SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to __________
Commission file number 0-14177
MRI Business Properties Fund, Ltd. II
(Exact name of Registrant as specified in its charter)
California 94-2935565
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5665 Northside Drive N.W., Ste. 370, Atlanta, Georgia 30328
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (404) 916-9090
N/A
Former name, former address and fiscal year, if changed since last report.
Indicate by check mark whether 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_____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 12, 13, or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date __________________.
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
June 30, September 30,
1995 1994
(Unaudited) (Audited)
Assets
Cash and cash equivalents $ 36,525,000 $ 9,346,000
Restricted cash -- 1,921,000
Accounts receivable and other assets 3,135,000 4,835,000
Real Estate:
Real estate 91,663,000 132,781,000
Accumulated depreciation (36,665,000) (53,454,000)
Allowance for impairment of value (10,948,000) (10,948,000)
------------- -------------
Real estate, net 44,050,000 68,379,000
------------- -------------
Intangible assets 42,000 1,187,000
------------- -------------
Total assets $ 83,752,000 $ 85,668,000
============= =============
Liabilities and Partners' Equity
Accounts payable and other liabilities $ 2,671,000 $ 4,039,000
Due to an affiliate of the joint venture partner 160,000 91,000
Due to unconsolidated joint venture 261,000 338,000
Notes payable 36,682,000 56,814,000
------------- -------------
Total liabilities 39,774,000 61,282,000
------------- -------------
Minority interest in joint venture 2,767,000 2,630,000
------------- -------------
Commitments and Contingencies
Partners' Equity:
General partners' (deficit) 660,000 (2,876,000)
Limited partners' equity (91,083 units outstanding
at June 30, 1995 and September 30, 1994) 40,551,000 24,632,000
------------- -------------
Total partners' equity 41,211,000 21,756,000
------------- -------------
Total liabilities and partners' equity $ 83,752,000 $ 85,668,000
============= =============
See notes to consolidated financial statements.
2 of 16
MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
Consolidated Statements of Operations (Unaudited)
For the Nine Months Ended
June 30, 1995 June 30, 1994
Revenues:
Room revenue $ 26,998,000 $ 25,301,000
Food and beverage revenue 14,235,000 12,912,000
Other operating revenues 2,307,000 2,123,000
Interest 348,000 254,000
Gain on sale of property 18,497,000 --
------------ ------------
Total revenues 62,385,000 40,590,000
------------ ------------
Expenses:
Room expenses 6,081,000 5,500,000
Food and beverage expenses 10,775,000 9,776,000
Other operating expenses 16,467,000 16,591,000
Interest 4,861,000 4,487,000
Depreciation and amortization 4,160,000 3,681,000
Loss in unconsolidated joint venture's operations 93,000 262,000
General and administrative 356,000 341,000
------------ ------------
Total expenses 42,793,000 40,638,000
------------ ------------
Income (loss) before minority interest in joint venture's
operations 19,592,000 (48,000)
Minority interest in joint venture's operations (137,000) 54,000
------------ ------------
Net income $ 19,455,000 $ 6,000
============= =============
Net income per limited partnership assignee unit $ 175 --
============ =============
See notes to consolidated financial statements.
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended
June 30, 1995 June 30, 1994
Revenues:
Room revenue $ 10,092,000 $ 9,132,000
Food and beverage revenue 4,852,000 4,046,000
Other operating revenues 834,000 818,000
Interest 125,000 102,000
Equity in unconsolidated joint venture's
operation 14,000 --
Gain on sale of property 18,497,000 --
------------ ------------
Total revenues 34,414,000 14,098,000
------------ ------------
Expenses:
Room expenses 2,058,000 1,950,000
Food and beverage expenses 3,597,000 3,074,000
Other operating expenses 5,843,000 5,725,000
Interest 1,396,000 1,570,000
Depreciation and amortization 1,363,000 1,208,000
Loss in unconsolidated joint venture's
operations -- 110,000
General and administrative 117,000 122,000
------------ -----------
Total expenses 14,374,000 13,759,000
------------ -----------
Income before minority interest in joint
venture's operations 20,040,000 339,000
Minority interest in joint venture's
operations (56,000) (6,000)
------------- ------------
Net income $ 19,984,000 $ 333,000
============= ============
Net income per limited partnership
assignee unit $ 181 $ 4
============ ============
See notes to consolidated financial statements.
