FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended...............................September 30, 1996
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 0-16793
BASS REAL ESTATE FUND II
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(Exact name of partnership as specified in its charter)
North Carolina 56-1490907
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4000 Park Road Charlotte, North Carolina 28209
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(Address of principal executive office) (Zip Code)
Partnership's telephone number, including area code: (704) 523-9407
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Indicate by check mark whether the partnership (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
partnership was required to file such reports), and [2] has been subject to such
filing requirements for the past 90 days.
YES X NO
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BASS REAL ESTATE FUND II
INDEX
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PAGE
NUMBER
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Balance Sheet
as of September 30, 1996
(Unaudited) 3
Condensed Statement of Income Three months and nine months ended
September 30, 1996 and 1995
(Unaudited) 4
Statement of Partners' Equity 5
(Unaudited)
Condensed Statement of Cash Flows
Nine months ended September 30, 1996 and 1995
(Unaudited) 6
Notes to Condensed Financial
Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION 10
SIGNATURES 12
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BASS REAL ESTATE FUND II
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CONDENSED BALANCE SHEET
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September 30, December 31,
1996 1995
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ASSETS (Unaudited)
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RENTAL PROPERTIES, at cost:
Land $930,002 $930,002
Buildings 8,395,647 8,393,797
Furnishings and fixtures 625,487 610,949
Accumulated depreciation (2,851,230) (2,588,880)
------------------- -----------------
7,099,906 7,345,868
CASH AND CASH INVESTMENTS 321,633 223,210
RESTRICTED ESCROW DEPOSITS 28,055 39,183
DEFERRED COSTS AND OTHER ASSETS, net 120,549 59,214
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Total assets $7,570,143 $7,667,475
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LIABILITIES AND PARTNERS' EQUITY
-------------------------------------
MORTGAGE LOAN PAYABLE $6,013,484 $6,053,951
SECURITY DEPOSITS 22,194 33,610
ACCRUED LIABILITIES 63,969 15,720
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Total liabilities 6,099,647 6,103,281
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PARTNERS' EQUITY:
Limited partners' interest 1,455,659 1,548,420
General partners' interest 14,837 15,774
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Total partners' equity 1,470,496 1,564,194
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Total liabilities and partners' equity $7,570,143 $7,667,475
=================== =================
The accompanying notes are an integral part of
the financial statements.
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BASS REAL ESTATE FUND II
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CONDENSED STATEMENT OF INCOME
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(Unaudited)
Three months Nine Months Three months Nine Months
ended ended ended ended
September 30, September 30, September 30, September 30,
1996 1996 1995 1995
--------------- --------------- --------------- ---------------
REVENUE:
Rental income $370,051 $1,091,240 $343,753 $1,010,260
Interest income 3,538 7,949 907 1,953
Other operating income 15,256 42,534 12,751 32,828
--------------- --------------- --------------- ---------------
388,845 1,141,723 357,411 1,045,041
--------------- --------------- --------------- ---------------
OPERATING EXPENSES:
Fees and expenses to affiliates 43,647 130,806 42,494 131,863
Property taxes and insurance 19,731 59,193 18,906 56,717
Utilities 22,179 63,744 21,089 59,028
Repairs and maintenance 32,115 94,098 33,007 99,432
Advertising 5,145 16,318 5,726 18,725
Depreciation and amortization 89,370 269,460 91,410 248,496
Other 664 4,113 2,339 4,699
--------------- --------------- --------------- ---------------
212,851 637,732 214,971 618,960
INTEREST EXPENSE 152,450 458,375 153,776 462,256
OTHER NONOPERATING EXPENSES 8,573 39,314 8,113 45,712
--------------- --------------- --------------- ---------------
Total expenses 373,874 1,135,421 376,860 1,126,928
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $14,971 $6,302 ($19,449) ($81,887)
=============== =============== =============== ===============
NET INCOME (LOSS) ALLOCATED TO GENERAL PARTNERS $150 $63 ($194) ($819)
=============== =============== =============== ===============
NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS $14,821 $6,239 ($19,255) ($81,068)
=============== =============== =============== ===============
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT,
based on number of units outstanding (9,938) $1.49 $0.63 ($1.94) ($8.16)
=============== =============== =============== ===============
The accompanying notes are an integral
part of the financial statements.
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BASS REAL ESTATE FUND II
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STATEMENT OF PARTNERS' EQUITY
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(Unaudited)
Limited General
Partners Partners Total
---------------- ---------------- --------------
Balance, January 1, 1996 $1,548,420 $15,774 $1,564,194
Distribution to partners (99,000) (1,000) (100,000)
Net income 6,239 63 6,302
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Balance, September 30, 1996 $1,455,659 $14,837 $1,470,496
================ ================ ==============
Limited General
Partners Partners Total
---------------- ---------------- --------------
Balance, January 1, 1995 $1,750,042 $17,811 $1,767,853
Distribution to partners (99,000) (1,000) ($100,000)
Net loss (81,068) (819) (81,887)
---------------- ---------------- --------------
Balance, September 30, 1995 $1,569,974 $15,992 $1,585,966
================ ================ ==============
The accompanying notes are an integral part of
the financial statements.
