SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 2, 1996
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Charter)
Massachusetts 0-17664 04-2969061
(State of (Commission (IRS Employer
Organization) File No.) Identification No.)
200 Clarendon Street
Boston, MA 02116 (800) 722-5457
(Address of principal executive (Registrant's telephone
offices, including zip code) number, including area
code)
Not Applicable
(Former name or former address, if changed since last report)
Page 1 of 8
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
ITEM 2 - Acquisition or Disposition of Assets
- ---------------------------------------------
Disposition of the Fulton Business Park
- ---------------------------------------
On December 2, 1996, the Partnership sold Fulton Business Park, a
warehouse/distribution/office facility located in Atlanta, Georgia, for a
net sales price of approximately $3,315,000, after deductions for
commissions and selling expenses incurred in connection with the sale of
the property. The sale of the property resulted in a non-recurring loss of
approximately $692,000, which represents the difference between the net
sales price and the property's net book value of approximately $3,997,000
(including unamortized leasing costs of approximately $122,000).
Based upon the General Partner's analysis of comparable sales transactions
and its review of the offers received during the property's marketing
period, the General Partner accepted the offer from FR Acquisitions, Inc.
(the "Buyer"). There is no relationship between the Buyer and the
Partnership or any associate, director or officer of the General Partner.
The sale was made pursuant to a Purchase and Sale Agreement dated November
25, 1996, which is included as Exhibit 1 of this report.
ITEM 7 - Financial Statements
- -----------------------------
(A) Financial Statements
Pro Forma Balance Sheet at September 30, 1996 4
Pro Forma Statement of Operations for the Nine Months
Ended September 30, 1996 5
Pro Forma Statement of Operations for the Year Ended
December 31, 1995 6
Notes to Pro Forma Financial Statements 7
(B) Exhibits
1. Purchase and Sale Agreement (excluding exhibits) between
John Hancock Realty Income Fund-II Limited Partnership
and FR Acquisitions, Inc. dated November 25, 1996 11
2
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
On December 2, 1996, the Partnership sold the Fulton Business Park to the
Buyer for a net sales price of approximately $3,315,000. The Pro Forma
Balance Sheet reflects the financial position of the Partnership as if the
Fulton Business Park property had been sold on September 30, 1996. The Pro
Forma Statement of Operations for the nine months ended September 30, 1996
reflects the continued operations of the Partnership as if the Fulton
Business Park property had been sold on December 31, 1995. In addition,
the Pro Forma Statement of Operations for the year ended December 31, 1995
reflects the continued operations of the Partnership as if the Fulton
Business Park property had been sold on December 31, 1994.
3
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1996
(Unaudited)
Pro Forma
Historical Adjustment for
Summary Fulton Pro Forma
September 30, Business September 30,
1996 Park 1996
---- ---- ----
Current assets:
Cash and cash equivalents $5,047,640 $3,314,954 $8,362,594
Restricted cash 39,907 (2,924) 36,983
Other current assets 207,156 (26) 207,130
---------- ---------- ----------
Total current assets 5,294,703 3,312,004 8,606,707
Real estate loans 5,794,587 - 5,794,587
Investment in property:
Land 5,560,000 (520,000) 5,040,000
Buildings and improvements 18,836,994 (4,618,786) 14,218,208
---------- ---------- ----------
24,396,994 (5,138,786) 19,258,208
Less: accumulated depreciation (4,995,238) 1,238,604 (3,756,634)
---------- ---------- ----------
19,401,756 (3,900,182) 15,501,574
Investment in joint venture 7,656,986 - 7,656,986
Long-term restricted cash 109,258 (27,775) 81,483
Deferred expenses, net of accumulated
amortization of $1,210,715 in 1996 1,138,637 (131,295) 1,007,342
---------- ---------- ----------
Total assets $39,395,927 ($747,248) $38,648,679
=========== =========== ===========
Current liabilities:
Accounts payable and accrued expenses $544,451 ($76,845) $467,606
Accounts payable to affiliates 39,208 - 39,208
---------- ---------- ----------
Total current liabilities 583,659 (76,845) 506,814
Partners' equity/(deficit):
General Partner (155,528) (6,704) (162,232)
Limited Partners 38,967,796 (663,699) 38,304,097
---------- ---------- ----------
Total partners' equity 38,812,268 (670,403) 38,141,865
---------- ---------- ----------
Total liabilities and partners' equity $39,395,927 ($747,248) $38,648,679
=========== ========== ===========
See Notes to Pro Forma Financial Statements
4
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
Historical
Summary Pro Forma Pro Forma
For the Nine Adjustment for For the Nine
Months Ended Fulton Months Ended
September 30, Business September 30,
1996 Park 1996
---- ---- ----
Income:
Rental income $1,894,511 ($337,532) $1,556,979