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended
June 30, 1995 June 30, 1994
Operating Activities:
Net income $ 19,455,000 $ 6,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,464,000 3,890,000
Minority interest in joint venture's operations 137,000 (54,000)
Equity in unconsolidated joint venture's operations 93,000 262,000
Financing costs paid (211,000) (8,000)
Gain on sale of property (18,497,000) --
Changes in operating assets and liabilities:
Accounts receivable and other assets (1,014,000) (217,000)
Accounts payable, other liabilities and due
to an affiliate of the joint venture partner (434,000) 284,000
------------- ------------
Net cash provided by operating activities 3,993,000 4,163,000
------------- ------------
Investing Activities:
Proceeds from sale of property 30,000,000 --
Unconsolidated joint venture contributions (170,000) (150,000)
Properties and improvements additions (7,034,000) (2,330,000)
Settlement proceeds -- 102,000
Restricted cash decrease (increase) 1,465,000 (1,328,000)
Purchase of cash investments -- (4,444,000)
Proceeds from cash investments -- 9,581,000
------------- ------------
Net cash provided by investing activities 24,261,000 1,431,000
------------- ------------
Financing Activities:
Satisfaction of mortgages payable (19,874,000) --
Proceeds from mortgage refinancing 19,400,000 --
Notes payable principal payments (601,000) (631,000)
------------- ------------
Net cash (used in) financing activities (1,075,000) (631,000)
------------- ------------
Increase in Cash and Cash Equivalents 27,179,000 4,963,000
Cash and Cash Equivalents at Beginning of Period 9,346,000 4,063,000
------------- ------------
Cash and Cash Equivalents at End of Period $ 36,525,000 $ 9,026,000
============= ============
Supplemental Disclosure of Cash Flow Information:
Interest paid in cash during the period $ 4,399,000 $ 4,010,000
============= ============
Supplemental Disclosure of Non-Cash Investing and
Financing Activities:
Equipment financed -- $ 329,000
============= ============
Sale of property and assumption of debt in 1995 - See Note 3
See notes to consolidated financial statements.
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements, footnotes and
discussions should be read in conjunction with the consolidated financial
statements, related footnotes and discussions contained in the
Partnership's Annual Report for the year ended September 30, 1994.
Certain accounts have been reclassified in order to conform to the current
period.
The financial information contained herein is unaudited. In the opinion
of management, however, all adjustments necessary for a fair presentation
of such financial information have been included. All adjustments are of
a normal recurring nature, except for the gain on sale.
At June 30, 1995, the Partnership had $29,964,000 invested in a short-term
U.S. Treasury obligations and approximately $2,751,000 invested in
overnight repurchase agreements, both earning approximately 6% per annum.
The results of operations for the nine and three months ended June 30,
1995 and 1994 are not necessarily indicative of the results to be expected
for the full year.
2. Transactions with Related Parties
Affiliates of MGP received reimbursement of administrative expenses
amounting to $78,000 and $52,000 during the periods ending June 30, 1995
and 1994, respectively. These reimbursements are included in general and
administrative expenses.
3. Gain on Sale of Property
On June 16, 1995, the Partnership's Marriott Riverwalk (San Antonio,
Texas) property was sold to an unaffiliated third party for $49,268,000.
The sale proceeds were comprised of cash of $30,000,000 and the mortgage
note of $19,268,000, which was assumed by the buyer. The note in the
amount of $18,387,000 had been refinanced by the Partnership in December,
1994. At the date of the sale, the net carrying value of the property was
$28,390,000 and net assets of approximately $2,115,000 were taken over by
the purchaser. The sale resulted in a gain of approximately $18,497,000,
which includes accrued selling expenses of approximately $266,000.
4. Notes Payable
The Partnership's unconsolidated joint venture's (the Holiday Inn Crowne
Plaza) mortgage payable in the amount of $34,000,000 was due to mature in
July 1995. On June 28, 1995, the Partnership obtained a six month
extension of the due date to December 29, 1995. The loan requires monthly
payments of interest only at 12.29% commencing August 1, 1995.
