SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994
Commission File Number 0-17664
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2969061
(State or other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
200 Berkeley Street, Boston, MA 02117
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (800) 722-5457
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Assignee Units
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: Not applicable, since securities are non-voting.
Documents incorporated by reference. None.
Exhibit Index on Pages 24 - 29
Page 1 of 67
TABLE OF CONTENTS
PART I
Item 1 Business 3
Item 2 Properties 7
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote
of Security Holders 9
PART II
Item 5 Market for the Partnership's Securities and Related
Security Holder Matters 9
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 8 Financial Statements and Supplementary Data 19
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 19
PART III
Item 10 Directors and Executive Officers of the Partnership 19
Item 11 Executive Compensation 21
Item 12 Security Ownership of Certain Beneficial Owners
and Management 24
Item 13 Certain Relationships and Related Transactions 24
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 24
Signatures 30
2
Part I
Item 1 - Business
The Registrant, John Hancock Realty Income Fund-II Limited Partnership (the
"Partnership"), is a limited partnership organized on June 30, 1987 under
the provisions of the Massachusetts Uniform Limited Partnership Act. As of
December 31, 1994, the partners in the Partnership consisted of John
Hancock Realty Equities, Inc. (the "General Partner"), John Hancock Realty
Funding, Inc. (the "John Hancock Limited Partner"), John Hancock Income
Fund-II Assignor, Inc. (the "Assignor Limited Partner") and 4,575 Unit
holders (the "Investors"). The Assignor Limited Partner holds 2,601,552
Assignee Units (the "Units") for the benefit of the Investors. The John
Hancock Limited Partner, the Assignor Limited Partner and the Investors are
collectively referred to as the Limited Partners. The initial capital of
the Partnership was $2,000, representing capital contributions of $1,000 by
the General Partner and $1,000 by the John Hancock Limited Partner. During
the offering period, the John Hancock Limited Partner made additional
capital contributions of $4,161,483. The Amended Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement") authorized the
sale of up to 5,000,000 Units representing economic and certain other
rights attributable to Investor Limited Partnership Interests in the
Partnership.
The Units were offered and sold to the public during the period from
October 2, 1987 to January 2, 1989, pursuant to a Registration Statement on
Form S-11 under the Securities Act of 1933. The Partnership sold the Units
for $20 per Unit. No established public market exists on which the Units
may be traded.
The Partnership is engaged solely in the business of (i) acquiring,
improving, operating, holding for investment and disposing of existing
income-producing retail, industrial, and office properties on an all-cash
basis, free and clear of mortgage indebtedness, and (ii) making mortgage
loans consisting of conventional first mortgage loans and participating
first mortgage loans secured by income-producing retail, industrial and
office properties. Although the Partnership's properties were acquired and
are held free and clear of mortgage indebtedness, the Partnership may incur
mortgage indebtedness on its properties under certain circumstances, as
described in the Partnership Agreement. The Partnership's principal
objectives are to:
(1) preserve the capital investment of the Investors;
(2) provide quarterly distributions of cash from operations on a
partially tax-deferred basis;
(3) protect the Investors' investment against inflation; and
(4) obtain long-term appreciation in market value of the properties
acquired and provide gains through sharing in the appreciation
and/or increased cash flow of properties financed with
participating mortgage loans.
The latest date on which the Partnership is due to terminate is December
31, 2017, unless it is sooner terminated in accordance with the terms of
the Partnership Agreement. It is expected that in the ordinary course of
the Partnership's business, the investments of the Partnership will be
disposed of, and the Partnership terminated, before December 31, 2017.
3
Item 1 - Business (continued)
The Partnership's equity real estate investments are subject to various
risk factors. Although the risks of equity investing are reduced when
properties are acquired on an unleveraged basis, the major risk of owning
income-producing properties is the possibility that the properties will not
generate income sufficient to meet operating expenses and to fund adequate
reserves for repair, replacements and contingencies. The income from
properties may be affected by many factors, including: i) adverse changes
in general economic conditions and local conditions, such as competitive
overbuilding, a decrease in employment, or adverse changes in real estate
zoning laws, which may reduce the desirability of real estate in the area
and ii) other circumstances over which the Partnership may have little or
no control, such as fires, earthquakes and floods. To the extent that the
Partnership's properties are leased in any substantial portion to any
specific retail, industrial or office tenants, the financial failure of any
such major tenant, resulting in the termination of the tenant's lease or
non-payment of rentals due, would likely cause at least a temporary
reduction in cash flow from any such property and might result in a
decrease in the market value of that property.
The Partnership's mortgage loans are subject to the risk of default by the
borrowers, in which event the Partnership would have the added
responsibility of foreclosing on or pursuing other remedies on the property
involved to protect the value of its investment. A borrower's ability to
meet its regular mortgage loan payments is dependent upon the risks
generally incident to the ownership of real property, as discussed above.
On March 10, 1988, the Partnership made a participating mortgage loan to
205 Newbury Associates secured by a first mortgage on 205 Newbury Street,
an office and retail property located in Boston, Massachusetts. The
property contains 7,029 net rentable square feet of office and retail
space. The loan has a term of 120 months with interest only payable to the
Partnership on a monthly basis at a fixed interest rate of 9.5% per annum.
The full amount of the principal and accrued but unpaid interest is due and
payable to the Partnership on April 1, 1998. In addition to these amounts,
the borrower is also obligated to pay contingent interest payments to the
Partnership in the amount of 25% of the net cash flow derived from the
operations of the property during the term of this loan and a specified
portion of the net sales price or mutually agreed upon fair market value of
the property upon its sale or refinancing. 205 Newbury Associates remains
current on its minimum required debt service payments as of December 31,
1994 and as of the date hereof. Contingent interest payments, which are
based upon the net cash flow from the property, have not been received
since 1990 because the property has not generated any cash flow in excess
of the minimum required debt service payments. Market conditions in
Boston, Massachusetts have weakened since the mortgage investment was made.
However, market conditions stabilized during 1993 and began to improve
during 1994, resulting in increasing market rental rates and a decline in
vacancies. The General Partner anticipates that these positive trends will
continue during 1995.
On July 15, 1988, the Partnership acquired Park Square Shopping Center, a
neighborhood shopping center located in Brooklyn Park, Minnesota. The
Brooklyn Park real estate market, including the Park Square Shopping
Center, has experienced increasing vacancy rates as well as competitive
pricing for available space in recent years. The General Partner expects
market conditions in Brooklyn Park to remain competitive during 1995 and,
therefore, no increase in market rental rates is anticipated.
4
Item 1 - Business (continued)
On September 20, 1988, the Partnership acquired Fulton Business Park, a
warehouse/distribution/office facility located in Atlanta, Georgia. Real
estate market conditions for industrial space in Atlanta have declined
since the Partnership purchased the Fulton Business Park. During 1994,
vacancies in the Atlanta industrial real estate market declined and rental
rates increased. However, construction of new industrial projects
continues and a significant amount of space remains vacant. The General
Partner expects market conditions for industrial space in Atlanta to remain
competitive during 1995.
On October 18, 1988, the Partnership made a participating first mortgage
loan to Siete Properties IV secured by a first mortgage on the Siete Square
IV Office Building ("Siete Square"). Siete Square is a four-story garden
office building located in Phoenix, Arizona. During 1990, the borrower was
unable to meet the minimum required debt service payments, thereby placing
the loan in default. On July 25, 1990, the Partnership acquired title to
this property by a deed-in-lieu of foreclosure, and realized a $2,800,000
loss on the transaction, representing the difference between the
outstanding mortgage balance and the estimated market value of the
property. On December 10, 1992 the Partnership sold Siete Square to a non-
affiliated buyer for a net sales price of $1,605,675 and realized a loss of
$2,116,459 on the transaction, representing the difference between the net
book value of the property and the net sales proceeds. In accordance with
the terms of the Partnership Agreement, the Partnership distributed the net
sales proceeds in February 1993 as follows: $1,456,869 to the Investors,
$116,550 to the John Hancock Limited Partner and $32,256 was retained in
working capital reserves.
On December 28, 1988, the Partnership acquired a 99.5% interest in JH Quince
Orchard Partners (the "Affiliated Joint Venture"), a joint venture between
the Partnership and John Hancock Realty Income Fund-III Limited Partnership
("Income Fund-III"). The Affiliated Joint Venture then acquired 98%
(subject to certain adjustments) of QOCC-1 Associates, an existing
partnership which owns and operates a three-story office building and
related land and improvements located in Gaithersburg, Maryland (the "Quince
Orchard Corporate Center"). Pursuant to the terms of the partnership
agreement of the Affiliated Joint Venture, Income Fund-III had the option to
increase its investment and interest in the Affiliated Joint Venture to 50%
prior to December 31, 1990. During the second quarter of 1989, Income Fund-
III exercised such option and the Partnership sold a 49.5% interest in the
Affiliated Joint Venture to Income Fund-III. Since the second quarter of
1989 the Partnership has held a 50% interest in the Affiliated Joint
Venture. During the years ended December 31, 1994 and 1993, the partners in
QOCC-1 Associates were required to make additional capital contributions in
order to fund leasing costs at the property. In accordance with the terms
of the partnership agreement of QOCC-1 Associates, the Affiliated Joint
Venture contributed 95% of such additional capital, the Partnership's share
of which amounted to an aggregate of $1,282,243. As a result, the
Affiliated Joint Venture's share of invested capital in QOCC-1 Associates
was 97.55% at December 31, 1994.
The Quince Orchard Corporate Center is occupied by Boehringer Mannhiem
Pharmaceuticals, Inc. under a lease which commenced on March 1, 1994. The
facility had been vacant since October 1993 when the former tenant's lease
expired. The present tenant's lease is for a ten-year term with a base rent
of $2,477,293 during the first lease year. Pursuant to the lease, the
tenant will receive free rent during the first, second, eleventh and twelfth
months of the lease. In addition, the tenant has been granted two options,
one, to terminate the lease at the end of the seventy-sixth month of the
lease, and, two, to extend the term of the lease for an additional five year
period.
5
Item 1 - Business (continued)
On June 30, 1989, the Partnership made a $5,500,000 mortgage loan to
General Camera Corporation ("GCC"), a non-affiliated borrower, secured by a
first mortgage on 540 West 36th Street, a 72,000 square foot
office/warehouse/service facility located in New York, New York. In
addition, the loan is personally guaranteed by the principal stockholders
of GCC. Under the original terms of this loan, GCC was required to pay
interest only monthly at an annual rate of 11% with the entire principal
balance and all accrued but unpaid interest due on July 1, 1996. The
property had been primarily occupied by the GCC. However, during the
second quarter of 1994, GCC sold substantially all of its operating assets
(but not the land and building securing the Partnership's mortgage loan) to
a non-affiliated buyer. In connection with this sale, approximately 70% of
the building was leased to the buyer of the operating assets. The General
Partner consented to the lease transaction in consideration of GCC
providing the Partnership with additional security for the mortgage loan in
addition to the Partnership's security interest in the property and the
personal guaranty of the principal stockholders of GCC, both of which the
Partnership retains. Such additional security included, among other
things, a one-time payment in the amount of $250,000 towards the
outstanding principal balance of the loan and a requirement that all future
monthly payments under the loan include additional amounts to amortize a
portion of the outstanding principal balance of the loan.