Interest income 655,281 - 655,281
Income from joint venture 572,852 - 572,852
---------- ---------- ----------
Total income 3,122,644 (337,532) 2,785,112
Expenses:
Depreciation 470,869 (115,423) 355,446
Property operating expenses 362,488 (56,417) 306,071
Amortization of deferred expenses 215,340 (41,119) 174,221
General and administrative 180,937 - 180,937
---------- ---------- ----------
Total expenses 1,229,634 (212,959) 1,016,675
---------- ---------- ----------
Net income $1,893,010 ($124,573) $1,768,437
========== ========== ==========
Allocation of net income:
General Partner $18,930 ($1,246) $17,684
John Hancock Limited Partner - - -
Investors 1,874,080 (123,327) 1,750,753
---------- ---------- ----------
$1,893,010 ($124,572) $1,768,437
========== ========== ==========
Net income per Unit $0.72 ($0.05) $0.67
========== ========== ==========
See Notes to Pro Forma Financial Statements
5
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
Historical Pro Forma
Summary Adjustment for Pro Forma
For the Year Ended Fulton For the Year Ended
December 31, Business December 31,
1995 Park 1995
---- ---- ----
(Audited) (Unaudited) (Unaudited)
Income:
Rental income $2,447,532 ($426,318) $2,021,214
Interest income 879,508 - 879,508
Income from joint venture 755,198 - 755,198
---------- -------- ----------
Total income 4,082,238 (426,318) 3,655,920
Expenses:
Depreciation 627,886 (153,960) 473,926
Property operating expenses 536,613 (102,136) 434,477
General and administrative 231,487 - 231,487
Amortization of deferred expenses 272,228 (39,531) 232,697
---------- -------- ----------
Total expenses 1,668,214 (295,627) 1,372,587
---------- -------- ----------
Net income $2,414,024 ($130,691) $2,283,333
========== ======== ==========
Allocation of net income:
General Partner $24,140 ($1,307) $22,833
John Hancock Limited Partner - - -
Investors 2,389,884 (129,384) 2,260,500
---------- -------- ----------
$2,414,024 ($130,691) $2,283,333
========== ======== ==========
Net income per Unit $0.92 ($0.05) $0.87
========== ======== ==========
See Notes to Pro Forma Financial Statements
6
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Pro Forma Financial Statements
(Unaudited)
Note 1 - Fulton Business Park
- -----------------------------
On December 2, 1996, the Partnership sold the Fulton Business Park property
in Atlanta, Georgia, for a net sales price of approximately $3,315,000,
after deductions for commissions and selling expenses incurred in
connection with the sale of the property. The sale of the property
resulted in a non-recurring loss of approximately $692,000 which represents
the difference between the net sales price and the property's net book
value of approximately $3,997,000 (including unamortized leasing costs of
approximately $122,000).
The historical financial statements are adjusted to show the effects
resulting from the sale of the Fulton Business Park property on the
Partnership's operations, assets and liabilities. The Pro Forma Balance
Sheet at September 30, 1996 reflects the financial position of the
Partnership as if the Fulton Business Park property had been sold on
September 30, 1996. The Pro Forma Statement of Operations for the nine
months ended September 30, 1996 reflects the continued operations of the
Partnership as if the Fulton Business Park property had been sold on
December 31, 1995. In addition, the Pro Forma Statement of Operations for
the year ended December 31, 1995 reflects the continued operations of the
Partnership as if the Fulton Business Park property had been sold on
December 31, 1994.
Note 2 - Distributions and Allocations
- --------------------------------------
Distributable Cash from Operations (defined in the Partnership Agreement)
is distributed 1% to the General Partner and the remaining 99% in the
following order of priority: first, to the Investors until they receive a
7% non-cumulative, non-compounded annual cash return on their Invested
Capital (defined in the Partnership Agreement); second, to the General
Partner to pay the Subordinated Allocation (defined in the Partnership
Agreement) equal to 3 1/2% of Distributable Cash from Operations for
managing the Partnership's activities; third, to the John Hancock Limited
Partner until it receives a 7% non-cumulative, non-compounded annual cash
return on its Invested Capital; fourth, to the Investors and the John
Hancock Limited Partner in proportion to their respective Capital
Contributions (defined in the Partnership Agreement), until they have
received a 10% non-cumulative, non-compounded annual cash return on their
Invested Capital; fifth, to the General Partner to pay the Incentive
Allocation (defined in the Partnership Agreement) equal to 2 1/2% of
Distributable Cash from Operations; and sixth, to the Investors and the
John Hancock Limited Partner in proportion to their respective Capital
Contributions. Any Distributable Cash from Operations which is available
as a result of a reduction of working capital reserves funded by Capital
Contributions of the Investors, will be distributed 100% to the Investors.