The Partnership's $650,000 renovation loan from Marriott on the
Partnership's Somerset Marriott Hotel matured in January 1994. The
Partnership has not repaid the loan. If necessary the Partnership can
satisfy the loan from working capital reserves.
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Notes Payable (Continued)
On December 21, 1994, the Partnership satisfied the renovation loan from
Marriott on the Partnership's Marriott Riverwalk Hotel in the amount of
$1,487,000 plus accrued interest of approximately $126,000. The loan was
due to mature on December 31, 1994.
5. Contract for Sale of Property
On June 23, 1995, the Partnership entered into a contract with an
unaffiliated third party to sell the Somerset Marriott property (Somerset,
New Jersey) for $25,000,000. If the hotel is sold, the Partnership would
receive net proceeds of approximately $2,400,000 and recognize a gain on
the sale.
6. Subsequent Events
As of July 7, 1995, the Combined Fund, a joint venture in which the
Partnership has a 50% interest, entered into an agreement with its joint
venture partner in the Holiday Inn Crowne Plaza pursuant to which the
parties agreed to sell the Holiday Inn Crowne Plaza. The agreement
provides that the net proceeds to the Combined Fund from any such sale
must be at least $5,000,000. If the property is not sold by January 31,
1996, the joint venture partner is obligated to purchase the joint venture
interest of the Combined Fund for $5,000,000. The Partnership anticipates
that it will recognize net proceeds of approximately $2,500,000 and a gain
on disposition of approximately $2,700,000 for financial statement
purposes on the transaction.
On July 26, 1995, the Partnership distributed $32,334,000 to the limited
partners ($355 per limited partnership unit) and $660,000 to the general
partners. The distributions were made from sale proceeds of $30,000,000
and working capital reserves of approximately $3,000,000.
7. Legal Proceedings
On May 19, 1995 final approval was given by the Court to a settlement
agreement relating to the tender offer litigation. As required by the
terms of the settlement agreement, DeForest Ventures I L.P. ("DeForest")
commenced a second tender offer (the "Second Tender Offer") on June 2,
1995 for units of limited partnership in the Partnership. Pursuant to the
Second Tender Offer, DeForest acquired an additional 339 limited
partnership units of the Partnership.
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Investment in Unconsolidated Joint Venture
The following are the condensed balance sheets as of June 30, 1995 and
September 30, 1994 and condensed statements of operations for the nine
and the three months ended June 30, 1995 and 1994 of the unconsolidated
joint venture:
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED BALANCE SHEETS
June 30, September 30,
1995 1994
(Unaudited) (Audited)
Assets
Cash and cash equivalents $ 1,010,000 $ 561,000
Restricted cash 790,000 564,000
Accounts receivable and other assets 2,230,000 1,323,000
Real Estate:
Real estate 63,293,000 62,898,000
Accumulated depreciation (17,535,000) (16,335,000)
Allowance for impairment of value (11,962,000) (11,962,000)
----------- ------------
Real estate, net 33,796,000 34,601,000
----------- ------------
Total assets $ 37,826,000 $ 37,049,000
=========== ============
Liabilities and Partners' Deficiency
Accounts payable and other liabilities $ 3,000,000 $ 2,320,000
Due to affiliates 1,884,000 2,095,000
Note payable 34,000,000 34,000,000
----------- ------------
Total liabilities 38,884,000 38,415,000
----------- ------------
Minority interest in joint venture (535,000) (689,000)
----------- ------------
Commitments and Contingencies
Partners' Deficiency:
MRI BPF, LTD. II (261,000) (338,000)
MRI BPF, LTD. III (262,000) (339,000)
----------- ------------
Total partners' deficiency (523,000) (677,000)
----------- ------------
Total liabilities and partners'
deficiency $ 37,826,000 $ 37,049,000
=========== ============
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Investment in Unconsolidated Joint Venture (Continued)
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Nine Months Ended
June 30, 1995 June 30, 1994
Revenues $ 15,730,000 $ 15,096,000
Expenses 16,102,000 16,144,000
------------- ------------
(Loss) before minority interest in joint
venture operations (372,000) (1,048,000)
Minority interest in joint venture
operations 186,000 524,000
------------- ------------
Net (loss) $ (186,000) $ (524,000)
============= ============
Allocation of net loss:
MRI BPF, Ltd. II $ (93,000) $ (262,000)
MRI BPF, Ltd. III (93,000) (262,000)
------------- ------------
Net (loss) $ (186,000) $ (524,000)
============= ============
For the Three Months Ended
June 30, 1995 June 30, 1995
Revenues $ 5,608,000 $ 4,944,000
Expenses 5,551,000 5,385,000
------------- ------------
Income (loss) before minority interest
in joint venture operations 57,000 (441,000)
Minority interest in joint venture
operations (29,000) 221,000
------------- ------------
Net income (loss) $ 28,000 $ (220,000)
============= ============
Allocation of net income (loss):
MRI BPF, Ltd. II $ 14,000 $ (110,000)
MRI BPF, Ltd. III 14,000 (110,000)
------------- ------------
Net income (loss) $ 28,000 $ (220,000)
============= ============
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
This item should be read in conjunction with the Consolidated Financial
Statements and other Items contained elsewhere in this Report.