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BASS REAL ESTATE FUND II
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CONDENSED STATEMENT OF CASH FLOWS
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(Unaudited)
Nine Months Nine Months
ended ended
September 30, September 30,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $6,302 ($81,887)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization 269,460 248,496
Change in assets and liabilities:
Increase in accrued and other liabilities 48,249 44,670
Increase in escrows and other assets, net (68,733) (49,219)
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Net cash provided by operating activities 255,278 162,060
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to rental properties (16,388) (20,615)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage loan payable to bank (40,467) (36,586)
Distribution to partners (100,000) (100,000)
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Net cash used in financing activities (140,467) (136,586)
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NET INCREASE (DECREASE) IN CASH AND
CASH INVESTMENTS 98,423 4,859
CASH AND CASH INVESTMENTS, beginning of year 223,210 160,079
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CASH AND CASH INVESTMENTS, September 30 $321,633 $164,938
=================== ==================
The accompanying notes are an integral part of
the financial statements.
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BASS REAL ESTATE FUND II
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION
Bass Real Estate Fund II (the Partnership) was organized to engage in the
acquisition, development, operation, holding and disposition of income-producing
residential and commercial properties. Limited partnership interests were sold
at $500 per unit (9,938 units) for a total of $4,969,000.
Under the terms of the partnership agreement, net income (loss) and cash
distributions from operations are to be allocated 99% to the limited partners
and 1% to the general partners. Upon the sale or liquidation of the partnership
property, the partnership agreement specifies certain allocations of net
proceeds and taxable gain or loss from the transaction.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership records are maintained on the accrual basis of accounting
in accordance with generally accepted accounting principles.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the Partnership's financial position as
of September 30, 1996, results of operations for the three months and nine
months ended September 30, 1996 and 1995, and cash flow for the nine months
ended September 30, 1996 and 1995.
3. RENTAL PROPERTIES
The rental property consists of a residential apartment complex named
Sabal Point I. The complex, which was constructed by an affiliate of the general
partners, is composed of 202 rental units. The units were available for lease
beginning June 1988. The 23.75 acres of land in Mecklenburg County, North
Carolina, where the apartment complex is located were purchased in December 1986
for $930,002 (including closing costs).
Affiliates of the general partners own two adjacent residential apartment
complexes, Sabal Point II and Sabal Point III. The three complexes merged their
management and leasing operations in 1990 and are sharing expenses related to
grounds, maintenance, leasing, management and other related costs. The managing
general partner believes that the allocation of expenses to each partnership has
been made on a reasonable basis.
The mortgage loan payable is a 10-year note due April 1, 1999, with
principal and interest at 10 1/8% payable monthly based upon a 30-year
amortization period. The Sabal Point I complex is pledged as collateral for this
mortgage.
4. GENERAL PARTNERS AND RELATED PARTY TRANSACTIONS
The general partners are Marion F. Bass (The Individual General Partner)
and Marion Bass Real Estate Group, Inc., (The Managing General Partner). The
rental property is managed by Marion Bass Properties, Inc., which is wholly
owned by Marion F. Bass.
Under the terms of the partnership agreement, the general partners or their
affiliates charged certain fees and expenses during the nine-month period ending
September 30, 1996 as follows:
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BASS REAL ESTATE FUND II
Management fee of 5% of gross revenues $56,504
Reimbursed maintenance salaries and benefits 36,595
Reimbursed property manager salaries and benefits 37,707
$130,806
The general partners and certain of their affiliates also perform, without
cost to the Partnership, day-to-day investment, management and administrative
functions of the Partnership.
The general partners are entitled to receive 1% of all items of partnership
income, gain, loss, deduction, credit and net cash flow from operations.
Therefore, during the second quarter of 1996 the General Partners received a
cash distribution of $1,000 that represented excess cash reserves and net cash
flow from operations for the period January 1, 1995 through December 31, 1995.
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BASS REAL ESTATE FUND II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At September 30, 1996, partners' equity was $1,470,496 or 19% of total
assets and cash and cash reserves amounted to $321,633. The Partnership had
accrued liabilities of $63,969 that consisted of 1996 property taxes of $50,067,
management fees due to an affiliate of $6,281, trade accounts payable of $4,050
and tenant prepaid rent of $3,571.
Net cash provided by operating activities totaled $255,278 for the nine
months ended September 30, 1996. This is compared to net cash provided by
operating activities of $162,060 for the corresponding period in 1995. The
Partnership had a 10 1/8% mortgage note in the amount of $6,013,484 outstanding
at September 30, 1996. Principal payments of $40,467 were made during the nine
month period ended September 30, 1996 on the amortizing mortgage note.