7
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Pro Forma Financial Statements (continued)
(Unaudited)
Note 2 - Distributions and Allocations (continued)
- --------------------------------------
Cash from a Sale, Financing or Repayment (defined in the Partnership
Agreement) of a Partnership Investment, is first used to pay all debts and
liabilities of the Partnership then due and then to fund any reserves for
contingent liabilities. Cash from Sales, Financings or Repayments is
distributed and paid in the following order of priority: first, to the
Investors and the John Hancock Limited Partner, with the distribution
allocated to Investors and the John Hancock Limited Partner in proportion
to their respective Capital Contributions, until the Investors and the John
Hancock Limited Partner have received an amount equal to their Invested
Capital; second, to the Investors until they have received, after giving
effect to all previous distributions of Distributable Cash from Operations
and any previous distributions of Cash from Sales, Financings or Repayments
after the return of their Invested Capital, the Cumulative Return on
Investment (defined in the Partnership Agreement); third, to the John
Hancock Limited Partner until it has received, after giving effect to all
previous distributions of Distributable Cash from Operations and any
previous distributions of Cash from Sales, Financings or Repayments after
the return of its Invested Capital, the Cumulative Return on Investment;
fourth, to the General Partner to pay any Subordinated Disposition Fees
then payable pursuant to Section 6.4(c) of the Partnership Agreement; and
fifth, 99% to the Investors and the John Hancock Limited Partner and 1% to
the General Partner, with the distribution allocated to the Investors and
the John Hancock Limited Partner in proportion to their respective Capital
Contributions.
Cash from the sale or repayment of the last of the Partnership's properties
or mortgage loans is distributed in the same manner as Cash from Sales,
Financings or Repayments, except that before any other distribution is made
to the Partners, each Partner shall first receive from such cash, an amount
equal to the then positive balance, if any, in such Partner's Capital
Account after crediting or charging to such account the profits or losses
for tax purposes from such sale. To the extent, if any, that a Partner is
entitled to receive a distribution of cash based upon a positive balance in
its capital account prior to such distribution, such distribution will be
credited against the amount of such cash the Partner would have been
entitled to receive based upon the manner of distribution of Cash from
Sales, Financings or Repayments, as specified in the previous paragraph.
8
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Pro Forma Financial Statements (continued)
(Unaudited)
Note 2 - Distributions and Allocations (continued)
- --------------------------------------
Profits for tax purposes from the normal operations of the Partnership for
each fiscal year are allocated to the Partners in the same amounts as
Distributable Cash from Operations for that year. If such profits are less
than Distributable Cash from Operations for any year, then they are
allocated in proportion to the amounts of Distributable Cash from
Operations allocated for that year. If such profits are greater than
Distributable Cash from Operations for any year, they are allocated 1% to
the General Partner and 99% to the John Hancock Limited Partner and the
Investors, with the allocation made between the John Hancock Limited
Partner and the Investors in proportion to their respective Capital
Contributions. Losses for tax purposes from the normal operations of the
Partnership are allocated 1% to the General Partner and 99% to the John
Hancock Limited Partner and the Investors, with the allocation made between
the John Hancock Limited Partner and the Investors in proportion to their
respective Capital Contributions.
Profits and Losses from Sales, Financings or Repayments are generally
allocated 99% to the Limited Partners and 1% to the General Partners,
subject to the provisions of the Partnership Agreement.
9
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report on Form 8-K to be signed on its
behalf by the undersigned, hereunto duly authorized, on the 17th day of
December, 1996.
John Hancock Realty Income Fund-II
Limited Partnership
By: John Hancock Realty Equities, Inc.,
General Partner
By: WILLIAM M. FITZGERALD
--------------------------------
William M. Fitzgerald, President
By: RICHARD E. FRANK
--------------------------------
Richard E. Frank, Treasurer
(Chief Accounting Officer)