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)