The 1996 operating plan and budget projects net cash flow from partnership
activities (exclusive of changes in assets and liabilities and distribution to
partners) of $260,000. The budget assumes that the Partnership will achieve
occupancy rates equivalent to 95%. For the nine months ended September 30, 1996,
actual average economic occupancy was 98% and actual net cash flow from
partnership activities (exclusive of changes in assets and liabilities and
distribution to partners) was $218,907. Rents have been increased 5% over rates
charged in 1995 to offset any normal increase in operating expenses. Capital
expenditures of $36,000 are budgeted and include selected carpet and vinyl
replacements. As of September 30, 1996, actual capital expenditures and
additions to rental property totaled $38,156. On the basis of these estimates
and year-to-date results, the Partnership believes that the cash flow from
operations will be sufficient to meet cash requirements, rebuild cash reserves
and provide distributions to partners. Funds totaling $100,000 provided by cash
reserves and 1995 operational net cash flow were distributed to partners in
April 1996. The next available distribution to partners is scheduled for the
first quarter of 1997 and the amount is dependent upon 1996 operating results.
Results of Operations
The following discussion relates to the Partnership's operation of Sabal
Point for the three months and nine months ended September 30, 1996 and 1995.
Results of operations for the three months ended September 30, 1996 reflect
an average economic occupancy of 98% compared to 95% for the corresponding
period in 1995. A third quarter comparison of 1996 and 1995 reflects higher
rental income of $26,298 during 1996 due to rents being increased 5% over rates
charged in 1995. Other operating income increased $2,505. Overall, total income
for the third quarter ended September 30, 1996 was $31,434 higher than the
corresponding period in 1995.
Operating expenses were $212,851 for the three months ended September 30,
1996, compared to $214,971 for the corresponding period in 1995 which reflects a
variance of $2,120. Fees and expenses to affiliates that consist of a management
fee of 5% of gross revenues and the reimbursement of complex employee salaries
and benefits were higher by $1,153. Property taxes and insurance were higher by
$825 due to rate increases. Utilities were higher by $1,090 due to
resident usage.
After interest expense of $152,450 and other nonoperating expenses
(partnership expenses and nonrecurring replacement costs) of $8,573, partnership
operations recognized a net income of $14,971 for the three months ended
September 30, 1996. This is compared to a net loss of $19,449 for the
corresponding period in 1995.
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BASS REAL ESTATE FUND II
Overall the Partnership recognized a net increase in total revenues of
$96,682 (due to rents being increased 5% over rates charged in 1995) and a net
increase in total operating expenses of $18,772 (due mainly to a 1995 adjustment
of $28,302 which decreased depreciation and amortization) for the nine months
ended September 30, 1996 compared to the corresponding period in 1995. After
interest expense of $458,375 and other operating expenses of $39,314
(partnership expenses and nonrecurring replacement costs) the Partnership had a
net income of $6,302 for the nine months ended September 30, 1996. This is
compared to a net loss of $81,887 for the corresponding period in 1995.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(a) Copy of Certificate of Limited Partnership dated as of
November 13, 1985, filed as Exhibit 3(a) to the Partnership's
Form 10-K Annual Report for the fiscal year ended December 31,
1987, filed with the Securities and Exchange Commission, which
is incorporated herein by reference.
3(b) Copy of Amended and Restated Limited Partnership Agreement
dated as of July 10, 1986, filed as Exhibit 3(b) to the
Partnership's Form 10-K Annual Report for the fiscal year
ended December 31, 1987, filed with the Securities and
Exchange Commission, which is incorporated herein by
reference.
3(c) Copy of Amended and Restated Certificate of Limited
Partnership, dated as of July 10, 1986, filed as Exhibit 3(c)
to the Partnership's Form 10-K Annual Report for the fiscal
year ended December 31, 1987, filed with the Securities and
Exchange Commission, which is incorporated herein by
reference.
3(d) Copy of Second Amended and Restated Certificate of Limited
Partnership, dated as of July 31, 1986, files as Exhibit 3(d)
to the Partnership's Form 10-K Annual Report for the fiscal
year ended December 31, 1987, filed with the Securities and
Exchange Commission, which is incorporated herein by
reference.
3(e) Copy of Third Amended and Restated Certificate of Limited
Partnership, dated as of August 29, 1986, filed as Exhibit
3(e) to the Partnership's Form 10-K Annual Report for the
fiscal year ended December 31, 1987, filed with the Securities
and Exchange Commission, which is incorporated herein by
reference.
10
BASS REAL ESTATE FUND II
3(f)Copy of Fourth Amended and Restated Certificate of Limited
Partnership, date as of September 30, 1986, filed as Exhibit
3(f) to the Partnership's Form 10-K Annual Report for the
fiscal year ended December 31, 1987, filed with the Securities
and Exchange Commission, which is incorporated herein by
reference.
3(g)Copy of Certificate of Domestic Limited Partnership, dated as
of October 31, 1986, filed as Exhibit 3(g) to the
Partnership's Form 10-K Annual Report for the fiscal year
ended December 31, 1987, filed with the Securities and
Exchange Commission, which is incorporated herein by
reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
the quarter covered by this report.
11
BASS REAL ESTATE FUND II
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Partnership has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BASS REAL ESTATE FUND II
By: Marion Bass Real Estate Group, Inc. as Managing General Partner
By: Marion F. Bass, President
Date: November 1, 1996
By: Robert J. Brietz, Executive Vice President
Date: November 1, 1996
12