FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 312905, eff. 4/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period.........to.........
(Amended by Exchange Act Rel. No. 312905, eff. 4/26/93.)
Commission file number 0-14177
MRI BUSINESS PROPERTIES FUND, LTD. II
(Exact name of registrant as specified in its charter)
California 94-2935565
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) MRI BUSINESS PROPERTIES FUND, LTD. II
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(in thousands, except unit data)
March 31, 1996
(Unaudited)
Assets
Cash and cash equivalents $ 1,330
Accounts receivable 560
Total assets 1,890
Liabilities
Accrued expenses 35
Estimated costs during the
period of liquidation 18
53
Net assets in liquidation $ 1,837
See Notes to Consolidated Financial Statements
a) MRI BUSINESS PROPERTIES FUND, LTD. II
CONSOLIDATED BALANCE SHEET
September 30,
1995
ASSETS
Cash and cash equivalents $ 4,813
Accounts receivable and other assets 2,712
Due from affiliate 170
Real Estate:
Real estate 92,497
Accumulated depreciation (37,814)
Allowance for impairment of value (10,948)
Real estate, net 43,735
Total assets $ 51,430
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and other liabilities $ 2,407
Due to an affiliate of the joint venture
partner 55
Due to unconsolidated joint venture 618
Notes payable 36,610
Minority interest in joint venture 2,937
Commitments and Contingencies
Partners' Equity:
General partners' 2
Limited partners' (91,083 assignee units
outstanding at September 30, 1995) 8,801
Total partners' equity 8,803
Total liabilities and partners' equity $ 51,430
See Notes to Consolidated Financial Statements
b) MRI BUSINESS PROPERTIES FUND, LTD. II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
Revenues:
Room revenue $ (157) $ 8,245 $ 2,226 $16,906
Food and beverage revenue -- 4,476 1,761 9,383
Other operating revenues -- 683 312 1,473
Interest 111 46 136 223
Gain on sale of properties -- -- 14,445 --
Gain on sale of unconsolidated
joint venture property -- -- 2,694 --
Equity in unconsolidated joint
venture's operations -- -- 370 --
Total revenues (46) 13,450 21,944 27,985
Expenses:
Room expenses -- 1,979 579 4,023
Food and beverage expenses -- 3,398 1,256 7,178
Other operating expenses -- 5,157 2,208 10,624
Interest -- 1,446 361 3,465
Depreciation and amortization -- 1,595 334 2,797
Equity in unconsolidated joint
venture's operations -- 23 -- 107
General and administrative 142 117 254 239
Total expenses 142 13,715 4,992 28,433
Income (loss) before minority interest
in joint venture's operations and
adjustment to liquidation basis (188) (265) 16,952 (448)
Minority interest in joint venture's
operations -- 20 (41) (81)
Adjustment to liquidation basis (18) -- (18) --
Net income (loss) $ (206) $ (245) $16,893 $ (529)
Net income (loss) allocated to
general partners $ (4) $ (5) $ 479 $ (11)
Net income (loss) allocated to
limited partners (202) (240) 16,414 (518)
$ (206) $ (245) $16,893 $ (529)
Net income (loss) per limited
partnership unit $ (2.22) $ (2.64) $180.21 $ (5.68)
Distribution per limited partnership
unit $225.94 $ -- $256.70 $ --
<FN>
See Notes to Consolidated Financial Statements
c) MRI BUSINESS PROPERTIES FUND, LTD.II
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
(Unaudited)
(in thousands, except unit data)
Limited General Limited
Partnership Partners' Partners' Total
Units Equity Equity Equity
Partners' equity at
September 30, 1995 91,083 $ 2 $ 8,801 $ 8,803
Net income for the six months
ended March 31, 1996 -- 479 16,414 16,893
Distributions paid -- (477) (23,382) (23,859)
Partners' equity at
March 31, 1996 91,083 $ 4 $ 1,833 $ 1,837
<FN>
See Notes to Consolidated Financial Statements
d) MRI BUSINESS PROPERTIES FUND, LTD.II
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 16,893 $ (529)
Adjustments to liquidation basis 18 --
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization 384 3,014
Minority interest in joint venture's operations 41 81
Equity in unconsolidated joint venture's operations (370) 107
Gain on sale of properties (14,445) --
Gain on sale of unconsolidated joint venture
property (2,694) --
Change in accounts:
Accounts receivable and other assets 1,664 2
Due from affiliate 55 --
Accounts payable, other liabilities and due to an
affiliate of the joint venture partner (2,526) (568)
Net cash (used in) provided by operating activities (980) 2,107
Cash flows from investing activities:
Property improvements and replacements (772) (6,126)
Net proceeds from sale of properties 55,588 --
Unconsolidated joint venture distributions 2,445 --
Restricted cash decrease -- 1,229
Cash provided by (used in) investing activities 57,261 (4,897)