On July 31, 1989, the Partnership acquired the Miami International
Distribution Center ("MIDC"), a warehouse/distribution facility located in
Miami, Florida. The General Partner had acquired MIDC in its own name on
an interim basis from a non-affiliated seller on December 20, 1988.
Initially, the General Partner delayed transferring title for MIDC to the
Partnership since the Partnership had not completed the offering of Units
and had not raised sufficient funds to acquire the property. Upon the
completion of the offering period, the General Partner deemed it
appropriate to further delay the transfer of MIDC to the Partnership due to
the unexpected loss of a tenant who had occupied approximately 20% of the
total net rentable square feet of the property. As of July 31, 1989 the
General Partner had leased the previously vacated space and transferred
title to the Partnership at its original cost.
A tenant at MIDC that had occupied approximately 70,000 square feet, or 33%
of the property, has been delinquent in rental payments and expense
reimbursements since July 1993 and vacated the property in September 1993.
The tenant's lease obligations were scheduled to expire in December 1994.
The General Partner is pursuing legal remedies to obtain full collection
from the former tenant of these delinquent amounts as well as all other
obligations due under the lease agreement. The General Partner
subsequently secured two replacement tenants for the vacated space. One
tenant took occupancy of approximately 28,000 square feet, or 13% of the
property, under a lease commencing during June 1994 and the other tenant
took occupancy of approximately 42,000 square feet, or 20% of the property,
under a lease commencing during July 1994. However, the tenant leasing the
28,000 square foot space subsequently vacated the space and is delinquent
in rental payments and expense reimbursements due since November 1, 1994.
The General Partner is using all available remedies to obtain collection
from this tenant of all obligations due under its lease agreement, which is
scheduled to expire in September 2004. The General Partner has also been
seeking a replacement tenant for this space.
The MIDC property is located in an area that the Miami Airport Authority
has targeted for future expansion of the Airport. In this regard, the
Miami Airport Authority has contacted the General Partner concerning a
potential sale of the property.
6
Item 1 - Business (continued)
Within the power accorded to the General Partner under the terms of the
Partnership Agreement, the General Partner contracted, effective as of
January 1, 1992, with Hancock Realty Investors Incorporated ("HRI"), a
wholly-owned, indirect subsidiary of John Hancock Mutual Life Insurance
Company ("John Hancock"), to assist the General Partner in the performance
of its management duties as enumerated in the Partnership Agreement.
Effective May 28, 1993, HRI subcontracted with John Hancock to assist HRI
in the performance of its duties as enumerated in the January 1, 1992
contract. The Partnership has not incurred any additional costs or
expenses as a result of these agreements. The General Partner is further
described in Item 10 of this Report.
Industry segment information has not been provided since the Partnership is
engaged in only one industry segment.
Item 2 - Properties
As of December 31, 1994, the Partnership held the following investment
portfolio:
Park Square Shopping Center
---------------------------
On July 15, 1988, the Partnership purchased the Park Square Shopping Center
("Park Square") located in Brooklyn Park, Minnesota, from a non-affiliated
seller. The property, substantially completed during the first quarter of
1988, contains approximately 137,108 square feet of rentable space located
on a 17 acre site.
The average occupancy for Park Square for the year ended December 31, 1994
was 85%.
Fulton Business Park Warehouse
------------------------------
On September 20, 1988, the Partnership purchased the Fulton Business Park
located in Atlanta, Georgia, from a non-affiliated seller. The property,
completed in 1986, contains 150,535 square feet of rentable space located
on an 8 acre site.
The average occupancy for Fulton Business Park for the year ended December
31, 1994 was 84%.
7
Item 2 - Properties (continued)
JH Quince Orchard Partners
--------------------------
On December 28, 1988, the Partnership acquired a 99.5% interest in JH
Quince Orchard Partners (the "Affiliated Joint Venture"), a joint venture
between the Partnership and Income Fund-III, which acquired 98% (subject to
certain adjustments) of QOCC-1 Associates, an existing partnership which
owns and operates the Quince Orchard Corporate Center, a three-story office
building containing 99,782 square feet of rentable space located on an 8
acre site in Gaithersburg, Maryland. The Partnership acquired an initial
99.5% interest and Income Fund-III acquired an initial 0.5% interest in the
Affiliated Joint Venture. During the second quarter of 1989 the
Partnership sold a 49.5% interest in the Affiliated Joint Venture to Income
Fund-III. Since the second quarter of 1989 the Partnership has held a 50%
interest in the Affiliated Joint Venture. During the years ended December
31, 1994 and 1993, the partners in QOCC-1 Associates were required to make
additional capital contributions in order to fund leasing costs at the
property. In accordance with the terms of the partnership agreement of
QOCC-1 Associates, the Affiliated Joint Venture contributed 95% of such
additional capital, the Partnership's share of which amounted to an
aggregate of $1,282,242. As a result of the capital contributions made by
the partners in QOCC-1 Associates, the Affiliated Joint Venture's share of
invested capital in QOCC-1 Associates was 97.55% at December 31, 1994.
The present tenant at the Quince Orchard Corporate Center, Boehringer
Mannhiem Pharmaceuticals, Inc., took occupancy of the entire property in
March 1994 under a ten year lease. The facility had been vacant since
October 1993 when the former tenant's lease expired. As a result, the
average occupancy for the Quince Orchard Corporate Center for the year
ended December 31, 1994 was 83%.
Miami International Distribution Center
---------------------------------------
On July 31, 1989, the Partnership purchased the Miami International
Distribution Center ("MIDC") located in Miami, Florida, from the General
Partner, which transferred title to the property through a nominee
corporation. MIDC is a 215,019 square foot warehouse/distribution facility
located on a 9 acre site.
Average occupancy for MIDC for the year ended December 31, 1994 was 70%.
As of December 31, 1994 the Partnership held the following mortgage loans
in its investment portfolio:
Loan to 205 Newbury Associates
------------------------------
On March 10, 1988, the Partnership made a $1,700,000 participating
non-recourse mortgage loan to 205 Newbury Associates (the "Borrower"), a
non-affiliated borrower, secured by a first mortgage on a property located
at 205 Newbury Street, Boston, Massachusetts. The property contains 7,029
rentable square feet of office and retail space.
During the year ended December 31, 1994 the loan to 205 Newbury Associates
generated 6% of the Partnership's net cash provided from operations.
8
Item 2 - Properties (continued)
Loan to General Camera Corporation
----------------------------------
On June 30, 1989, the Partnership made a $5,500,000 mortgage loan to
General Camera Corporation ("GCC"), a non-affiliated borrower, secured by a
first mortgage on a 72,000 square foot office/warehouse/service facility
located at 540 West 36th Street, New York, New York.
The foregoing investments of the Partnership are further described in Item
7 of this Report.
Item 3 - Legal Proceedings
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business of the Partnership, to which
the Partnership is a party or to which any of its properties is subject.
Item 4 - Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders of the
Partnership during the fourth quarter of 1994.
Part II
Item 5 - Market for the Partnership's Securities and Related Security
Holder Matters
(a) Market Information
The Partnership's outstanding securities consist of 2,601,552 Units
originally sold for $20 per Unit. The Units were offered and sold to the
public during the period from October 2, 1987 to January 2, 1989. No
established public market exists on which the Units may be traded.
Consequently, Investors may not be able to liquidate their investments in
the event of an emergency, or for any other reason. Additionally, the
assignment or other transfer of Units would be subject to compliance with
the minimum investment and suitability standards imposed by the Partnership
and by applicable law including state "Blue Sky" laws.
(b) Number of Security Holders
Number of
Record holders Number of Units
as of outstanding as of
Title of Class December 31, 1994 December 31, 1994
-------------- ----------------- -----------------
Assignee Units 4,575 2,601,552
9
Item 5 - Market for the Partnership's Securities and Related Security
Holder Matters (continued)
(c) Dividend History and Restrictions
During the fiscal years ended December 31, 1994 and 1993, the Partnership
distributed cash in the amount of $2,522,714 and $2,811,779, respectively,
from Distributable Cash from Operations (as defined in the Partnership
Agreement). In addition, during the fiscal year ended December 31, 1993
the Partnership distributed cash in the aggregate amount of $1,573,419 from
Cash from Sales. These amounts were allocated to the General Partner, John
Hancock Limited Partner and the Investors in accordance with the terms of
the Partnership Agreement.
The following table reflects cash distributions made during the two year
period ended December 31, 1994:
Amount Paid to
Date of Amount of Amount Paid to John Hancock Amount Paid Distribution
Distribution Distribution General Partner Limited Partner to Investors Per Unit
------------ ------------ --------------- --------------- ------------ --------
February 15, 1993 $2,361,768 $7,883 $116,550 $2,237,335 $0.86*
May 14, 1993 762,072 7,621 - 754,451 0.29
August 13, 1993 630,679 6,307 - 624,372 0.24
November 15, 1993 630,679 6,307 - 624,372 0.24
February 15, 1994 630,678 6,307 - 624,372 0.24
May 13, 1994 629,609 5,236 - 624,373 0.24
August 15, 1994 629,858 5,486 - 624,372 0.24
November 15, 1994 632,569 8,196 - 624,373 0.24
* Represents distributions made from Distributable Cash from Operations ($0.30 per Unit) and Cash
from Sales ($0.56 per Unit).
During the years ended December 31, 1994 and 1993, a substantial portion of
the Partnership's reserves was used to fund leasing costs incurred at the
Quince Orchard Corporate Center as well as those incurred at the Miami
International Distribution Center, Park Square Shopping Center and Fulton
Business Park. The General Partner, having projected this use of working
capital reserves, reduced cash distributions to Investors commencing with
the third quarter of 1993, from an annualized rate of 6% to an annualized
rate of 5%, in order to replenish working capital reserves and satisfy the
Partnership's general liquidity requirements. Cash distributions to
Investors during 1994 continued at the 5% annualized rate. The General
Partner anticipates that the Partnership will make cash distributions in
1995 comparable to those made during 1994. For a further discussion on the
financial condition and results of operations of the Partnership, see Item
7 of this Report.
10
Item 6 - Selected Financial Data
The following table sets forth selected financial information regarding the
Partnership's financial position and operating results for the five year
period ended December 31, 1994. This information should be read in
conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Financial Statements and Notes
thereto, which are included in Items 7 and 8, respectively, of this Report.