Liquidity and Capital Resources
Registrant's two remaining properties are hotels, the Radisson South located
in Minneapolis, Minnesota and the Somerset Marriott located in Somerset, New
Jersey. In addition, Registrant has an interest in an unconsolidated joint
venture, the Holiday Inn Crowne Plaza, located in Atlanta, Georgia.
Registrant receives hotel operating revenues and is responsible for operating
expenses, administrative expenses, capital improvements and debt service
payments. Registrant's Marriott Riverwalk Hotel was sold on June 16, 1995.
As of August 1, 1995 one of the original three properties purchased by the
Registrant were sold.
Registrant uses working capital reserves provided from any undistributed cash
flow from operations and sales of properties as its primary sources of
liquidity. During the nine months ended June 30, 1995, the Radisson South
generated positive cash flow while the Somerset Marriott Hotel generated
negative cash flow due to significant property improvements. The Holiday Inn
Crowne Plaza, owned by the unconsolidated joint venture, experienced positive
cash flow during such period. During the nine months ended June 30, 1995,
$7,034,000 was spent on guest room and other renovations. Registrant spent
$1,337,000 at the Radisson South, $3,838,000 at the Marriott Riverwalk and
$1,859,000 at the Somerset Marriott. Management does not anticipate
significant additional room renovations during 1995 at any of Registrant's
hotels. Registrant distributed $32,334,465 to the limited partners ($355 per
limited partnership unit) and $659,887 to the General Partners on July 26,
1995. The distributions were made from sale proceeds of $30,000,000, and
working capital reserves of approximately $3,000,000.
On June 23, 1995, Registrant signed a contract to sell its Somerset
Marriott hotel. If thehotel is sold, Registrant would receive net
proceeds of approximately $2,400,000 and recognize a gain on the sale.
As described in Item 1, Note 6, pursuant to an agreement, Registrant's
interest in the Holiday Inn Crowne Plaza will be sold or otherwise
disposed of by January 31, 1996. Registrant anticipates that it will
receive net proceeds of approximately $2,500,000 on the transaction.
Registrant is also marketing its Radisson South joint venture property
for sale. If all the remaining hotels are sold, the Partnership will be
terminated and all remaining proceeds, after payment of outstanding
liabilities, will be distributed to partners.
The level of liquidity based upon cash and cash equivalents experienced a
$27,179,000 increase at June 30, 1995, as compared to September 30, 1994, due
to the receipt of sale proceeds of $30,000,000 from the sale of Registrant's
Marriott Riverwalk property. Registrant's $3,993,000 of cash from operating
activities and $24,261,000 of net cash from investing activities was
partially offset by $1,075,000 of net cash used in financing activities.