Cash flows from financing activities:
Mortgage principal repayments (41) (399)
Satisfaction of mortgages payable (35,864) (19,874)
Proceeds from mortgage financing -- 19,400
Financing costs paid -- (211)
Distributions paid (23,859) --
Cash used in financing activities (59,764) (1,084)
Net decrease in cash and cash equivalents (3,483) (3,874)
Cash and cash equivalents at beginning of period 4,813 9,346
Cash and cash equivalents at end of period $ 1,330 $ 5,472
Supplemental information:
Interest paid $ 490 $ 3,094
Other assets assumed by purchaser $ 566 $ --
Capitalized leases assumed by purchaser $ 655 $ --
<FN>
See Notes to Consolidated Financial Statements
e) MRI BUSINESS PROPERTIES FUND, LTD. II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the Managing General Partner, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six and three month periods ended
March 31, 1996, are not necessarily indicative of the results that may be
expected for the fiscal year ending September 30, 1996. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-K for the fiscal year ended September
30, 1995.
The balance sheet at September 30, 1995 was derived from audited financial
statements at such date.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
During the first quarter of fiscal 1996, the Partnership sold its remaining
properties. As a result, the Partnership changed its basis of accounting as of
March 31, 1996, to a liquidation basis. Consequently, assets have been valued
at estimated net realizable value and liabilities are presented at their
estimated settlement amounts, including estimated costs associated with carrying
out the liquidation. The valuation of assets and liabilities necessarily
requires many estimates and assumptions and there are substantial uncertainties
in carrying out the liquidation. The actual realization of assets and
settlement of liabilities could be higher or lower than amounts indicated and is
based on the estimates as of the date of the financial statements.
Note B - Transactions with Affiliated Parties
MRI Business Properties Fund, Ltd. II (the "Partnership") has no employees and
is dependent on its general partners and affiliates for the management and
administration of all partnership activities. The Partnership Agreement
provides for payments to affiliates for services and as reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
The following transactions with affiliates of Insignia Financial Group,
Inc.("Insignia"), National Property Investors, Inc.("NPI"), and affiliates of
NPI were charged to expense in 1996 and 1995:
For the Six Months Ended
March 31,
1996 1995
Reimbursement for services of affiliates (included
in general and administrative expenses) $ 39,000 $ 54,000
Note B - Transactions with Affiliated Parties (continued)
An affiliate of the Managing General Partner was paid a fee of $49,000 relating
to a successful real estate tax appeal on the Partnership's Somerset Marriott
Hotel during the six months ended March 31, 1996.
The managing general partner of the Partnership is Montgomery Realty Company-84
("Montgomery"), a general partnership, and the associate general partner is MRI
Associates, Ltd. II ("MRI"), a limited partnership. Fox Realty Investors
("FRI") is the managing general partner of Montgomery and a general partner of
MRI.
On December 6, 1993, NPI Equity Investments II, Inc. ("Managing General Partner"
or "NPI Equity") became the managing general partner of FRI. As a result, the
Managing General Partner became responsible for the operation and management of
the business and affairs of the Partnership and the other investment
partnerships sponsored by FRI and its affiliates. The individuals who had
served previously as partners of FRI contributed their general partnership
interests in FRI to a newly formed limited partnership, Portfolio Realty
Associates, L.P. ("PRA"), in exchange for limited partnership interests in PRA.
In the foregoing capacity, such partners continue to hold, indirectly, certain
economic interests in the Partnership and such other partnerships, but have
ceased to be responsible for the operation and management of the Partnership and
such other partnerships. The Managing General Partner is a wholly-owned
subsidiary of NPI.
On August 17, 1995, the stockholders of NPI entered into an agreement to sell to
IFGP Corporation, a Delaware corporation, an affiliate of Insignia, all of the
issued and outstanding common stock of NPI for an aggregate purchase price of
$1,000,000. The closing of the transactions contemplated by the above
mentioned agreement (the "Closing") occurred on January 19, 1996.