Years Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Rental income $2,170,416 $2,296,571 $2,817,557 $2,885,906 $2,671,129
Interest income 843,631 872,180 883,680 933,924 1,291,646
Income from joint venture 541,188 221,738 432,782 445,670 444,479
Net income/(loss) 1,985,107 1,935,917 273,753 2,258,118 (141,359)
Net income per Unit (b) 0.76 0.74 0.16 0.86 0.03
Ordinary tax income (a) 2,025,648 2,072,792 384,410 2,456,533 522
Ordinary tax income per Unit (b) 0.77 0.79 0.21 0.93 0.08
Cash distributions per Unit
from operations 0.96 1.07 1.20 1.25 1.40
Distributable cash from sales or
refinancings - - 1,573,419 - -
Cash distribution per Unit from
sales or refinancings - 0.56 - - -
Cash and cash equivalents at
December 31 2,561,288 3,742,273 4,713,396 3,189,873 2,896,859
Total assets at December 31 39,413,410 40,559,574 42,421,785 45,381,848 46,076,063
(a) The ordinary tax income for the Partnership was allocated as follows:
Years Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
General Partner $20,256 $20,728 $3,844 $24,565 $5
John Hancock Limited Partner - - (159,110) - (205,333)
Investors 2,005,392 2,052,064 539,676 2,431,968 205,850
---------- ---------- -------- ---------- --------
Total $2,025,648 $2,072,792 $384,410 $2,456,533 $522
========== ========== ======== ========== ========
(b) The actual ordinary tax income per Unit has not been presented because
the actual ordinary tax income is allocated between tax-exempt and tax-
paying entities based upon the respective number of Units held by each
entity at December 31, 1994, 1993, 1992, 1991 and 1990. The ordinary
tax income per Unit as presented for 1994, 1993, 1992, 1991 and 1990
was computed by dividing the Investors' share of ordinary tax income
by the number of Units outstanding during the year.
11
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
-------
During the offering period, from October 2, 1987 to January 2, 1989, the
Partnership sold 2,601,552 Units representing gross proceeds (exclusive of
the John Hancock Limited Partner's contribution, which was used to pay
sales commissions) of $52,031,040. The proceeds of the offering were used
to acquire investments, fund reserves, and pay acquisition fees and
organizational and offering expenses. These investments are described more
fully in Items 1 and 2 and Notes 5, 6 and 8 to the Financial Statements
included in Item 8 of this Report.
Liquidity and Capital Resources
-------------------------------
At December 31, 1994, the Partnership had $2,561,288 in cash and cash
equivalents, $24,557 in restricted cash and $86,214 in long-term restricted
cash. Cash and cash equivalents decreased by $1,180,985 from December 31,
1993 to December 31, 1994, primarily as a result of additional capital
contributions made by the Partnership to the Affiliated Joint Venture.
The Partnership has a working capital reserve with a current balance of
approximately 3.6% of the offering proceeds. During the years ended
December 31, 1994 and 1993, a substantial portion of the Partnership's
reserves was used to fund leasing costs incurred at the Quince Orchard
Corporate Center as well as those incurred at the Miami International
Distribution Center, Park Square Shopping Center and Fulton Business Park.
The General Partner, having projected this use of working capital reserves,
reduced cash distributions to Investors commencing with the third quarter
of 1993, from an annualized rate of 6% to an annualized rate of 5%, in
order to replenish working capital reserves and satisfy the Partnership's
general liquidity requirements. Liquidity would, however, be materially
adversely affected by a significant reduction in revenues, unanticipated
operating costs or unanticipated capital expenditures. If any or all of
these events were to occur, to the extent that working capital reserves
would be insufficient to satisfy the cash requirements of the Partnership,
it is anticipated that additional funds would be obtained through a further
reduction of cash distributions to Investors, bank loans, short-term loans
from the General Partner or its Affiliates, or the sale or financing of
Partnership investments.
The Quince Orchard Corporate Center, which is owned by the Affiliated Joint
Venture, is occupied by Boehringer Mannheim Pharmaceuticals, Inc., under a
lease which commenced on March 1, 1994. The facility had been vacant since
October 1993 when the former tenant did not renew its lease. The present
tenant's lease is for a ten-year term with a base rent of $2,477,293 during
the first lease year. Pursuant to the lease, the tenant received free rent
during the first, second, eleventh and twelfth months of the lease. In
connection with this lease the Partnership made additional capital
contributions to the Affiliated Joint Venture in the amounts of $1,104,902
and $177,341 during the years ended December 31, 1994 and 1993,
respectively, towards the payment of leasing costs incurred at the Quince
Orchard Corporate Center.
12
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
-------------------------------
A tenant at the Miami International Distribution Center that had occupied
approximately 70,000 square feet, or 33% of the property, has been
delinquent in rental payments and expense reimbursements since July 1993
and vacated the property in September 1993. The tenant's lease obligations
were scheduled to expire in December 1994. The General Partner has brought
an action against the former tenant to obtain full collection of all
delinquent and other amounts due under the lease agreement in the aggregate
amount of approximately $550,000. The General Partner has applied for a
trial date but, as of the date hereof, the court has not set a trail date.
The General Partner subsequently secured two replacement tenants for the
vacated space. One tenant took occupancy of approximately 28,000 square
feet, or 13% of the property, under a lease commencing during June 1994 and
the other tenant took occupancy of approximately 42,000 square feet, or 20%
of the property, under a lease commencing during July 1994. However, the
tenant leasing the 28,000 square foot space subsequently vacated the space
and is delinquent in rental payments and expense reimbursements due since
November 1, 1994. The General Partner is using all available remedies to
obtain collection from this tenant of all obligations due under its lease
agreement, which is scheduled to expire in September 2004. The General
Partner has also been seeking a replacement tenant for this space.
The Miami International Distribution Center is located in an area that the
Miami Airport Authority has targeted for future expansion. In this regard
the Miami Airport Authority has contacted the General Partner concerning a
potential sale of the property.
A tenant holding a lease for approximately 31,000 square feet, or 20% of
the space at the Fulton Business Park, and whose initial lease term expired
on December 31, 1994, extended the term of the lease until April 30, 1995.
The General Partner is currently negotiating a long-term lease renewal with
the tenant. Should the tenant decide not to renew its lease, then the
General Partner will seek a replacement tenant for the space.
Cash of $103,652 was used during 1994 for the payment of leasing costs
incurred at the Miami International Distribution Center, Fulton Business
Park and Park Square Shopping Center. The General Partner anticipates that
the Partnership will incur a total of approximately $400,000 in leasing
costs at these properties during 1995. The current balance in the working
capital reserve should be sufficient to pay such costs.
Cash in the amount of $1,104,902 was contributed by the Partnership to the
Affiliated Joint Venture during 1994. This amount was used by the
Affiliated Joint Venture to fund leasing costs incurred at the Quince
Orchard Corporate Center. The General Partner does not anticipate that any
leasing costs will be incurred at the Quince Orchard Corporate Center
during 1995.
During 1994, approximately $26,000 of cash generated from the Partnership's
operations was used to fund non-recurring repair and maintenance costs
incurred at the Miami International Distribution Center, Fulton Business
Park and Park Square Shopping Center. The General Partner anticipates that
the Partnership will incur additional non-recurring repair and maintenance
costs of approximately $98,000 at its properties during 1995. These
additional costs will be funded from the operations of the Partnership's
properties and are not expected to have a significant impact on the
Partnership's liquidity.
13
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
-------------------------------
Cash in the amount of $2,522,714, generated from the Partnership's
operations, was distributed to the General Partner and the Limited Partners
during 1994. The General Partner anticipates that the Partnership will
make comparable distributions during 1995.
On June 1, 1994, General Camera Corporation ("GCC") sold substantially all
of its operating assets (but not the land and building securing the
Partnership's mortgage loan) to a non-affiliated buyer. In connection with
this sale, approximately 70% of the building was leased to the buyer of the
assets. The General Partner consented to the lease transaction in
consideration of GCC's providing the Partnership with additional security
for the mortgage loan in addition to the Partnership's security interest in
the property and the personal guaranty of the principal stockholders of
GCC, both of which the Partnership retains. Such security included, among
other things, a one-time payment in the amount of $250,000 towards the
outstanding principal balance of the loan upon the sale of GCC's assets and
a requirement that all future monthly payments under the loan include
additional amounts to amortize a portion of the outstanding principal
balance of the loan.
GCC remained current on the required debt service payments as of December
31, 1994 and as of the date hereof. The General Partner has no reason to
believe, based upon current information and events, that the minimum
required debt service payments will not continue to be met or that the
outstanding principal balance of the loan will not be repaid upon maturity.
Should the borrower fail to meet the minimum required debt service
payments, there would be a material adverse affect upon the Partnership's
liquidity as well as a permanent impairment in the book value of the
mortgage investment.
During the fourth quarter of 1994, the General Partner had the facility
securing the Partnership's $1,700,000 mortgage loan to 205 Newbury
Associates independently appraised. Based upon the appraiser's
investigation and analysis, the property's market value is estimated to be
approximately $1,650,000 as of December 31, 1994. Market conditions in
Boston, Massachusetts have weakened since the mortgage investment was made
resulting in a decline in rental demand and rental rates. Therefore, the
property's current market value has declined as compared to the
Partnership's original mortgage investment.
The $1,700,000 principal balance of the mortgage loan made to 205 Newbury
Associates was evaluated in comparison to the recent independent appraisal.
Based upon this evaluation, the General Partner determined that it is
probable that the property will generate sufficient cash flow to enable the
borrower to pay the minimum required debt service payments and that the
residual value of the property will enable the borrower to repay the
principal balance of the loan upon maturity. As such, no write-down in
value was recorded at December 31, 1994. 205 Newbury Associates remained
current on the minimum required debt service payments as of December 31,
1994 and as of the date hereof. Should the borrower fail to meet the
minimum required debt service payments, there would be a material adverse
affect upon the Partnership's liquidity as well as a permanent impairment
in the book value of the mortgage investment.
14
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
-------------------------------
During the third quarter of 1994, the General Partner had the Quince
Orchard Corporate Center property independently appraised. Based upon the
appraiser's investigation and analysis, the property's market value was
estimated to be approximately $16,000,000. The value of the Partnership's
investment in the Affiliated Joint Venture was estimated to be
approximately $7,800,000 as compared to the Partnership's cumulative
investment in the Affiliated Joint Venture of approximately $8,697,000.
The carrying value of the Partnership's Affiliated Joint Venture investment
of approximately $7,882,000 at December 31, 1994 was evaluated in
comparison to the estimated future undiscounted cash flows and the recent
independent appraisal and, based upon such evaluation, the General Partner
determined that no permanent impairment in value exists and that a write-
down in value was not required as of December 31, 1994.
The General Partner evaluated the carrying values of the Park Square
Shopping Center, the Miami International Distribution Center and the Fulton
Business Park as of December 31, 1994 by comparing each carrying value to
the estimated future undiscounted cash flows and recent internal appraisals
in order to determine if a permanent impairment in value existed. Based
upon such evaluations, the General Partner determined that no permanent
impairment in values exist and, therefore, no write-downs were recorded as
of December 31, 1994.
The General Partner will continue to conduct property and investment
valuations, using internal or independent appraisals, in order to determine
whether a permanent impairment in value exists on any of the Partnership's
investments.
Results of Operations
---------------------
Net income for the year ended December 31, 1994 was $1,985,107 as compared
to $1,935,917 in 1993 and $273,753 in 1992. Included in the results for
1992 is a $2,116,459 loss on the sale of the Siete Square IV Office
Building.
Average occupancy for the Partnership's equity real estate investments was
as follows:
Years Ended December 31,
1994 1993 1992
---- ---- ----
Park Square Shopping Center 85% 93% 99%
Fulton Business Park 84% 82% 71%
Miami International Distribution
Center 70% 92% 100%
Quince Orchard Corporate Center
(Affiliated Joint Venture) 83% 75% 100%
15
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
---------------------
Total rental income for the year ended December 31, 1994 decreased by
$126,155, or 5%, as compared to 1993 and by $647,141, or 23%, as compared
to 1992. Rental income at the Park Square Shopping Center declined by
approximately 3% and 7% in 1994 as compared to 1993 and 1992, respectively,
primarily due to a decline in occupancy between periods. A tenant with a
lease for approximately 33% of the net rentable space at the Miami
International Distribution Center has been delinquent in making rental
payments since July 1993, resulting in declines in rental income at the
property of 10% and 19% as compared to 1993 and 1992, respectively. Rental
income at the Fulton Business Park was consistent between periods. Rental
income in 1992 includes approximately $386,000 generated from the Siete
Square IV Office Building, which was sold in December 1992.