Investing activities consisted of net sale proceeds of $30,000,000 and a
decrease in restricted cash of $1,465,000, which were partially offset by
property improvements of $7,034,000 and $170,000 of contributions to
unconsolidated joint venture. The decrease in restricted cash is primarily
the result of the lender releasing $823,000 of restricted cash relating to
completed renovations at Registrant's Marriott Somerset property. Financing
activities consisted of $19,874,000 paid in satisfaction of the mortgages
encumbering Registrant's Marriott Riverwalk property, $601,000 of notes
payable principal payments and proceeds of $19,400,000 from refinancing the
mortgages
10 of 16
MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Liquidity and Capital Resources (Continued)
encumbering Registrant's Marriott Riverwalk property. A prepayment premium of
approximately $640,000 was paid to the former mortgagee. Mortgage costs of
$211,000 (operating activities) paid during the nine months ended June 30,
1995 and $194,000 paid in the prior year were incurred in connection with the
refinancing. All other increases (decreases) in certain assets and
liabilities are the result of the timing of receipt and payment of various
operating activities.
Working capital reserves are primarily invested in United States Treasury
obligations. The Managing General Partner believes that, if market conditions
remain relatively stable, cash flow from operations, when combined with
working capital reserves, will be sufficient to fund essential capital
improvements and debt service payments in 1995 and the foreseeable future. A
$650,000 renovation loan from Marriott on Registrant's Somerset Marriott Hotel
matured in January 1994. Registrant has not repaid the loan. If necessary the
Partnership can satisfy the loan from working capital reserves. Registrant
has balloon payments of $14,278,000 due in December 1995 on the mortgages
encumbering the Radisson South Hotel. Although management is confident that
these mortgages can be replaced or the properties sold, there is no assurance
that this will be accomplished, in which case, Registrant will risk losing its
entire investment in the property. If the Radisson South is lost through
foreclosure, Registrant would incur a loss of approximately $6,600,000. The
Managing General Partner, however, anticipates selling the Radisson South
before the maturity date of the mortgage. The mortgage payable in the amount
of $34,000,000 encumbering the Holiday Inn Crowne Plaza, was due to mature in
July 1995. Registrant obtained a six month extension of the due date to
December 29, 1995. The loan requires monthly payments of interest only at
12.29%, commencing August 1, 1995. The Managing General Partner, however,
anticipates selling the hotel on or before the maturity date. The Managing
General Partner believes that each of the mortgages will be refinanced, if the
properties are not sold, in an orderly fashion.
As required by the terms of the settlement of the actions brought against,
among others, DeForest Ventures I L.P. ("DeForest") relating to the tender
offer made by DeForest in October 1994 (the "First Tender Offer") for units of
limited partnership interest in Registrant and certain affiliated
partnerships, DeForest commenced a second tender offer (the "Second Tender
Offer") on June 2, 1995 for units of limited partnership interest in
Registrant. Pursuant to the Second Tender Offer, DeForest acquired an
additional 339 units of Registrant which, when added to the units acquired
during the First Tender Offer, represents approximately 29.2% of the total
number of outstanding units of Registrant. The Managing General Partner
believes that the tender will not have a significant impact on future
operations or liquidity of Registrant (see Part II, Item 1, Litigation). Also
in connection with the settlement, an affiliate of the Managing General
Partner has made available to Registrant a credit line of up to $150,000 per
property owned by Registrant. Based on present plans, management does not
anticipate the need to borrow in the near future.
At this time, it appears that the investment objective of capital growth will
not be attained and that investors will not receive a return of all of their
invested capital. The extent to which invested capital is returned to
investors is dependent upon the performance of Registrant's properties and the
markets in which such properties are located and on the sales price of the
remaining properties. The ability to hold and operate these properties is
dependent on Registrant's ability to obtain refinancing or debt modification
as required.
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Real Estate Market
The income and expenses of operating the properties owned by Registrant are
subject to factors outside of Registrant's control, such as over-supply of
similar properties resulting from over-building, increases in unemployment or
population shifts or changes in patterns or needs of users. Expenses, such as
local real estate taxes and miscellaneous expenses, are subject to change and
cannot always be reflected in room rate increases due to market conditions.
In addition, there are risks inherent in owning and operating lodging
facilities because such properties are management and labor intensive and
especially susceptible to the impact of economic and other conditions outside
the control of Registrant. There have been, and it is possible there may be
other Federal, state and local legislation and regulations enacted relating to
the protection of the environment. Registrant is unable to predict the
extent, if any, to which such new legislation or regulations might occur and
the degree to which such existing or new legislation or regulations might
adversely affect the properties owned by Registrant.
