct or otherwise significantly influence the activities of the Local Limited Partnership that most significantly impact such entity's economic performance. | |
The one VIE at March 31, 2014 consisted of a Local Limited Partnership that was directly engaged in the ownership and management of one apartment property with a total of 48 units. The Partnership is involved with the VIE as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIE is limited to the Partnership’s recorded investments in and receivables from this VIE, which was zero at both March 31, 2014 and December 31, 2013. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. |
Note_2_Investments_in_and_Adva
Note 2 - Investments in and Advances To Local Partnerships | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Notes | ' | |||
Note 2 - Investments in and Advances To Local Partnerships | ' | |||
Note 2 - Investments in and Advances to Local Limited Partnership | ||||
As of March 31, 2014 and December 31, 2013, the Partnership held limited partnership interests in one Local Limited Partnership. As of March 31, 2014 and December 31, 2013, the Local Limited Partnership owned a residential low income rental project consisting of 48 apartment units. The mortgage loans of this project are payable to or insured by various governmental agencies. | ||||
The Partnership, as a limited partner, does not have a contractual relationship with the Local Limited Partnership or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Limited Partnership that would require or allow for consolidation. Accordingly, the Partnership accounts for its investment in the Local Limited Partnership using the equity method. The Partnership is allocated profits and losses of the Local Limited Partnerships based upon its respective ownership percentage (99%). Distributions of surplus cash from operations from the Local Limited Partnership are restricted by the Local Limited Partnership's Regulatory Agreements with the United States Department of Housing and Urban Development (“HUD”) and/or are restricted by the terms of the mortgages encumbering the Projects. These restrictions limit the distribution to a portion, generally less than 10%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Limited Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Limited Partnership's partnership agreement. This agreement limits the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Limited Partnership. | ||||
The investment is carried at cost plus the Partnership’s share of the Local Limited Partnership’s profits less the Partnership’s share of the Local Limited Partnership’s losses, distributions and impairment charges. The Partnership is not legally liable for the obligations of the Local Limited Partnership and is not otherwise committed to provide additional support to it. Therefore, it does not recognize losses once its investment in the Local Limited Partnership reaches zero. Distributions from the Local Limited Partnership are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying unaudited statements of operations. Operating distributions from the Local Limited Partnership in which the Partnership’s investment in the Local Limited Partnership has been reduced to zero were $0 for the three months ended March 31, 2014 and 2013, respectively. | ||||
At times, advances are made to the Local Limited Partnership. Advances made by the Partnership to the individual Local Limited Partnership are considered part of the Partnership’s investment in the limited partnership. Advances made to Local Limited Partnership for which the investment has been reduced to zero are generally charged to expense. There were no advances made during the three months ended March 31, 2014 and 2013. | ||||
For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Limited Partnerships only to the extent of distributions received and amortization of acquisition costs from those Local Limited Partnerships. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize. | ||||
The Partnership had no carrying value in investment in the Local Limited Partnership as of March 31, 2014 or December 31, 2013. | ||||
In October 2013, the Partnership sold its limited partnership interest in Magnolia Estates to an affiliate of the Local Operating General Partner. The Partnership received $16,500 in proceeds from the sale. The Partnership's investment balance in this Local Partnership was zero at the time of sale. | ||||
In October 2013, the Partnership sold its limited partnership interest in Crystal Springs to an affiliate of the Local Operating General Partner. The Partnership received $7,700 in proceeds from the sale. The Partnership's investment balance in this Local Partnership was zero at the time of sale. | ||||
In October 2013, the Partnership sold its limited partnership interest in Azalea Court to an affiliate of the Local Operating General Partner. The Partnership received $13,200 in proceeds from the sale. The Partnership's investment balance in this Local Partnership was zero at the time of sale. | ||||
The following are unaudited condensed combined estimated statements of operations for the three months ended March 31, 2014 and 2013 for the Local Limited Partnerships in which the Partnership has invested excluding the operations of Magnolia Estates, Crystal Springs and Azalea Court for which the Partnership sold its limited partnership interest in October 2013 (in thousands): | ||||
Three Months Ended March 31, 2014 | Three Months Ended March 31, 2013 | |||
Revenues | ||||
Rental and other | $ 110 | $ 110 | ||
Expenses | ||||
Depreciation | 10 | 9 | ||
Interest | 15 | 15 | ||
Operating | 91 | 70 | ||
Total expenses | 116 | 94 | ||
Income (loss) from continuing operations | $ (6) | $ 16 |
Note_3_Transactions_With_Affil
Note 3 - Transactions With Affiliated Parties | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 3 - Transactions With Affiliated Parties | ' |
Note 3 – Transactions With Affiliated Parties | |
Under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is liable to NAPICO for an annual management fee equal to 0.4 percent of the Partnership’s original remaining invested assets of the Local Limited Partnerships and is calculated at the beginning of each year. Invested assets are defined as the costs of acquiring project interests, including the proportionate amount of the mortgage loans related to the Partnership’s interests in the capital accounts of the respective partnerships. The fee was approximately $2,000 and $5,000 for the three months ended March 31, 2014 and 2013, respectively. |
Note_4_Fair_Value_of_Financial
Note 4 - Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 4 - Fair Value of Financial Instruments | ' |
Note 4 – Fair Value of Financial Instruments | |
