Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Aug. 12, 2015 | |
Document and Entity Information: | ||
Entity Registrant Name | REAL ESTATE ASSOCIATES LTD II | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Trading Symbol | real2 | |
Amendment Flag | false | |
Entity Central Index Key | 314,237 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 10,507 | |
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 | 2,015 | |
Document Fiscal Period Focus | Q3 |
Balance Sheets (September 30, 2
Balance Sheets (September 30, 2015 Unaudited) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
ASSETS | ||
Cash and cash equivalents | $ 555 | $ 601 |
Accounts Receivable - limited partners | 103 | 103 |
Total assets | 658 | 704 |
Liabilities: | ||
Accounts payable and accrued expenses | 17 | 20 |
Total liabilities | 17 | 20 |
Partners' capital (deficiency) | ||
General partners | (135) | (135) |
Limited partners | 776 | 819 |
Total partners' capital (deficiency) | 641 | 684 |
Total liabilities and partners' capital (deficiency) | $ 658 | $ 704 |
Statements of Operations (Unaud
Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Operating Expenses: | ||||
Management fees - General Partner | $ 2 | $ 2 | $ 6 | $ 6 |
Administrative | 4 | 3 | 20 | 17 |
Legal and accounting | 7 | 7 | 21 | 29 |
Total operating expenses | 13 | 12 | 47 | 52 |
Loss from partnership operations | (13) | (12) | (47) | (52) |
Distributions in excess of investment in Local Limited Partnership | 0 | 0 | 4 | 5 |
Net income (loss) | (13) | (12) | (43) | (47) |
Net income (loss) allocated to general partners (1%) | 0 | 0 | 0 | 0 |
Net income (loss) allocated to limited partners (99%) | $ (13) | $ (12) | $ (43) | $ (47) |
Net Income (Loss) per limited partnership interest | $ (1.24) | $ (1.14) | $ (4.09) | $ (4.47) |
Statement of Changes in Partner
Statement of Changes in Partners' Capital (Deficiency) (Unaudited) - 9 months ended Sep. 30, 2015 - USD ($) $ in Thousands | General Partners | Limited Partners | Total |
Partners' capital (deficiency), beginning balance at Dec. 31, 2014 | $ (135) | $ 819 | $ 684 |
Net loss | 0 | (43) | (43) |
Partners' capital (deficiency), ending balance at Sep. 30, 2015 | $ (135) | $ 776 | $ 641 |
Statements of Cash Flows (Unaud
Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (43) | $ (47) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Distributions in excess of investment in Local Limited Partnership | (4) | (5) |
Change in Accounts Receivable | 0 | (78) |
Change in Accounts payable and accrued expenses | (3) | 0 |
Net cash provided by (used in) operating activities | (50) | (130) |
Cash flows from investing activities: | ||
Distributions received from Local Limited Partnership | 4 | 5 |
Net cash provided by (used in) investing activities | 4 | 5 |
Cash flows provided by (used) in financing activities: | ||
Net decrease in cash and cash equivalents | (46) | (125) |
Cash and cash equivalents, beginning of period | 601 | 766 |
Cash and cash equivalents, end of period | $ 555 | $ 641 |
Note 1 - Organization and Summa
Note 1 - Organization and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
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, 2014 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 Partnerships 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, 2014 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 September 30, 2015 and December 31, 2014, there were 10,507, 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 10,507 for the nine months ended September 30, 2015 and 10,514 for the nine months ended September 30, 2014. 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 entitys 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 entitys 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 VIEs 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 VIEs economic performance and which party controls such activities; the amount and characteristics of the Partnerships 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 September 30, 2015 and December 31, 2014, 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 one VIE at September 30, 2015 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 Partnerships maximum exposure to loss as a result of its involvement with the unconsolidated VIE is limited to the Partnerships recorded investments in and receivables from this VIE, which was zero at both September 30, 2015 and December 31, 2014. 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 Adv
Note 2 - Investments in and Advances To Local Limited Partnerships | 9 Months Ended |
Sep. 30, 2015 | |
Notes | |
Note 2 - Investments in and Advances To Local Limited Partnerships | Note 2 - Investments in and Advances to Local Limited Partnership As of September 30, 2015 and December 31, 2014, the Partnership held limited partnership interests in one Local Limited Partnership. As of September 30, 2015 and December 31, 2014, 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 the United States Department of Housing and Urban Development(HUD). 