Results of Operations
Nine Months Ended June 30, 1995 vs. June 30, 1994
Operating results, prior to minority interest in joint venture's operations,
improved by $19,640,000 for the nine months ended June 30, 1995, as compared
to 1994. Operating results improved primarily due to the $18,497,000 gain on
the sale of Registrant's Marriott Riverwalk Hotel.
Revenues increased by $21,795,000 for the nine months ended June 30, 1995, as
compared to 1994, due to the previously mentioned sale. With respect to the
remaining properties, revenues increased by $3,094,000 due to an increase in
room revenues of $1,788,000, food and beverage revenues of $1,114,000 and
other operating revenues of $192,000. The increase in room revenues was
attributable to increases in both occupancy and room rates at Registrant's
remaining properties. Food and beverage revenue and other operating revenues
increased at all of Registrant's remaining properties. Interest income
increased due to the receipt of net sale proceeds of $30,000,000 from sale of
Registrant's Marriott Riverwalk Hotel on June 16, 1995 and the timing of
interest accruals.
Expenses increased by $2,155,000 for the nine months ended June 30, 1995, as
compared to 1994. With respect to the remaining properties, expenses
increased by $1,445,000 due to increases in room expenses of $520,000, food
and beverage expenses of $763,000, other operating expenses of $89,000,
interest expense of $88,000 and depreciation expense of $154,000, which were
partially offset by a decrease in loss from unconsolidated joint venture's
operations of $169,000.
The increase in room expenses is attributable to the increased occupancy at
Registrant's remaining properties. Food and beverage expenses increased at
both Registrant's remaining properties. Depreciation and amortization expense
increased due to guest room and other renovations at both of Registrant's
remaining properties. The loss from Registrant's unconsolidated joint
venture's property (the Holiday Inn Crowne Plaza) decreased due to improved
operations at the hotel. Other operating expenses and interest expense
remained relatively constant. General and administrative expenses increased
by $15,000, due to higher reimbursed expenses.
12 of 16
MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Three Months Ended June 30, 1995 vs. June 30, 1994
Operating results, before minority interest in joint venture's operations,
improved by $19,701,000 for the three months ended June 30, 1995, as compared
to 1994. Operating results improved primarily due to the $18,497,000 gain on
sale of Registrant's Marriott Riverwalk Hotel. The increase in revenues of
$20,316,000 was partially offset by increase in expenses of $615,000.
With respect to the remaining properties (not including equity from the
unconsolidated joint venture operations), revenues increased by $1,293,000 due
to an increase in room revenues of $585,000, food and beverage revenues of
$702,000 and other operating income of $6,000. Room revenues increased
primarily due to an increase in rates at Registrant's remaining properties.
Occupancy increased at Registrant's Radisson South Hotel but declined at
Registrant's Somerset Marriott Hotel. Food and beverage revenue increased at
both of Registrant's remaining properties. Other operating revenues remained
relatively constant. Interest income increased due to the receipt of net sale
proceeds of $30,000,000 from sale of Registrant's Marriott Riverwalk Hotel on
June 16, 1995. Equity from Registrant's unconsolidated joint venture property
(the Holiday Inn Crowne Plaza) improved due to improved operations at the
hotel.
With respect to the remaining properties (not including the loss in
unconsolidated joint venture operations), expenses increased by $680,000 due
to increases in room expenses of $118,000, food and beverage expenses of
$505,000, other operating expenses of $40,000, interest expense of $14,000 and
depreciation expense of $3,000.
Room expenses increased at both of Registrant's remaining properties, with the
largest increase at the Radisson South Hotel, primarily due to increased
occupancy. Food and beverage expenses increased at both Registrant's
remaining properties. Other operating expenses and interest expense remained
relatively constant. Depreciation expense remained constant due to a portion
of Registrant's assets becoming fully depreciated, which was offset by guest
room and other renovations at both of Registrant's remaining properties. In
addition, general and administrative expenses remained relatively constant.
Unconsolidated Joint Venture Operations (MRI BPF Combined Fund No. 1)
Nine Months Ended June 30, 1995 vs. June 30, 1994
Operating results, prior to the minority interest, improved by $676,000 for
the nine months ended June 30, 1995, as compared to 1994, due to increases in
revenues and decreases in expenses. The increase in revenue is attributable
to higher average room rates.
