UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR FISCAL YEAR ENDED DECEMBER 31, 1995
Commission File Number:
33-04345
Exact name of Registrant as specified in its charter:
Florida Income Fund II, Limited Partnership
State or other Jurisdiction of incorporation or organization:
Ohio
I.R.S. Employer Identification Number:
33-1168320
Address of Principal Executive Offices:
12800 University Drive, Ste 675
Fort Myers, FL 33907
Registrant's Telephone Number, including Area Code:
(941) 481-2011
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
The registrant 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
has been subject to such filing requirements for the past 90 days.
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
FORM 10-K - 1995
CONTENTS AND CROSS REFERENCE INDEX
PART ITEM FORM 10-K
NO. NO. DESCRIPTION PAGE NO.
- ---- ---- ----------- ---------
I 1 Business 3
2 Properties 4 - 8
3 Legal Proceedings 8
4 Submission of Matters to a Vote of
Security Holders 8
II 5 Market for Registrant's Partnership
Equity and Related Partner Matters 9
6 Selected Financial Data 9
7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 13
8 Financial Statements and Supplementary Data 13 - 29
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 30
III 10 Directors and Executive Officers of
the Registrant 30 - 32
11 Executive Compensation 33
12 Security Ownership of Certain Beneficial
Owners and Management 34
13 Certain Relationships and Related Party
Transactions 34
IV 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 35
Signatures 36
2
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS - Florida Income Fund II, Limited Partnership,
(the Partnership) is an Ohio Limited Partnership formed as of March 26, 1986,
for the purpose of investing in a diversified portfolio of income-producing
commercial and residential real estate properties primarily located in Southwest
Florida. The Partnership's primary objectives are to preserve and protect the
Partnership's original capital, provide distributable cash, a portion of which
may constitute nontaxable income, obtain capital appreciation through increases
in value of Partnership properties, build equity through reductions of mortgage
indebtedness and realize capital gains from the sale of Partnership properties.
There can be no assurance that these objectives will be achieved. The
achievement of these objectives depends on many factors, including principally
the ability of the Managing General Partner to select suitable properties at
favorable prices (completed) and the successful management of those properties.
The General Partners of the Partnership are Mariner Capital Management, Inc., a
Florida corporation (Managing General Partner or Mariner) and MCD Real Estate,
Inc., an Ohio corporation. For further information see Item 10. The primary
market is Southwest Florida. The intent was to invest in several properties in
order to achieve a measure of diversification. The Partnership's original intent
was to hold these properties as long-term investments. The Managing General
Partner has chosen to invest primarily in Southwest Florida because of its
experience in dealing in real estate in this area. Southwest Florida offers, in
management's opinion, a competitive but growing economic base in which to meet
its performance objectives.
The Partnership commenced a $15,000,000 offering of limited partnership interest
(the Units) at $1,000 per unit (15,000 total units) on June 13, 1986, pursuant
to a registration statement on Form S-11 under the Securities Act of 1933 (Reg.
No. 33-04345) (Registration Statement). McDonald and Company Securities, Inc.,
an affiliate of MCD Real Estate, Inc., Janney Montgomery Scott, Inc. and J. J.
B. Hilliard, W. L. Lyons, Inc., acted as the managing dealers of the offering.
The Prospectus filed pursuant to Rule 424(B) and 424(C) under the Securities Act
of 1933 (the Prospectus) was supplemented on August 7, 1986, November 20, 1986,
January 12, 1987 and March 23, 1987. The Prospectus and supplements are
incorporated herein by reference to the extent necessary or appropriate.
Pursuant to the terms of the offering, there was a right to offer for sale an
additional 5,000 units. The Partnership sold a total of $10,655,000 (10,655
units) to the public.
The Partnership itself has no executive officers as employees. The Managing
General Partner, which has responsibility for the management of the Partnership,
has assigned certain individuals to devote as much time to the operations of the
Partnership as deemed necessary. All these individuals serve the Partnership on
a part-time basis. The Managing General Partner is a General Partner in other
publicly and privately offered limited partnerships, some having the same or
similar investment objectives as the Partnership.
3
ITEM 2. PROPERTIES
The Partnership has purchased six properties. Broadway Medical Center and Laurel
Center, which are located in Fort Myers, Florida, were purchased on December 15,
1986. In 1987, the Partnership purchased two additional properties. Town Centre
Shopping Center, located in Marco Island, Florida was purchased on April 9,
1987, and Manatee West Shopping Center, located in Bradenton, Florida was
purchased on November 4, 1987. Heritage Square Shopping Center, located in Marco
Island, Florida was purchased on March 11, 1988, and Pinebrook Commons, located
in Bradenton, Florida was purchased on August 3, 1988. A brief description of
these properties and the terms of the purchases by the Partnership follows:
BROADWAY MEDICAL CENTER - Broadway Medical Center is a medical office
building located in Lee County, Florida consisting of approximately 15,300
square feet of net leasable area situated on 2.23 acres of land. The
building was constructed in 1975.