Interest income for the year ended December 31, 1994 decreased by $28,549,
or 3%, and $40,049, or 5%, as compared to 1993 and 1992, respectively. The
decrease in 1994 as compared to both 1993 and 1992 is primarily due to the
modification of GCC's mortgage loan payments in June 1994. This
modification required, among other things, that GCC make additional
payments towards the outstanding principal balance of the mortgage loan,
thereby reducing the amount of interest due on the remaining outstanding
balance of the mortgage loan.
Income from joint venture (the Affiliated Joint Venture) increased by
$319,450, or 144%, and by $108,406, or 25%, as compared to 1993 and 1992,
respectively. This increase is primarily due to the termination of the
former tenant's lease at the Quince Orchard Corporate Center in September
1993 and the present tenant taking occupancy of the property in March 1994
under a lease with a rental rate greater than that which the former tenant
paid.
Depreciation expense for the year ended December 31, 1994 was consistent
with the results for 1993 and decreased by $112,076, or 15%, as compared to
1992. This decrease in 1994 as compared to 1992 is due to the sale of the
Siete Square IV Office Building in December 1992.
During 1994, property operating expenses increased by $68,114, or 19%, as
compared to 1993 and decreased by $136,628, or 24%, as compared to 1992.
Included in the 1993 results is a refund of a portion of prior year taxes
due to a successful appeal of the assessed valuation of the Siete Square
property. Included in the results for 1992 is approximately $342,000 of
property operating expenses incurred at the Siete Square property, which
was sold in December 1992.
Property operating expenses at the Miami International Distribution Center
decreased by 17% in 1994 as compared to 1993 and increased by 98% as
compared to 1992. The decrease in 1994 as compared to 1993 is primarily
due to cleanup costs incurred in 1993 as a result of damage caused by
Hurricane Andrew. Higher base year expense amounts relating to leases for
new tenants at the property and a corresponding decrease in the amount of
expenses reimbursed by the tenants resulted in an increase in expenses
during 1994 as compared to 1992. In addition, a tenant representing 33% of
the property has been delinquent in expense reimbursements since July 1993,
resulting in an increase in operating expenses in 1994 as compared to both
1993 and 1992.
16
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
---------------------
A decline in occupancy at the Park Square Shopping Center in 1994 as
compared to 1993 and 1992 resulted in a decrease in the amount of expenses
reimbursed by the tenants and a corresponding increase in property
operating expenses incurred by the Partnership.
During 1994, the Fulton Business Park incurred approximately $14,000 in non-
recurring maintenance and repair costs. Excluding this amount, property
operating expenses at the property decreased by 14% and 32% during 1994 as
compared to 1993 and 1992, respectively, due to an increase in occupancy,
and, therefore, an increase in tenant reimbursements.
General and administrative expenses in 1994 were consistent with 1993 and
decreased by $16,957, or 7%, as compared to 1992. The decrease in 1994 as
compared to 1992 was due to minor decreases in the Partnership's fees and
expenses relating to printing, postage and audit charges. These decreases
were partially offset by an increase in the General Partner's costs, a
portion of which are allocated to the Partnership pursuant to the
Partnership Agreement.
Amortization of deferred expenses for the year ended December 31, 1994
increased by $49,743, or 21%, and $91,982, or 47%, as compared to 1993 and
1992, respectively. This increase in primarily due to the Partnership
reducing the period over which deferred expenses relating to acquisition
fees are amortized. Commencing with the third quarter of 1993, the
Partnership reduced the amortization period for such deferred acquisition
fees from thirty years, the estimated useful life of the buildings owned by
the Partnership, to eight and one-half years, the then estimated remaining
life of the Partnership, thereby resulting in increased amortization. In
addition, an increase in leasing costs incurred at the Miami International
Distribution Center, Park Square Shopping Center and Fulton Business Park
during the last three fiscal years and the subsequent amortization of such
costs also contributed to the increase.
The General Partner believes that inflation has had no significant impact
on income from operations during the last three fiscal years, and the
General Partner anticipates that inflation will not have a significant
impact during 1995.
17
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Cash Flow
---------
The following table provides the calculations of Cash from Operations and
Distributable Cash from Operations for the five year period ended December
31, 1994, which are calculated in accordance with Section 17 of the
Partnership Agreement:
Years Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Net cash provided by operating
activities (a) $2,224,822 $3,695,258 $3,425,279 $3,451,763 $3,811,029
Net change in operating assets
and liabilities (a) 645,878 (724,719) 92,471 (90,306) (181,667)
---------- ---------- ---------- ---------- ----------
Net cash provided by
operations (a) 2,870,700 2,970,539 3,517,750 3,361,457 3,629,362
Increase in working capital
reserves (347,983) (316,431) (364,354) (208,059) -
---------- ---------- ---------- ---------- ----------
Cash from operations (b) 2,522,717 2,654,108 3,153,396 3,153,398 3,629,362
Decrease in working capital
reserves - - - - 49,106
---------- ---------- ---------- ---------- ----------
Distributable cash from
operations (b) $2,522,717 $2,654,108 $3,153,396 $3,153,398 $3,678,468
========== ========== ========== ========== ==========
Allocation to General Partner $25,227 $26,541 $31,534 $31,534 $36,295
Allocation to Investors 2,497,490 2,627,567 3,121,862 3,121,864 3,642,173
Allocation to John Hancock
Limited Partner - - - - -
---------- ---------- ---------- ---------- ----------
$2,522,717 $2,654,108 $3,153,396 $3,153,398 $3,678,468
========== ========== ========== ========== ==========
(a)Net cash provided by operating activities, net change in operating
assets and liabilities, and cash provided by operations are as
calculated in the Statements of Cash Flows included in Item 8 of this
Report.
(b)As defined in the Partnership Agreement. Distributable Cash from
Operations should not be considered as an alternative to net income
(i.e. not an indicator of performance) or to reflect cash flows or
availability of discretionary funds.
On February 15, 1995, the Partnership made a cash distribution of $624,372
to the Investors representing a 5% annualized return to all Investors of
record at December 31, 1994, based on Distributable Cash from Operations
for the quarter then ended. The General Partner anticipates that the
Partnership will make cash distributions in each of the four quarters of
1995 comparable to those made during 1994.
18
Item 8 - Financial Statements and Supplementary Data
The response to this Item appears beginning on page F-1 of this Report.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
No events requiring disclosure under this Item have occurred.
Part III
Item 10 - Directors and Executive Officers of the Partnership
(a-b) Identification of Directors and Executive Officers
By virtue of its organization as a limited partnership, the Partnership has
no directors or executive officers. As indicated in Item 1 of this Report,
the General Partner of the Partnership is John Hancock Realty Equities,
Inc., a Delaware corporation. Pursuant to the terms of the Partnership
Agreement, the General Partner is solely responsible for the management of
the Partnership's business. The names and ages of the directors and
executive officers of the General Partner are as follows:
Name Title Age
---- ----- ---
William M. Fitzgerald President and Director 51
Malcolm G. Pittman, III Director 43
Susan M. Shephard Director 42
Richard E. Frank Treasurer (Chief
Accounting Officer) 33
(c) Identification of certain significant persons
The General Partner is responsible for the identification, analysis,
purchase, operation, and disposal of specific Partnership real estate and
mortgage loan investments. The General Partner has established a Real
Estate Investment Committee utilizing senior real estate personnel of John
Hancock and its affiliates to review each proposed investment. The members
of the Real Estate Investment Committee are designated each year at the
annual meeting of the Board of Directors of John Hancock Realty Equities,
Inc. The current members of the committee are as follows:
Name Title Age
---- ----- ---
Edward P. Dowd Senior Vice President of 52
John Hancock's Real Estate
Investment Group
Kevin McGuire Vice President of John Hancock's 48
Real Estate Investment Group, President of
John Hancock Realty Services
Corp. and subsidiaries
19
Item 10 - Directors and Executive Officers of the Partnership (continued)
(d) Family relationships
There exist no family relationships among any of the foregoing directors or
officers of the General Partner.
(e) Business experience
William M. Fitzgerald (age 51), joined John Hancock in 1968. He has been
President and a Director of the General Partner, and a Senior Investment
Officer of John Hancock, since June 1993 and a Managing Director of Hancock
Realty Investors Incorporated since November 1991. His term as a Director
of the General Partner expires in May 1995. From 1987 to 1991, Mr.
Fitzgerald was a Senior Vice President of John Hancock Properties, Inc.
Prior to that time, he held a number of positions including Senior Real
Estate Management Officer and Real Estate Management Officer of John
Hancock. He holds an M.B.A. from Boston University and a B.A. from Boston
College.
Malcolm G. Pittman (age 43), joined John Hancock in 1986 as an Assistant
Counsel. He has been a Director of the General Partner since November
1991. His term as a Director of the General Partner expires in May 1995.
Mr. Pittman has been Counsel of John Hancock's Mortgage and Real Estate Law
Division since 1993. From 1989 to 1993, he was an Associate Counsel of
John Hancock. He holds a J.D. from Yale Law School and a B.A. from Oberlin
College.
Susan M. Shephard (age 42), joined John Hancock in 1985 as an Attorney.
She has been a Director of the General Partner since November 1991. Her
term as a Director of the General Partner expires in May 1995. Ms.
Shephard has been a Mortgage Investment Officer of John Hancock since 1991.
From 1988 to 1991, she was an Associate Counsel of John Hancock and from
1987 to 1988, she was an Assistant Counsel of John Hancock. She holds a
J.D. from Georgetown University Law Center and a B.A. from the University
of Rhode Island.
Richard E. Frank (age 33), joined John Hancock in 1983. He has been
Treasurer of the General Partner and a Senior Financial Administrator of
John Hancock since June 1993. From 1991 to 1993, Mr. Frank was an
Associate of Hancock Realty Investors Incorporated; from 1990 to 1991, he
held the position of Assistant Treasurer of John Hancock Realty Services
Corp.; and from 1987 to 1990, he was a Senior Accountant of John Hancock
Realty Services Corp. He holds a B.S. from Stonehill College.
Edward P. Dowd (age 52), joined John Hancock in 1970. He has been a
Director of Hancock Realty Investors, Incorporated since 1991, and a
Director of John Hancock Realty Services Corp. and subsidiaries and John
Hancock Property Investors Corp. since 1987. Mr. Dowd has been a Senior
Vice President of John Hancock since 1991. From 1989 to 1990, he was a
Vice President of John Hancock and from 1986 to 1989, he was a Second Vice
President of John Hancock. Prior to that time, he held a number of
positions including Senior Real Estate Investment Officer and Real Estate
Investment Officer of John Hancock. From July 1982 to May 1986, Mr. Dowd
was President of the General Partner. He holds an A.B. from Boston
College.