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 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 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 Partnerships distributions to an amount substantially less than its ownership percentage in the Local Limited Partnership. The investment is carried at cost plus the Partnerships share of the Local Limited Partnerships profits less the Partnerships share of the Local Limited Partnerships 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 Partnerships investment in the Local Limited Partnership has been reduced to zero were approximately $4,000 and $5,000 for the nine months ended September 30, 2015 and 2014, 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 Partnerships 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 nine months ended September 30, 2015 and 2014. For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnerships 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 September 30, 2015 or December 31, 2014. The following are unaudited condensed combined estimated statements of operations for the three and nine months ended September 30, 2015 and 2014 for the Local Limited Partnerships in which the Partnership has invested: Three Months Ended September 30, Nine Months Ended September 30 2015 2014 2015 2014 Revenues Rental and other $ 75 $ 109 $ 296 $ 335 Expenses Depreciation 7 10 23 29 Interest 14 14 43 44 Operating 79 90 238 272 Total expenses 100 114 304 345 Income (loss) from continuing operations $ (25) $ (5) $ (8) $ (10) |
Note 3 - Transactions With Affi
Note 3 - Transactions With Affiliated Parties | 9 Months Ended |
Sep. 30, 2015 | |
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 Partnerships 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 Partnerships interests in the capital accounts of the respective partnerships. The fee was approximately $6,000 for the nine months ended September 30, 2015 and 2014. |
Note 4 - Fair Value of Financia
Note 4 - Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2015 | |
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 September 30, 2015 that require such disclosure approximated their fair value due to the short-term maturity of these instruments. |
Note 5 - Contingencies
Note 5 - Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
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 - Subsequent Event
Note 6 - Subsequent Event | 9 Months Ended |
Sep. 30, 2015 | |
Notes | |
Note 6 - Subsequent Event | Note 6 Subsequent Event The Partnerships management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed. |
Note 1 - Organization and Sum12
Note 1 - Organization and Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
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 Sum13
Note 1 - Organization and Summary of Significant Accounting Policies: Method of Accounting For Investments in Local Limited Partnerships (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Policies | |
Method of Accounting For Investments in Local Limited 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 Sum14
Note 1 - Organization and Summary of Significant Accounting Policies: Net Income (Loss) Per Limited Partnership Interest (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Policies | |
Net Income (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 10,507 for the nine months ended September 30, 2015 and 10,514 for the nine months ended September 30, 2014. |
Note 1 - Organization and Sum15
Note 1 - Organization and Summary of Significant Accounting Policies: Variable Interest Entities (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
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 entitys 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 entitys 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 VIEs 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 VIEs economic performance and which party controls such activities; the amount and characteristics of the Partnerships 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 September 30, 2015 and December 31, 2014, 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 one VIE at September 30, 2015 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 Partnerships maximum exposure to loss as a result of its involvement with the unconsolidated VIE is limited to the Partnerships recorded investments in and receivables from this VIE, which was zero at both September 30, 2015 and December 31, 2014. 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 A16
Note 2 - Investments in and Advances To Local Limited Partnerships: Estimated condensed combined statements of operations for Local Partnerships (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Tables/Schedules | |
Estimated condensed combined statements of operations for Local Partnerships | Three Months Ended September 30, Nine Months Ended September 30 2015 2014 2015 2014 Revenues Rental and other $ 75 $ 109 $ 296 $ 335 Expenses Depreciation 7 10 23 29 Interest 14 14 43 44 Operating 79 90 238 272 Total expenses 100 114 304 345 Income (loss) from continuing operations $ (25) $ (5) $ (8) $ (10) |
Note 1 - Organization and Sum17
Note 1 - Organization and Summary of Significant Accounting Policies (Details) - shares | Sep. 30, 2015 | Dec. 31, 2014 |
Details | ||
Number of Limited Partnership Interests Outstanding | 10,507 | 10,507 |
Note 1 - Organization and Sum18
Note 1 - Organization and Summary of Significant Accounting Policies: Net Income (Loss) Per Limited Partnership Interest (Details) - shares | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Details | ||
Number of limited partnership interests in EPS calculation | 10,507 | 10,514 |
Note 2 - Investments in and A19
Note 2 - Investments in and Advances To Local Limited Partnerships: Estimated condensed combined statements of operations for Local Partnerships (Details) - Partnership Interest - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenues | ||||
Rental Income, Nonoperating | $ 75 | $ 109 | $ 296 | $ 335 |
Expenses | ||||
Depreciation, Depletion and Amortization, Nonproduction | 7 | 10 | 23 | 29 |
Interest Expense | 14 | 14 | 43 | 44 |
Operating Costs and Expenses | 79 | 90 | 238 | 272 |
Total Expenses | 100 | 114 | 304 | 345 |
Income (Loss) from Continuing Operations, Including Portion Attributable to Noncontrolling Interest | $ (25) | $ (5) | $ (8) | $ (10) |