Upon the closing, the officers and directors of NPI and NPI Equity resigned and
IFGP Corporation caused new officers and directors of each of those entities to
be elected.
Note C - Investment in Unconsolidated Joint Venture
The following are the condensed balance sheets as of March 31, 1996, and
September 30, 1995, and condensed statements of operations for the six months
ended March 31, 1996 and 1995, of the unconsolidated joint venture:
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED BALANCE SHEETS
March 31, September 30,
1996 1995
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 245 $ 887
Restricted cash -- 958
Accounts receivable and other assets -- 1,321
Real Estate:
Real estate -- 63,148
Accumulated depreciation -- (17,952)
Allowance for impairment of value -- (11,962)
Real estate, net -- 33,234
Total assets $ 245 $ 36,400
Liabilities and Partners' Deficiency
Accounts payable and other liabilities $ -- $ 1,805
Due to affiliates 245 3,069
Note payable -- 34,000
Total liabilities 245 38,874
Minority interest in joint venture -- (1,238)
Partners' Deficiency:
MRI BPF, Ltd. II -- (618)
MRI BPF, Ltd. III -- (618)
Total partners' deficiency -- (1,236)
Total liabilities and partners' deficiency $ 245 $ 36,400
Note: The balance sheet at September 30, 1995 was derived from audited
financial statements at such date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
Note C - Investment in Unconsolidated Joint Venture (continued)
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Six Months Ended
March 31, March 31,
1996 1995
Revenues $ 4,015 $ 10,122
Gain on sale of hotel 9,755 --
Total revenues 13,770 10,122
Expenses 2,536 10,551
Income (loss) before minority interest in
joint venture operations 11,234 (429)
Minority interest in joint venture
operations (5,107) 215
Net income (loss) $ 6,127 $ (214)
Allocation of net income (loss):
MRI BPF, Ltd. II $ 3,064 $ (107)
MRI BPF, Ltd. III 3,063 (107)
Net income (loss) $ 6,127 $ (214)
For the Three Months Ended
March 31, March 31,
1996 1995
Revenues $ 1 $ 5,251
Expenses 1 5,346
Loss before minority interest in joint
venture's operations -- (95)
Minority interest in joint venture's
operations -- 48
Net loss $ -- $ (47)
Allocation of net loss:
MRI BPF, Ltd. II $ -- $ (23)
MRI BPF, Ltd. III -- (24)
Net loss $ -- $ (47)
Note D - Sale of Investment Properties
On October 5, 1995, the Partnership's Somerset Marriott Hotel was sold to an
unaffiliated third party for $24,950,000. After satisfaction of notes payable
of approximately $21,830,000 (including accrued interest), a prepayment premium
of $500,000 and closing costs, the partnership received approximately
$2,200,000. The sale resulted in a gain of $1,351,000. The Partnership had
previously recorded a $10,948,000 provision for impairment of value in 1992 and
1993.
On December 1, 1995, the joint venture (in which the Partnership had a
controlling interest) sold the Radisson South Hotel to an unaffiliated third
party for $31,840,000, which terminated the joint venture. After satisfaction
of mortgage notes of approximately $14,452,000 (including accrued interest) and
closing costs, the joint venture received approximately $17,000,000. In
accordance with the joint venture agreement, the Partnership is entitled to all
the net proceeds of the sale. In addition, the Partnership received
approximately $990,000 of cash from operations, as well as, approximately
$1,300,000 in outstanding receivables of which approximately $340,000 was
outstanding at March 31, 1996. The sale resulted in a gain of approximately
$13,094,000, which included $2,978,000 of gain from termination of the joint
venture.
On December 1, 1995, the Combined Fund sold the Holiday Inn Crowne Plaza
property to an unaffiliated third party for $44,000,000. After satisfaction of
the mortgage note of $34,000,000, closing costs and other expenses the joint
venture received approximately $8,900,000. In accordance with the July 7, 1995
agreement, the Combined Fund received $5,000,000. The Partnership's share of
net proceeds, after expenses, was $2,445,000. The Partnership has recognized a
gain on sale of $2,694,000. The Combined Fund had previously recorded an
approximate $11,900,000 provision for impairment of value in 1991 and 1992. A
former joint venture partner may be required to contribute certain funds to the
Partnership in accordance with the joint venture agreement. The amount of
contribution, if any, is not determinable at this time.