20
Item 10 - Directors and Executive Officers of the Partnership (continued)
(e) Business experience (continued)
Kevin McGuire (age 48), joined John Hancock in 1968. He has been a Vice
President of John Hancock since June 1993 and President of John Hancock
Realty Services Corp. and subsidiaries since July 1993. He has been a
Managing Director and a Director of Hancock Realty Investors Incorporated
since 1991, and a Director of John Hancock Property Investors Corp. since
1987. Mr. McGuire served as an interim basis President of the General
Partner from May 1991 to November 1991 and was President of John Hancock
Properties, Inc. from 1987 to 1991. Prior to that time, he held a number
of positions including Second Vice President, Senior Real Estate Investment
Officer and Real Estate Investment Officer of John Hancock. He holds an
M.B.A. from Babson College and a B.A. from Boston College.
(f) Involvement in certain legal proceedings
None
Compliance with Section 16(a) of the Exchange Act
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
General Partner's directors and executive officers, as well as any person
holding more than ten percent of the Units, are required to report their
initial ownership of Units and any subsequent change in such ownership to
the Securities and Exchange Commission and the Partnership (such
requirements hereinafter referred to as "Section 16(a) filing
requirements"). Specific time deadlines for Section 16(a) filing
requirements have been established.
To the Partnership's knowledge, no officer or director of the General
Partner has an ownership interest in the Partnership and no person holds
more than ten percent of the Units.
Item 11 - Executive Compensation
None of the officers or directors of the General Partner or any of the Real
Estate Investment Committee members referred to in Item 10(c) receive any
current or proposed direct remuneration in their capacities as officers,
directors or Real Estate Investment Committee members, pursuant to any
standard arrangements or otherwise, from the Partnership nor is any such
remuneration currently proposed. In addition, the Partnership has not
given and does not propose to give any options, warrants or rights,
including stock appreciation rights to any such persons in such capacities.
No long-term incentive plan exists with any such persons in such capacities
and no remuneration plan or arrangement exists with any such persons
resulting from resignation, retirement or any other termination.
Therefore, tables relating to these topics have been omitted.
For its activities occurring during the offering period, which terminated
on January 2, 1989, the General Partner and/or its Affiliates received
certain fees and reimbursement for certain organizational, offering and
acquisition expenses, in accordance with the terms of the Partnership
Agreement.
In accordance with the terms of the Partnership Agreement, the General
Partner and its Affiliates (as defined in the Partnership Agreement) are
entitled to the following types of compensation, fees, profits/(losses),
expense reimbursements and distributions:
21
Item 11 - Executive Compensation (continued)
An Affiliate of the General Partner is entitled to receive a Property
Management Fee for providing property management services for Partnership
properties. The Partnership may pay a fee equal to the amount customarily
charged in arm's-length transactions by independent parties rendering
comparable services for comparable properties in the localities where such
properties are located but in no event may such fee exceed 6% of the gross
receipts of the property under management. To date, no Affiliate of the
General Partner has provided property management services to the
Partnership, therefore, the Partnership did not pay any such fees during
1994, 1993 and 1992.
An Affiliate of the General Partner is entitled to receive a Mortgage
Servicing Fee for providing mortgage servicing services for Partnership
mortgage loans. The Partnership may pay a monthly servicing fee equal to
the amount customarily charged in arm's-length transactions by independent
parties rendering comparable services, but in no event to exceed 1/4 of 1%
annually of any mortgage loan serviced under such agreement. The
Partnership did not pay any such fees during the years ended December 31,
1994, 1993 and 1992.
The General Partner and its Affiliates are also entitled to Reimbursement
for Expenses (as defined in the Partnership Agreement) relating to the
administrative services necessary to the prudent operation of the
Partnership, such as legal, accounting, computer, transfer agent and other
services. The amounts charged to the Partnership for such administrative
services may not exceed the lesser of the General Partner's or such
Affiliates' costs or 90% of those which the Partnership would be required
to pay to independent parties for similar services in the same geographic
area. The Partnership reimbursed the General Partner for $135,667,
$138,697 and $125,640 of such expenses during the years ended December 31,
1994, 1993 and 1992, respectively.
A Subordinated Disposition Fee (as defined in the Partnership Agreement)
for selling properties is payable to the General Partner in the amount of
3% of the sales price of each property sold. However, no such Subordinated
Disposition Fees may be paid to the General Partner unless and until the
Investors and the John Hancock Limited Partner have received a return of
their total Invested Capital (as defined in the Partnership Agreement) plus
the Cumulative Return on Investment (as defined in the Partnership
Agreement) of 12% per annum for all fiscal years ended prior to the date of
payment. Such Subordinated Disposition Fees may not exceed 50% of the
competitive real estate commission in the area where the property is
located or, together with any other brokerage commission payable to or by
any other person, exceed 6% of the contract sales price of such property.
The Partnership did not pay any such Subordinated Disposition Fee during
1994, 1993 and 1992.
A share of the Partnership's Distributable Cash from Operations (as defined
in the Partnership Agreement) is distributable to the General Partner and
may be distributable to the John Hancock Limited Partner. Distributable
Cash from Operations is distributed 1% to the General Partner and the
remaining 99% among the Investors, the General Partner and the John Hancock
Limited Partner, in accordance with Section 8 of the Partnership Agreement
(as described more fully in Note 3 to the Financial Statements included in
Item 8 of this Report). The General Partner's Share of Distributable Cash
from Operations was $25,227, $26,541 and $31,534 for the years ended
December 31, 1994, 1993 and 1992, respectively. In accordance with the
Partnership Agreement, the John Hancock Limited Partner was not entitled to
receive any such distributions during 1994, 1993 and 1992.
22
Item 11 - Executive Compensation (continued)
A share of Cash from Sales, Financings or Repayments (as defined in the
Partnership Agreement) may be distributed to the General Partner and the
John Hancock Limited Partner. Cash from Sales, Financings or Repayments
are distributable in accordance with Section 8 of the Partnership Agreement
(as described more fully in Note 3 to the Financial Statements included in
Item 8 of this Report). The John Hancock Limited Partner's Share of Cash
from Sales, Financings or Repayments was $0, $0 and $116,550 during the
years ended December 31, 1994, 1993, and 1992, respectively. In accordance
with the Partnership Agreement, the General Partner was not entitled to
receive any such distributions during 1994, 1993 and 1992.
A share of the Partnership's Profits or Losses for tax purposes is
allocable to the General Partner and the John Hancock Limited Partner.
Such allocation generally approximates, insofar as practicable, their
percentage share of Distributable Cash from Operations and of Cash from
Sales, Financings or Repayments. The General Partner will generally be
allocated 1% of Partnership Losses for tax purposes, and the John Hancock
Limited Partner will be allocated tax losses associated with the
Partnership's sales commissions funded by the John Hancock Limited
Partner's Capital Contributions. The General Partner's Share of such
Profits and Losses were profits of $20,256, $20,728 and $3,844 during the
years ended December 31, 1994, 1993 and 1992, respectively. The John
Hancock Limited Partner's allocation of such Profits or Losses were losses
of $0, $0 and $159,110 during the years ended December 31, 1994, 1993 and
1992, respectively.
This table reflects all compensation, fees, profits/(losses), expense
reimbursements and distributions made by the Partnership to the General
Partner and/or its Affiliates for the three fiscal years ending December
31, 1994:
Years Ended December 31,
1994 1993 1992
---- ---- ----
Reimbursement for Operating
Expenses $135,667 $138,697 $125,640
General Partner Share of Distributable
Cash from Operations 25,227 26,541 31,534
John Hancock Limited Partner Share
of Cash from Sales, Financings
or Repayments - - 116,550
General Partner Share of Profits/
(Losses) 20,256 20,728 3,844
John Hancock Limited Partner Share
of Profits/(Losses) - - (159,110)
Compensation Committee Interlocks and Insider Participation:
The Partnership did not have a Compensation Committee in 1994 and does not
currently have such a committee. No current or former officer or employee
of the General Partner or its Affiliates participated during the 1994
fiscal year in deliberations regarding the General Partner's compensation
as it relates to the Partnership.
23
Item 12 - Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners
No person or group, including the General Partner, is known by the General
Partner to own beneficially more than 5% of the Partnership's 2,601,552
outstanding Units as of December 31, 1994.
(b) Security ownership of management.
By virtue of its organization as a Limited Partnership, the Partnership has
no officers or directors. Neither the General Partner nor any officer or
director of the General Partner possesses the right to acquire a beneficial
ownership of Units.
(c) Changes in control.
The Partnership does not know of any arrangements the operations of which
may at a subsequent date result in a change of control of the Partnership.
Item 13 - Certain Relationships and Related Transactions
See Note 4 to the Notes to Financial Statements included in Item 8 of this
Report for a description of certain transactions and related amounts paid
by the Partnership to the General Partner and its Affiliates during 1994,
1993 and 1992.
Part IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2) - Listed on Index to Financial Statements and Financial
Statement Schedules.