Three Months Ended June 30, 1995 vs. June 30, 1994
Operating results, prior to minority interest, improved by $498,000 for the
three months ended June 30, 1995, due to an increase in revenues which was
partially offset by an increase in expenses. The increase in revenue is
attributable to higher average room rates, which was partially offset by a
decline in occupancy.
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Properties
A description of the hotel properties in which Registrant has an ownership
interest during the period covered by this Report, together with occupancy and
room rate data, follows:
MRI BUSINESS PROPERTIES FUND, LTD. II
OCCUPANCY AND ROOM RATE SUMMARY
Average Average
Occupancy Rate (%) Daily Room Rate ($)
------------------------------ -----------------------------
Nine Months Three Months Nine Months Three Months
Date Ended Ended Ended Ended
of June 30, June 30, June 30, June 30,
Name and Location Rooms Purchase 1995 1994 1995 1994 1995 1994 1995 1994
- ----------------- ----- -------- ---- ---- ---- ---- ---- ---- ---- ----
Radisson South Hotel
Bloomington, Minnesota 575 11/84 67 64 73 68 75.58 71.80 76.93 70.94
Marriott Riverwalk Hotel
San Antonio, Texas (2) 500 11/84 76 81 82 85 122.29 117.68 130.15 119.99
Somerset Marriott Hotel
Somerset County, New Jersey 434 09/85 70 67 76 80 88.30 84.79 89.69 82.85
Holiday Inn Crowne Plaza
Atlanta, Georgia (1) 492 03/86 75 75 78 80 96.78 89.05 98.65 87.60
(1) Registrant and an affiliated partnership, MRI Business Properties Fund,
Ltd. III, (jointly the "Combined Fund"), own a joint venture which has
a 50 percent interest in this property.
(2) The property was sold on June 16, 1995. Average occupancy and average
daily room rates are through the date of sale.
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
PART II - OTHER INFORMATION
Item 1. Litigation
Lawrence M. Whiteside, on behalf of himself and all others similarly
situated, v. Fox Capital Management Corporation et al., Superior Court
of the State of California, San Mateo County, Case No. 390018.
Bonnie L. Ruben and Sidney Finkel, on behalf of themselves and all
others similarly situated, v. DeForest Ventures I L.P., et. al., United
States District Court, Northern District of Georgia, Atlanta Division,
Case No. 1-94-CV-2983-JEC.
Roger L. Vernon, individually and on behalf of all similarly situated
persons v. DeForest Ventures I L.P. et. al., Circuit Court of Cook
County, County Departments, Chancery Division, State of Illinois, Case
No. 94CH0100592.
James Andrews, et al., on behalf of themselves and all others similarly
situated v. Fox Capital Management Corporation, et al., United States
District Court, Northern District of Georgia, Atlanta Division, Case
No. 1-94-CV-3351-JEC.
On May 19, 1995, the Court gave final approval to the settlement
agreement entered into, in March 1995, by the plaintiffs and the
defendants in the above actions. Pursuant to the Court's order, all
claims made by the plaintiffs were dismissed with prejudice subject to
the defendants compliance with the settlement agreement. As required
by the settlement agreement, DeForest Ventures I L.P. ("DeForest") and
DeForest Ventures II L.P. commenced a tender offer for units of limited
partnership interest in Registrant as well as 18 other affiliated
partnerships on June 2, 1995 and implemented the other provisions of
the settlement agreement. See Part I, Item 2, "Management's Discussion
and Analysis of Financial Condition."
Item 6. Exhibits and Reports on Form 8-K.
On June 28, 1995 a current report on Form 8-K was filed with Securities
and Exchange Commission to provide for the sale of Registrant's
Marriott Riverwalk property. No other reports on Form 8-K were filed
during the period covered by this report.
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MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - JUNE 30, 1995
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MRI BUSINESS PROPERTIES FUND, LTD. II
By: MONTGOMERY REALTY COMPANY 84,
its Managing General Partner
By: FOX REALTY INVESTORS,
its Managing General Partner
By: NPI Equity Investments II, Inc.,
its Managing Partner
/S/ ARTHUR N. QUELER
Secretary/Treasurer and Director
(Principal Financial Officer)
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