Note E - Distributions
The Partnership distributed $2,802,000 to limited partners ($30.76 per limited
partnership assignee unit) and $57,000 to the general partners on October 25,
1995.
On January 23, 1996, the Partnership distributed $20,580,000 to limited partners
($225.94 per limited partnership assignee unit) and $420,000 to the general
partners. The distributions were from sales proceeds and working capital
reserves.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Operating results for the six months ended March 31, 1996, as compared to the
six months ended March 31, 1995, improved by $17,400,000, prior to minority
interest in joint venture's operations, due to the sale of the partnership's
Somerset Marriott Hotel, Radisson South Hotel and unconsolidated joint venture
property (the Holiday Inn Crowne Plaza) as discussed in further detail below.
As described in Item 1, "Notes to Financial Statements, Note D", the Partnership
sold its remaining properties during the first quarter of fiscal year 1996. The
aggregate sales prices for its properties was $100,790,000. After satisfaction
of existing mortgages, closing costs and amounts distributed to the
Partnership's joint venture partners, net proceeds received by the Partnership
were approximately $22,000,000. In addition, the Partnership received
approximately $990,000 of cash from operations in December 1995 and $946,000 in
outstanding receivables in January 1996, relating to the Radisson South Hotel.
The Partnership recorded a gain of $1,351,000 on the sale of the Somerset
Marriott Hotel, a gain of $13,094,000 on the sale of the Radisson South Hotel
and a gain of $2,694,000 on the sale of its unconsolidated joint venture
property, the Holiday Inn Crowne Plaza.
The Partnership distributed $2,802,000 to limited partners ($30.76 per limited
partnership assignee unit) and $57,000 to the general partners on October 25,
1995. The Partnership distributed $20,580,000 to limited partners ($225.94 per
limited partnership assignee unit) and $420,000 to the general partners on
January 23, 1996. The distributions were from sales proceeds and working
capital reserves. Since these were the Partnership's last remaining properties,
the Partnership expects to be terminated in 1996 after collection of
receivables, payment of outstanding liabilities and a final distribution to the
partners.
Cash and cash equivalents decreased by $3,483,000 at March 31, 1996, as compared
to September 30, 1995. The Partnership's $57,261,000 of net cash provided by
investing activities was offset by $980,000 of net cash used in operating
activities and $59,764,000 of net cash used in financing activities. Investing
activities consisted of $55,588,000 of proceeds from sales of the Partnership's
Somerset Marriott and Radisson South hotel properties and $2,445,000 of net
proceeds from the sale of the Partnership's unconsolidated joint venture
property, the Holiday Inn - Crowne Plaza and $772,000 of property improvements.
Financing activities consisted of $35,864,000 paid in satisfaction of the
mortgages encumbering the Partnership's Somerset Marriott and Radisson South
hotels, $23,859,000 of distributions to partners and $41,000 in notes payable
principal payments. All other increases (decreases) in certain assets and
liabilities are the result of the timing of receipt and payment of various
operating activities.
The Partnership, due to its fiscal year end of September 30, may be obligated
under Section 444 of the Internal Revenue Code to deposit funds with the IRS
effectively advancing the estimated tax liability of its partners. This deposit
is due May 15 and the current years required deposit is in excess of the
Partnership's available funds. The general partner is currently exploring its
alternatives in this matter. No liability for this deposit has been recorded in
the accompanying financial statements.
The Partnership's original investment objective of capital growth will not be
attained. Accordingly, a significant portion of invested capital will not be
returned to limited partners. Upon termination of the Partnership, the general
partners will be required to contribute approximately $1,727,000 to the
Partnership in accordance with the partnership agreement.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: A Form 8-K dated January 19, 1996, was filed
reporting the change in control of the Partnership.
SIGNATURE
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.
MRI BUSINESS PROPERTIES FUND, LTD. II
By: MONTGOMERY REALTY COMPANY 84,
A California General Partnership,
its managing general partner
By: FOX REALTY INVESTORS,
A California General Partnership,
its managing general partner
By: NPI EQUITY INVESTMENTS II, INC.,
A Florida Corporation,
its managing partner
/s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
/s/ Ronald Uretta
Ronald Uretta
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: May 15, 1996