(3) - Listing of Exhibits
Page Number
or Exhibit Page Number or
Number Under Incorporation by
Regulation S-K Description Reference
-------------- ----------- ---------
4 Instruments defining the rights
of security holders
4.1 Amended Agreement of Exhibit A to the
Limited Partnership* Prospectus filed under
the Partnership's
Amendment No. 1 to
Form S-11
Registration
Statement
(File 33-15630)
24
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
4.2 Subscription Agreement Exhibit C to the
Signature Page and Power of Prospectus filed under
Attorney whereby a subscriber the Partnership's
agrees to purchase Units and Form S-11
adopts the provisions of the Registration
Amended Agreement of Limited Statement
Partnership* (File 33-15630)
4.3 Copy of Certificate of Exhibit 4.3 to the
Limited Partnership filed Partnership's
with the Massachusetts Secretary Form S-11
of State on June 30, 1987* Registration
Statement
(File 33-15630)
4.4 Copy of First Amendment and Exhibit 4.4 to the
Restatement of Certificate Partnership's
of Limited Partnership filed Amendment No. 1 to
with the Massachusetts Secretary Form S-11
of State on September 28, 1987* Registration
Statement
(File 33-15630)
10 Material contracts and other
documents
10.1 Form of Escrow Agreement* Exhibit 10.1 to
the Partnership's
Form S-11
Registration Statement
(File 33-15630)
10.2 Letter from John Hancock Exhibit 10.2 to
Subsidiaries, Inc. containing the Partnership's
undertaking as to the net Form S-11
worth of the General Partner* Registration
Statement
(File 33-15630)
10.3 Documents relating to
205 Newbury Street
(a) Promissory Note between Exhibit 10.3 (a) to
John Hancock Realty Income the Partnership's
Fund-II Limited Partnership Report on Form 10-K
and Trustees of 205 Newbury dated December 31, 1987
Associates* (File 33-15630)
25
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(b) Mortgage Deed and Security Exhibit 10.3 (b) to
Agreement between John Hancock the Partnership's
Realty Income Fund-II Limited Report on
Partnership and Trustees of Form 10-K dated
205 Newbury Associates* December 31, 1987
(File 33-15630)
10.4 Documents relating to
Park Square Shopping Center
(a) Agreement of Purchase and Sale Exhibit 10.4(a)
dated April 11, 1988, between to the Partnership's
Carolyn M. Johnson, as Post-Effective
Personal Representative of the Amendment No. 2
Estate of Curtis O. Johnson and to Form S-11
John Hancock Realty Equities, Registration Statement
Inc.* (File 33-15630)
(b) Lease Guaranty dated July 15, Exhibit 10.4(b)
1988, by CMT Investments to the Partnership's
Limited Partnership to and Post-Effective
for the benefit of John Hancock Amendment No. 2
Realty Income Fund-II Limited to Form S-11
Partnership* Registration Statement
(File 33-15630)
10.5 Documents relating to
Fulton Business Park
(a) Agreement of Purchase and Exhibit 10.5(a) to
Sale dated August 10, 1988, the Partnership's
between Fulton Business Park Post-Effective
Associates and John Hancock Amendment No. 3
Realty Equities, Inc.* to Form S-11
Registration Statement
(File 33-15630)
10.6 Documents relating to
Siete Square IV
(a) Promissory Note dated Exhibit 10.6(a) to the
October 14, 1988, between Partnership's Report
John Hancock Realty Income on Form 10-K dated
Fund-II Limited Partnership December 31, 1990
and Siete Properties IV (File 33-15630)
General Partnership*
(b) Contingent Interest Agreement Exhibit 10.6(b) to the
dated October 14, 1988, between Partnership's Report
John Hancock Realty Income on Form 10-K dated
Fund-II Limited Partnership and December 31, 1990
Siete Properties IV General (File 33-15630)
Partnership*
26
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(c) Deed of Trust, Assignment of Exhibit 10.6(c) to the
Rents and Security Agreement Partnership's Report
dated October 14, 1988, between on Form 10-K dated
John Hancock Realty Income December 31, 1990
Fund-II Limited Partnership, (File 33-15630)
Founder's Title Company and
Siete Properties IV General
Partnership*
(d) Letter of Credit Agreement Exhibit 10.6(d) to the
dated October 14, 1988, between Partnership's Report
Siete Properties IV General on Form 10-K dated
Partnership and John Hancock December 31, 1990
Realty Income Fund-II Limited (File 33-15630)
Partnership*
(e) Deed-in-lieu of Foreclosure Exhibit 1 to Amendment
between Siete Properties IV Number 1 to the
General Partnership and Partnership's
John Hancock Realty Income Report on Form 10-K
Fund-II Limited Partnership * dated December 31, 1991
(File 0-17664)
(f) Agreement of Purchase and Sale Exhibit 1 to the
dated November 17, 1992 Partnership's
between John Hancock Realty Report on Form 8-K
Income Fund-II and Century dated December 10, 1992
National Insurance Company * (File 0-17664)
10.7 Documents relating to
JH Quince Orchard Partners
(a) Amended and Restated Partnership Exhibit 10.7(a) to the
Agreement dated December 28, Partnership's Report
1988, for QOCC-1 Associates among on Form 10-K dated
JH Quince Orchard Partners and December 31, 1990
Quad Properties Inc.* (File 33-15630)
(b) Amended and Restated Declaration Exhibit 10.7(b) to the
of Protective Covenants, Partnership's Report
Conditions and Restrictions of on Form 10-K dated
Quince Orchard Corporate Park December 31, 1990
dated December 27, 1988* (File 33-15630)
(c) Partnership Agreement dated Exhibit 10.7(c) to the
December 23, 1988, between Partnership's Report
John Hancock Realty Income on Form 10-K dated
Fund-II Limited Partnership December 31, 1990
and John Hancock Realty Income (File 33-15630)
Fund-III Limited Partnership*
27
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
10.8 Documents relating to
General Camera Corporation
(a) Mortgage dated June 30, 1989 Exhibit 1 to the
by and between General Partnership's Report
Camera Corporation and on Form 8-K dated
John Hancock Realty Income June 30, 1989
Fund-II Limited Partnership* (File 33-15630)
(b) Secured Note dated June 30, Exhibit 2 to the
1989 from General Camera Partnership's
Corporation to John Hancock Report on Form
Realty Income Fund-II Limited 8-K dated
Partnership.* June 30, 1989
(File 33-15630)
(c) Guaranty dated June 30, 1989 Exhibit 3 to the
by Richard Dibona, Margaret Partnership's
Dibona, Milton Keslow and Report on Form
Sandra Keslow to and for the 8-K dated
benefit of John Hancock June 30, 1989
Realty Income Fund-II (File 33-15630)
Limited Partnership.*
(d) First Amendment to Mortgage, Page 53
First Amendment to Assignment
of Leases, and First Amendment to
Assignment of Rents dated June 1,
1994 by and between General
Camera Corporation and John
Hancock Realty Income Fund-II LP+
(e) First Amendment to Note dated Page 63
June 1, 1994 from General Camera
Corporation and John Hancock Realty
Income Fund-II LP+
10.9 Documents relating to Miami
International Distribution
Center
(a) Agreement of Purchase and Exhibit 1 to the
Sale between National Life Partnership's
Insurance Company and John Report on
Hancock Realty Equities Form 8-K dated
Incorporated.* June 30, 1989
(File 33-15630)
28
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(b) Warranty deed dated July 31, Exhibit 2 to the
1989, between Palms of Partnership's
Carrollwood, Inc. and Report on
John Hancock Realty Income Form 8-K dated
Fund-II Limited Partnership.* June 30, 1989
(File 33-15630)
10.10 Documents relating to Management
Agreement
(a) Management Agreement dated Exhibit 10.10(a) to the
January 1, 1992 between Partnership's Report on
Hancock Realty Investors Incorporated Form 10-K dated
and John Hancock Realty Equities, Inc.* December 31, 1992
(File 0-17664)
(b) Agreement Concerning Subcontracting Exhibit 10.10(b)to the
of Management Services Pertaining to Partnership's Report on
John Hancock Realty Income Fund-II Form 10-K dated
Limited Partnership dated May 28, 1993 December 31, 1993
between John Hancock Realty Equities, (File 0-17664)
Inc., Hancock Realty Investors,
Incorporated and John Hancock Mutual
Life Insurance Company*
10.11 Documents relating to Executive
Compensation Plans and Arrangements
(a) Amended Agreement of Limited Exhibit A to the
Partnership* Prospectus filed
under the
Partnership's
Amendment No. 1
to Form S-11
Registration
Statement
(File 33-15630)
(b) There were no reports on Form 8-K filed during the quarter ended
December 31, 1994.
(c) Exhibits -- See Item 14 (a) (3) of this Report.
(d) Financial Statement Schedules--The response to this portion of Item 14
is submitted as a separate section of this Report commencing on Page F-
18.
-----------------------------
+Filed herewith
*Incorporated by reference
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the
30th day of March, 1995.
JOHN HANCOCK REALTY INCOME FUND-II
LIMITED PARTNERSHIP
By: John Hancock Realty Equities, Inc.
General Partner
By: WILLIAM M. FITZGERALD
---------------------
William M. Fitzgerald, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 30th day of March, 1995.
Signatures Title
---------- ------
President (Principal Executive Officer)
and
Director of John Hancock Realty
Equities,
WILLIAM M. FITZGERALD Inc. (General Partner of Registrant)
-----------------------
William M. Fitzgerald
Treasurer (Chief Accounting Officer)
of John Hancock Realty Equities, Inc.
RICHARD E. FRANK (General Partner of Registrant)
-----------------------
Richard E. Frank
Director of John Hancock Realty
Equities,
MALCOLM G. PITTMAN, III Inc. (General Partner of Registrant)
-----------------------
Malcolm G. Pittman, III
Director of John Hancock Realty
Equities,
SUSAN M. SHEPHERD Inc. (General Partner of Registrant)
-----------------------
Susan M. Shephard
30
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14 (a) (1) AND (2), (c) AND (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1994
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
BOSTON, MASSACHUSETTS
F-1
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(ITEMS 8 AND 14(a) (1) AND (2))
(1) Financial Statements Page
Report of Independent Auditors F-3
Balance Sheets at December 31, 1994 and 1993 F-4
Statements of Operations for the Years Ended
December 31, 1994, 1993 and 1992 F-5
Statements of Partners' Equity for the Years Ended
December 31, 1994, 1993 and 1992 F-6
Statements of Cash Flows for the Years Ended
December 31, 1994 1993 and 1992 F-7
Notes to Financial Statements F-9
(2) Financial Statement Schedules
Schedule III: Real Estate and Accumulated Depreciation F-18
Schedule IV: Mortgage Loans on Real Estate F-21
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.