Financial Accounting Standards Board Accounting Standards Codification Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amounts of other assets and liabilities reported on the balance sheet at March 31, 2014 that require such disclosure approximated their fair value due to the short-term maturity of these instruments. |
Note_5_Contingencies
Note 5 - Contingencies | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 5 - Contingencies | ' |
Note 5 - Contingencies | |
The General Partner is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the General Partner, the claims will not result in any material liability to the Partnership. |
Note_6_Distribution
Note 6 - Distribution | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 6 - Distribution | ' |
Note 6 – Distribution | |
During the three months ended March 31, 2013, the Partnership distributed approximately $1,500,000 to the limited partners, or $142.45 per limited partnership interest. |
Note_7_Subsequent_Event
Note 7 - Subsequent Event | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 7 - Subsequent Event | ' |
Note 7 – Subsequent Event | |
The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed. |
Note_1_Organization_and_Summar1
Note 1 - Organization and Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Basis of Presentation | ' |
Basis of Presentation | |
The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States. |
Note_1_Organization_and_Summar2
Note 1 - Organization and Summary of Significant Accounting Policies: Method of Accounting For Investment in Local Partnerships (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Method of Accounting For Investment in Local Partnerships | ' |
Method of Accounting for Investments in Local Limited Partnerships | |
The investments in local limited partnerships (the “Local Limited Partnerships”) are accounted for using the equity method. |
Note_1_Organization_and_Summar3
Note 1 - Organization and Summary of Significant Accounting Policies: Net Loss Per Limited Partnership Interest (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Net Loss Per Limited Partnership Interest | ' |
Net Income (Loss) Per Limited Partnership Interest | |
Net income (loss) per limited partnership interest was computed by dividing the limited partners’ share of net income (loss) by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 10,514 for the three months ended March 31, 2014 and 10,530 for the three months ended March 31, 2013. |
Note_1_Organization_and_Summar4
Note 1 - Organization and Summary of Significant Accounting Policies: Variable Interest Entities (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Variable Interest Entities | ' |
Variable Interest Entities | |
The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of | |
the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. | |
In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. | |
At March 31, 2014 and December 31, 2013, the Partnership held variable interests in one VIE for which the Partnership was not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in the Local Limited Partnership, that the general partner of the Local Limited Partnership is the primary beneficiary of the respective Local Limited Partnership. In making this determination, the Partnership considered the following factors: | |
· the general partner conducts and manages the business of the Local Limited Partnership; | |
· the general partner has the responsibility for and sole discretion over selecting a property management agent for the Local Limited Partnership's underlying real estate properties; | |
· the general partner is responsible for approving operating and capital budgets for the properties owned by the Local Limited Partnership; | |
· the general partner is obligated to fund any recourse obligations of the Local Limited Partnership; | |
· the general partner is authorized to borrow funds on behalf of the Local Limited Partnership; and | |
· the Partnership, as a limited partner in the Local Limited Partnership, does not have the ability to direct or otherwise significantly influence the activities of the Local Limited Partnership that most significantly impact such entity's economic performance. | |
The one VIE at March 31, 2014 consisted of a Local Limited Partnership that was directly engaged in the ownership and management of one apartment property with a total of 48 units. The Partnership is involved with the VIE as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIE is limited to the Partnership’s recorded investments in and receivables from this VIE, which was zero at both March 31, 2014 and December 31, 2013. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. |
Note_2_Investments_in_and_Adva1
Note 2 - Investments in and Advances To Local Partnerships: Estimated condensed combined statements of operations for Local Partnerships (Tables) | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Tables/Schedules | ' | |||
Estimated condensed combined statements of operations for Local Partnerships | ' | |||
Three Months Ended March 31, 2014 | Three Months Ended March 31, 2013 | |||
Revenues | ||||
Rental and other | $ 110 | $ 110 | ||
Expenses | ||||
Depreciation | 10 | 9 | ||
Interest | 15 | 15 | ||
Operating | 91 | 70 | ||
Total expenses | 116 | 94 | ||
Income (loss) from continuing operations | $ (6) | $ 16 |
Note_1_Organization_and_Summar5
Note 1 - Organization and Summary of Significant Accounting Policies (Details) | Mar. 31, 2014 | Dec. 31, 2013 |
Details | ' | ' |
Number of Limited Partnership Interests Outstanding | 10,514 | 10,514 |
Note_1_Organization_and_Summar6
Note 1 - Organization and Summary of Significant Accounting Policies: Net Loss Per Limited Partnership Interest (Details) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Details | ' | ' |
Number of limited partnership interests in EPS calculation | 10,514 | 10,530 |
Note_2_Investments_in_and_Adva2
Note 2 - Investments in and Advances To Local Partnerships: Estimated condensed combined statements of operations for Local Partnerships (Details) (Partnership Interest, USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Partnership Interest | ' | ' |
Revenues | ' | ' |
Rental Income, Nonoperating | $110 | $110 |
Expenses | ' | ' |
Depreciation, Depletion and Amortization, Nonproduction | 10 | 9 |
Interest Expense | 15 | 15 |
Operating Costs and Expenses | 91 | 70 |
Total Expenses | 116 | 94 |
Income (Loss) from Continuing Operations, Including Portion Attributable to Noncontrolling Interest | ($6) | $16 |
Note_6_Distribution_Details
Note 6 - Distribution (Details) (USD $) | 3 Months Ended |
Mar. 31, 2013 | |
Details | ' |
Distribution Made to Member or Limited Partner, Distributions Paid, Per Unit | $142.45 |