F-2
Report of Independent Auditors
To the Partners
John Hancock Realty Income Fund-II Limited Partnership
We have audited the accompanying balance sheets of John Hancock Realty
Income Fund-II Limited Partnership as of December 31, 1994 and 1993, and
the related statements of operations, partners' equity and cash flows for
each of the three years in the period ended December 31, 1994. Our audits
also included the financial statement schedule listed in the index at Item
14(a). These financial statements and schedule are the responsibility of
the Partnership's management. Our responsiblity is to express an opinion
on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of John Hancock Realty
Income Fund-II Limited Partnership at December 31, 1994 and 1993, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
ERNST & YOUNG LLP
February 3, 1995,
except for Note 10,
as to which the date
is February 15, 1995
F-3
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
BALANCE SHEETS
ASSETS
December 31,
1994 1993
---- ----
Current assets:
Cash and cash equivalents $2,561,288 $3,742,273
Restricted cash 24,557 26,099
Other current assets 92,152 93,875
----------- -----------
Total current assets 2,677,997 3,862,247
Real estate loans 6,874,539 7,200,000
Investment in property:
Land 5,560,000 5,560,000
Buildings and improvements 18,836,994 18,836,994
----------- -----------
24,396,994 24,396,994
Less: accumulated depreciation 3,896,483 3,268,285
----------- -----------
20,500,511 21,128,709
Investment in joint venture 7,882,420 6,749,008
Long-term restricted cash 86,214 45,628
Deferred expenses, net of accumulated
amortization of $992,527 in 1994
and $706,622 in 1993 1,391,729 1,573,982
----------- -----------
Total assets $39,413,410 $40,559,574
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $200,424 $828,655
Accounts payable to affiliates 30,213 10,539
----------- -----------
Total current liabilities 230,637 839,194
Partners' equity/(deficit):
General Partner deficit (151,822) (146,449)
Limited Partners' equity 39,334,595 39,866,829
----------- -----------
Total partners' equity 39,182,773 39,720,380
----------- -----------
Total liabilities and partners' equity $39,413,410 $40,559,574
=========== ===========
See Notes to Financial Statements
F-4
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended December 31,
1994 1993 1992
---- ---- ----
Income:
Rental income $2,170,416 $2,296,571 $2,817,557
Interest income 843,631 872,180 883,680
Income from joint venture 541,188 221,738 432,782
---------- ---------- ----------
Total income 3,555,235 3,390,489 4,134,019
Expenses:
Depreciation 628,198 628,198 740,274
Property operating expenses 422,514 354,400 559,142
General and administrative 233,511 235,812 250,468
Amortization of deferred
expenses 285,905 236,162 193,923
Loss on sale of property - - 2,116,459
---------- ---------- ----------
Total expenses 1,570,128 1,454,572 3,860,266
---------- ---------- ----------
Net income $1,985,107 $1,935,917 $273,753
========== ========== ==========
Allocation of net income/(loss):
General Partner $19,851 $19,359 $2,738
John Hancock Limited Partner - - (155,207)
Investors 1,965,256 1,916,558 426,222
---------- ---------- ----------
$1,985,107 $1,935,917 $273,753
========== ========== ==========
Net income per Unit $0.76 $0.74 $0.16
===== ===== =====
See Notes to Financial Statements
F-5
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31, 1994, 1993, and 1992
General Limited
Partner Partners Total
------- -------- -----
Partners' equity/(deficit) at
January 1, 1992
(2,601,552 Units outstanding) ($111,240) $45,158,198 $45,046,958
Less: Cash distributions (29,188) (3,121,862) (3,151,050)
Add: Net income 2,738 271,015 273,753
-------- ----------- -----------
Partners' equity/(deficit) at
December 31, 1992
(2,601,552 Units outstanding) (137,690) 42,307,351 42,169,661
Less: Cash distributions (28,118) (4,357,080) (4,385,198)
Add: Net Income 19,359 1,916,558 1,935,917
-------- ----------- -----------
Partners' equity/(deficit) at
December 31, 1993
(2,601,552 Units outstanding) (146,449) 39,866,829 39,720,380
Less: Cash distributions (25,224) (2,497,490) (2,522,714)
Add: Net income 19,851 1,965,256 1,985,107
-------- ----------- -----------
Partner's equity/(deficit) at
December 31, 1994
(2,601,552 Units outstanding) ($151,822) $39,334,595 $39,182,773
======== =========== ===========
See Notes to Financial Statements
F-6
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31,
1994 1993 1992
---- ---- ----
Operating activities:
Net income $1,985,107 $1,935,917 $ 273,753
Adjustments to reconcile net
income to net cash provided by
operating activities:
Amortization of deferred expenses 285,905 236,162 193,923
Depreciation 628,198 628,198 740,274
Excess cash distributions over equity
in net income of joint venture (28,510) 170,262 184,618
Deferred expense write-off - - 8,723
Loss on sale of property - - 2,116,459
---------- ---------- ----------
2,870,700 2,970,539 3,517,750
Changes in operating assets and liabilities:
Decrease/(increase) in restricted cash (39,044) 27,454 19,317
Decrease/(increase) in other current assets 1,723 105,995 (29,022)
Decrease in other assets - 4,200 -
Increase/(decrease) in accounts payable
and accrued expenses (628,231) 614,857 (93,731)
Increase/(decrease) in accounts payable to
affiliates 19,674 (27,787) 10,965
---------- ---------- ----------
Net cash provided by operating
activities 2,224,822 3,695,258 3,425,279
Investing activities:
Proceeds from sale of property, net - - 1,605,675
Principal payments on real estate loans 325,461 - -
Increase in deferred expenses (103,652) (103,842) (356,381)
Increase in investment in joint venture (1,104,902) (177,341) -
---------- ---------- ----------
Net cash provided by/(used in)
investing activities (883,093) (281,183) 1,249,294
Continued on Next Page
F-7
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
Years Ended December 31,
1994 1993 1992
---- ---- ----
Financing activities:
Cash distributed to Partners, net (2,522,714) (4,385,198) (3,151,050)
---------- ---------- ----------
Net cash used in financing
activities (2,522,714) (4,385,198) (3,151,050)
---------- ---------- ----------
Net increase/(decrease) in cash
and cash equivalents (1,180,985) (971,123) 1,523,523
Cash and cash equivalents at beginning
of year 3,742,273 4,713,396 3,189,873
---------- ---------- ----------
Cash and cash equivalents at end
of year $2,561,288 $3,742,273 $4,713,396
========== ========== ==========
See Notes to Financial Statements
F-8
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Organization of Partnership
---------------------------
John Hancock Realty Income Fund-II Limited Partnership (the
"Partnership") was formed under the Massachusetts Uniform Limited
Partnership Act on June 30, 1987. As of December 31, 1994, the
partners in the Partnership consisted of John Hancock Realty Equities,
Inc. (the "General Partner"), a wholly-owned, indirect subsidiary of
John Hancock Mutual Life Insurance Company; John Hancock Realty
Funding, Inc. (the "John Hancock Limited Partner"); John Hancock
Income Fund-II Assignor, Inc. (the "Assignor Limited Partner"); and
4,575 Unitholders (the "Investors"). The Assignor Limited Partner
holds 2,601,552 Assignee Units (the "Units"), representing economic
and certain other rights attributable to Investor Limited Partnership
Interests in the Partnership, for the benefit of the Investors. The
John Hancock Limited Partner, the Assignor Limited Partner and the
Investors are collectively referred to as the Limited Partners. The
General Partner and the Limited Partners are collectively referred to
as the Partners. The initial capital of the Partnership was $2,000,
representing capital contributions of $1,000 by the General Partner
and $1,000 from the John Hancock Limited Partner. The Amended
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement") authorized the issuance of up to 5,000,000 Assignee Units
at $20 per Unit. During the offering period, which terminated on
January 2, 1989, 2,601,552 Units were sold and the John Hancock
Limited Partner made additional capital contributions of $4,161,483.
There were no changes in the number of Units outstanding subsequent to
the termination of the offering period. The Partnership is engaged
solely in the business of (i) acquiring, improving, holding for
investment and disposing of existing income-producing retail,
industrial and office properties on an all-cash basis, free and clear
of mortgage indebtedness, and (ii) making mortgage loans consisting of
conventional first mortgage loans and participating mortgage loans
secured by income-producing retail, industrial and office properties.
Although the Partnership's properties were acquired and are held free
and clear of mortgage indebtedness, the Partnership may incur mortgage
indebtedness on its properties under certain circumstances.
The latest date on which the Partnership is due to terminate is
December 31, 2017, unless it is sooner terminated in accordance with
the terms of the Partnership Agreement. It is expected that, in the
ordinary course of the Partnership's business, the investments of the
Partnership will be disposed of, and the Partnership terminated,
before December 31, 2017.
2. Significant Accounting Policies
-------------------------------
The Partnership maintains its accounting records and recognizes rental
income on the accrual basis.
Cash equivalents are highly liquid investments with maturities of
three months or less when purchased. These investments are recorded
at cost plus accrued interest, which approximates market value.
Restricted cash represents funds restricted for tenant security
deposits and has been designated as short or long-term based upon the
term of the related lease agreement.
F-9
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
2. Significant Accounting Policies (continued)
-------------------------------
Real estate loans are recorded at amortized cost unless it is
determined by the General Partner that in economic substance the loan
represents an investment in property or joint venture. In such
instances, these investments are accounted for using the equity
method.
Investments in property are recorded at cost. Cost includes the
initial purchase price of the property plus acquisition and legal
fees, other miscellaneous acquisition costs and the cost of
significant improvements.
Depreciation has been provided on a straight-line basis over the
estimated useful lives of the various assets: thirty years for the
buildings and five years for related improvements. Maintenance and
repairs are charged to operations as incurred.
Investment in joint venture is recorded using the equity method.
Fees paid to the General Partner for the acquisition of joint venture
and mortgage loan investments have been deferred and are being
amortized over the life of the investments to which they apply.
During 1993, the Partnership reduced the period over which its
remaining deferred acquisition fees are amortized from thirty years,
the estimated useful life of the buildings owned by the Partnership,
to eight and one-half years, the then estimated remaining life of the
Partnership. Capitalized tenant improvements and lease commissions
are being amortized on a straight-line basis over the various lease
terms.
The net income per Unit for each year is calculated by dividing the
Investors' share of net income by the number of Units outstanding at
the end of each year.
No provision for income taxes has been made in the Financial
Statements since such taxes are the responsibility of the individual
Partners and Investors and not of the Partnership.
F-10
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
3. The Partnership Agreement
-------------------------
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 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. However, any Distributable Cash from
Operations, which is available as a result of reduction of working
capital reserves funded by Capital Contributions of the Investors,
will be distributed 100% to the Investors.
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. However, all tax aspects of the Partnership's payment
of the sales commissions from the Capital Contributions made by the
John Hancock Limited Partner are allocated 1% to the General Partner
and 99% to the John Hancock Limited Partner and not to the Investors.
Depreciation deductions are allocated 1% to the General Partner and
99% to the Investors, and not to the John Hancock Limited Partner.
Notwithstanding the foregoing, any such profits or losses or other
items which were based upon the Partnership's operations prior to the
first day of the month in which the initial closing date occurred were
allocated 1% to the General Partner and 99% to the John Hancock
Limited Partner.
F-11
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
3. The Partnership Agreement (continued)
-------------------------------------
Upon the occurrence of a Sale, Financing or Repayment of a Partnership
Investment, the General Partner first applies the proceeds to the
payment of all debts and liabilities of the Partnership then due and
then funds any reserves for contingent liabilities which it deems to
be appropriate. Cash from Sales, Financings or Repayments are
distributed and paid in the following order of priority: first, to
the Investors and the John Hancock Limited Partner, with the
distribution made between the 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;
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 made between the Investors and the John
Hancock Limited Partner in proportion to their respective Capital
Contributions.
4. Transactions with the General Partner and Affiliates
----------------------------------------------------
Fees, commissions and other costs incurred or paid for by the General
Partner or its Affiliates during the three years ended December 31,
1994, 1993 and 1992 and to which the General Partner or its Affiliates
are entitled to reimbursement from the Partnership were $135,667,
$138,697 and $125,640, respectively. These expenses are included in
expenses on the Statements of Operations.
Accounts payable to affiliates represents amounts due to the General
Partner and its Affiliates for various services provided to the
Partnership.
The General Partner serves in a similar capacity for three other
affiliated real estate limited partnerships.
F-12
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
5. Investment in Property
----------------------
Investment in property at cost consists of managed, fully-operating,
commercial real estate as follows:
December 31,
1994 1993
---- ----
Park Square Shopping Center $12,886,230 $12,886,230
Fulton Business Park 5,138,786 5,138,786
Miami International
Distribution Center 6,371,978 6,371,978
----------- -----------
$24,396,994 $24,396,994
=========== ===========
The net realizable value of a property held for long-term investment
purposes is measured by the recoverability of the investment through
expected future cash flows on an undiscounted basis. The net book
value of the property in the financial statements may be in excess of
its current fair market value.
The Partnership leases its properties to non-affiliated tenants
primarily under long-term operating leases.
At December 31, 1994, future minimum rentals on non-cancelable leases
relating to the above properties were as follows:
1995 $2,194,629
1996 2,168,197
1997 1,845,565
1998 1,631,943
1999 1,416,830
Thereafter 3,692,985
-----------
$12,950,149
===========
F-13
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
6. Real Estate Loans
-----------------
On March 10, 1988, the Partnership made a $1,700,000 participating non-
recourse mortgage loan to a non-affiliated borrower, secured by a
first mortgage on commercial real estate known as 205 Newbury Street,
located in Boston, Massachusetts. Under the terms of this loan
agreement, the borrower is required to pay interest only monthly at an
annual rate of 9.5% with the entire principal balance due on April 1,
1998. In addition to these amounts, the borrower is also obligated to
pay the Partnership 25% of the net cash flow derived from the
operations of the property during the term of this loan and a
specified portion of the net sales price or mutually agreed upon fair
market value of the property upon its sale or refinancing.
On June 30, 1989, the Partnership made a $5,500,000 mortgage loan to a
non-affiliated borrower, secured by a first mortgage on commercial
real estate known as General Camera Corporation ("GCC"), located in
New York, New York. Under the original terms of this loan agreement,
GCC was required to pay interest only monthly at an annual rate of
11%. Effective June 1, 1994, the loan agreement was amended to i)
require GCC to make a one-time payment of $250,000 towards the
outstanding balance of the loan and ii) to require that all future
monthly payments include amounts to amortize the outstanding loan
balance. GCC is required to make payments of $60,416 per month on the
first day of the month commencing on July 1, 1994 and ending on June
1, 1995. Commencing on July 1, 1995, payments of $85,416 per month
are required on the first day of the month. The entire unamortized
principal balance and all accrued but unpaid interest are due on July
1, 1996.
On October 18, 1988, the Partnership made a $6,800,000 participating
first mortgage loan to a non-affiliated borrower, secured by a first
mortgage on commercial real estate known as Siete Square. Under the
terms of this loan agreement, the borrower was required to pay
interest only monthly at an annual rate of 8.875% with the principal
balance due on October 18, 1998. During 1990, the borrower was unable
to meet the minimum required debt service payments, thereby placing
the loan in default. In July 1990, the Partnership accepted a deed-in-
lieu of foreclosure and realized a $2,800,000 write-down to record the
investment at an estimated market value of $4,000,000. On December
10, 1992, the Partnership sold the property for a net sales price of
$1,605,675 and realized a loss on the sale in the amount of
$2,116,459.
Real estate loans are evaluated for collectibility on an on-going
basis.
F-14
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
7. Deferred Expenses
-----------------
Deferred expenses consist of the following:
Unamortized Balance at December 31,
Description 1994 1993
----------- ---- ----
$35,072 acquisition fee for 205 Newbury St.
loan. This amount is amortized
over the term of the loan $12,322 $16,114
$113,468 acquisition fee for GCC
mortgage loan. This amount is
amortized over the term of the loan. 24,315 40,524
$152,880 acquisition fee for the joint venture
investment, the Affiliated Joint Venture. This
amount is amortized over a period of 31.5 years. 123,962 128,816
$1,203,097 acquisition fees paid to the
General Partner. Prior to June 30, 1993, this
amount was amortized over a period of 30 years.
Subsequent to June 30, 1993, the unamortized
balance is amortized over a period of 8.5 years. 848,777 970,031
$238,871 of tenant improvements. These amounts
are amortized over the terms of the leases
to which they relate. 105,252 115,823
$549,414 of lease commissions. These amounts
are amortized over the terms of the leases
to which they relate. 277,101 302,674
---------- ----------
$1,391,729 $1,573,982
========== ==========
F-15
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
8. Investment in Joint Venture
---------------------------
On December 28, 1988, the Partnership invested $14,726,079 to acquire
a 99.5% interest in JH Quince Orchard Partners (the "Affiliated Joint
Venture"), a joint venture between the Partnership and John Hancock
Realty Income Fund-III Limited Partnership ("Income Fund-III"). The
Partnership had an initial 99.5% interest and Income Fund-III had an
initial 0.5% interest in the Affiliated Joint Venture. Pursuant to
the partnership agreement of the Affiliated Joint Venture, Income
Fund-III had the option, exercisable prior to December 31, 1990, to
increase its investment and interest in the Affiliated Joint Venture
to 50%. During the second quarter of 1989, Income Fund-III exercised
its option and the Partnership transferred a 49.5% interest in the
Affiliated Joint Venture to Income Fund-III for cash in the aggregate
amount of $7,325,672. The Partnership has held a 50% interest in the
Affiliated Joint Venture since the second quarter of 1989.
On December 28, 1988, the Affiliated Joint Venture acquired a 98%
interest in QOCC-1 Associates, an existing partnership which owns and
operates the Quince Orchard Corporate Center, a three-story office
building and related land and improvements located in Gaithersburg,
Maryland. During the years ended December 31, 1994 and 1993, the
partners in QOCC-1 Associates were required to make additional capital
contributions towards the funding of leasing costs at the property.
In accordance with the terms of the partnership agreement of QOCC-1
Associates, the Affiliated Joint Venture contributed 95% of such
additional capital, the Partnership's share of which amounted to an
aggregate of $1,282,243. As a result, the Affiliated Joint Venture
held a 97.55% interest in QOCC-1 Associates at December 31, 1994.
Summarized financial information for QOCC-1 Associates is as follows:
Financial Position at
December 31,
1994 1993
---- ----
Current assets $185,785 $478,589
Deferred expenses, net 2,428,865 829,343
Other assets 1,004,518 -
Investment in property, net 13,013,140 13,354,211
----------- -----------
Total assets $16,632,308 $14,662,143
=========== ===========
Current liabilities $429,182 $833,879
Minority interest 373,162 265,122
Partners' equity 15,829,964 13,563,142
----------- -----------
Total liabilities and equity $16,632,308 $14,662,143
=========== ===========
F-16
JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
8. Investment in Joint Venture (continued)
---------------------------
Results of Operations
Years Ended December 31,
1994 1993 1992
---- ---- ----
Total income $2,243,942 $1,294,989 $1,808,320
Total expenses 1,144,080 853,695 936,323
---------- ---------- ----------
Net income $1,099,862 $441,294 $871,997
========== ========== ==========
9. Federal Income Taxes
--------------------
A reconciliation of the net income reported in the Statements of
Operations to the net income reported for federal income tax purposes
is as follows:
Years Ended December 31,
1994 1993 1992
---- ---- ----
Net income per Statements of Operations $1,985,107 $1,935,917 $273,753
Add/(less):Excess of book depreciation
over tax depreciation 107,477 106,680 128,712
Excess of book amortization
over tax amortization 111,468 38,270 43,242
Excess of tax loss over
book loss on disposition
of assets - - (53,222)
Other income and expense (178,404) (8,075) (8,075)
---------- ---------- --------
Net income for federal income tax purposes $2,025,648 $2,072,792 $384,410
========== ========== ========
10. Subsequent Events
On February 15, 1995 the Partnership made a cash distribution of
$624,372 to the Investors representing a 5% annualized return to all
Investors of record at December 31, 1994, based on Distributable Cash
from Operations for the quarter then ended.
F-17
JOHN HANCOCK REALTY INCOME FUND - II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Year Ended December 31, 1994
Costs
Capitalized
Initial Costs to Subsequent to Gross Amount
Partnership Acquisition At Which Carried at Close of Period
----------- ----------- -----------------------------------
Buildings Buildings
and and
Description Encumbrances Land Improvements Improvements Land Improvements Total (1)
----------- ------------ ---- ------------ ------------ ---- ------------ --------
Park Square
Shopping Center
Brooklyn Park, MN - $2,410,000 $10,419,611 $56,619 $2,410,000 $10,476,230 $12,886,230
Fulton Business Park
Warehouse
Atlanta, GA - 520,000 4,584,494 34,292 520,000 4,618,786 5,138,786
Miami International
Distribution Center
Miami, FL - 2,630,000 3,729,947 12,031 2,630,000 3,741,978 6,371,978
-- ---------- ---------- ------- ---------- ---------- -----------
Total - $5,560,000 $18,734,052 $102,942 $5,560,000 $18,836,994 $24,396,994
== ========== =========== ========= ========== =========== ===========
F-18
JOHN HANCOCK REALTY INCOME FUND - II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
SCHEDULE III (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
Year Ended December 31, 1994
Life on Which
Depreciation in
Latest Statement
Accumulated Date of Date of Operations
Description Depreciation (4) Construction Acquired is Computed
----------- ---------------- ------------ -------- -----------
Park Square
Shopping Center
Brooklyn Park, MN $2,251,339 1988 7/15/88 30 Years (2)
5 years (3)
Fulton Business Park
Warehouse
Atlanta, GA 969,221 1986 9/20/88 30 Years (2)
5 Years (3)
Miami International
Distribution Center
Miami, FL 675,923 1977 7/31/89 30 Years (2)
----------- 5 Years (3)
Total $3,896,483
============
(1)The Partnership's properties' aggregate cost for federal income tax
purposes at December 31, 1994 are as follows:
Property Amount
-------- ------
Park Square Shopping Center $12,760,226
Fulton Business Park Warehouse 5,110,858
Miami International Distribution Center 6,371,978
-----------
$24,243,062
===========
The Partnership's aggregate cost for federal income tax purposes may
differ from the aggregate cost for Financial Statement purposes.
(2) Estimated useful life for buildings
(3) Estimated useful life for improvements
(4) Reconciliation of Real Estate and Accumulated Depreciation
F-19
JOHN HANCOCK REALTY INCOME FUND - II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
SCHEDULE III (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
Year Ended December 31, 1994
Years Ended December 31,
1994 1993 1992
---- ---- ----
Investment in Real Estate
Balance at beginning of year $24,396,994 $24,396,994 $28,399,294
Dispositions - - (4,002,300)
Improvements - - -
----------- ----------- -----------
$24,396,994 $24,396,994 $24,396,994
=========== =========== ===========
Accumulated Depreciation
Balance at beginning of year $3,268,285 $2,640,087 $ 2,179,979
Additions charged to costs and expenses 628,198 628,198 740,274
Dispositions - - (280,166)
----------- ----------- -----------
Balance at end of year $3,896,483 $3,268,285 $2,640,087
=========== =========== ===========
F-20
JOHN HANCOCK REALTY INCOME FUND - II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
Year Ended December 31, 1994
Final Maturity Periodic
Description Interest Rate Date Payment Terms Prior Liens
----------- ------------- ---- ------------- -----------
Participating first 9.5% per annum April 1, 1998 Monthly payments
mortgage on and 25% of net of interest only.
an office/retail property cash flow The principal and
retail property from property all accrued but
located in Boston, MA operations unpaid interest
are due on
April 1,1996
First mortgage on an 11% per annum July 1, 1996 Monthly payments
office/warehouse of interest only
property located through June 30,
1994,
in New York, NY $60,416 through
June 30, 1995,
and $85,416, through
June 30, 1996. The
principal and all accrued
and unpaid interest
but due on July 1, 1998
Principal Amount
of Loans Subject
To Delinquent
Face Amount Carrying Amount Principal or
Description of Mortgages of Mortgages (1) Interest
----------- ------------ ---------------- --------
Participating first $1,700,000 $1,700,000 -
mortgage on
an office/retail property
retail property
located in Boston, MA
First mortgage on an
office/warehouse
in New York, NY 5,174,539 5,174,539 -
---------- ---------- ------
$6,874,539 $6,874,539 -
========== ========== ======
(1) Aggregate cost for federal income tax purposes is the same as for
book purposes.
F-21
JOHN HANCOCK REALTY INCOME FUND - II LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
SCHEDULE IV (Continued)
MORTGAGE LOANS ON REAL ESTATE
Year Ended December 31, 1994
INVESTMENT IN MORTGAGE LOANS
Year Ended December 31,
1994 1993 1992
---- ---- ----
Balance at beginning of year $7,200,000 $7,200,000 $7,200,000
New mortgage loans - - -
Collection of principal 325,461 - -
Foreclosures - - -
---------- ---------- ----------
Balance at end of year $6,874,539 $7,200,000 $7,200,000
========== ========== ==========
F-22