Broadway Medical Center is located at the Southwest corner of Broadway and
Carroll Road, just west of U.S. 41 and East of Fowler Avenue. This location
is between Lee Memorial Hospital and Southwest Regional Medical Center.
The Partnership acquired the Broadway Medical Center property on December
15, 1986. The Partnership has capitalized the following costs associated
with acquisition of Broadway Medical Center:
Contract Purchase Price $1,257,500
Acquisition Fee 62,875
Appraisal Fee 3,000
Survey Fee 1,479
----------
$1,324,854
==========
The terms of the purchase were $844,416 cash and a first mortgage of
$480,438. When purchased, the property was 100% occupied. At year end 1995
and 1994 the property was 100% occupied.
The first mortgage was paid off on September 6, 1990, with proceeds
obtained from a $6,000,000 consolidation loan, collateralized by Broadway
Medical, Town Center Mall and Heritage Square which bears an interest rate
of Prime +1%.
LAUREL CENTER - The Laurel Center is a 2,300 square foot medical center
on 1.95 acres of land that was acquired in 1986. The Partnership
capitalized the following costs associated with the acquisition:
Contract Purchase Price $1,657,500
Acquisition Fee 82,875
Closing Costs 4,885
----------
$1,745,260
==========
4
The property was deeded to the lender in lieu of foreclosure in 1994. A
non-recourse loan in the amount of $1,337,812 was forgiven by the lender
and no further liability exists on the part of the Partnership or its
General Partner. The Partnership recorded a loss of $87,150. See 8-K which
was filed in December 1994.
The above action was taken in response to a declining rental market in the
Fort Myers Central Avenue area. The subject neighborhood has been declining
and losing many of the long term medical office tenants to newer buildings
located in more desirable areas of Lee County. This has resulted in a high
supply of vacant space versus very low demand which has in turn led to
reduced rental rates. The General Partner was of the opinion that the
problem is long term and felt economically prudent to deed the property to
the lender to eliminate the negative cash flow being generated by the
property.
The General Partner believes that the conditions that affected Laurel
Center are isolated and will have no effect on other partnership
properties.
TOWN CENTER - Town Center is a retail shopping center consisting of four
buildings totalling approximately 101,000 square feet of net leasable area
situated on 10.12 acres of land. The age of the buildings range from 9 to
23 years. Town Center is located on Collier Boulevard, the main
thoroughfare, on Marco Island.
The Partnership acquired Town Center on April 9, 1987. The Partnership has
capitalized the following costs associated with the acquisition of Town
Center Shopping Center.
Contract Purchase Price $7,343,400
Acquisition Fee 220,300
Roof Inspection 602
Closing Costs 30,212
Less: Guaranteed Rent (190,000)
----------
$7,404,514
==========
The terms of the purchase were $3,364,302 cash and an interest only
mortgage of $4,200,000 at 9% for seven months, provided by the seller. The
purchase agreement contained a $190,000 rent guarantee to cover vacant
space. The temporary seller financing was paid off in September 1987, when
permanent financing was secured with a financial institution. This loan was
paid off on September 6, 1990, (see discussion of consolidation loan under
Broadway Medical).
When purchased, the center was 75% occupied. As of December 31, 1995 and
1994, the property was 82% and 90% occupied. The 82% figure for 1995
includes a 20,000 sq. ft. grocery store which has vacated, however, the
lessee is obligated under the lease to pay rent through 2005. Negotiations
are under way to replace that tenant with a national grocer.
5
The partnership has entered into a contract to sell Town Center to an
unrelated third party for a price in excess of the carrying value of the
property. A $100,000 non refundable deposit has been received by the
partnership. The sale is scheduled to occur in the second quarter of 1996,
however, there can be no assurance that the transaction will be completed.
MANATEE WEST SHOPPING CENTER - Manatee West is a shopping center consisting
of two separate buildings consisting of approximately 46,600 square feet
located in Bradenton, Florida. The property is located on 6.95 acres at
Manatee Avenue West (SR-64) and 75th Street West. Manatee Avenue West is a
major east-west artery through Manatee County with connecting access to
Interstate-75.
The Partnership acquired Manatee West on November 4, 1987. The Partnership
has capitalized the following costs associated with the acquisition of
Manatee West Shopping Center.
Purchase Price $3,500,000
Acquisition Fee 175,000
Closing Costs - Escrow Assumed 19,611
Less: Guaranteed Rent (200,000)
----------
$3,494,611
==========
The terms of the purchase were cash of $1,689,393 and the assumption of the
existing mortgage of $1,985,607. The purchase agreement contained a
$200,000 rent guarantee to cover the vacant space. The rent guarantee has
been received.
At the time of acquisition, the Partnership assumed a first mortgage held
by a life insurance company with a fixed rate of 11 3/8%, a 30 year
amortization and a maturity date of February 1, 1993, in the amount of
$1,916,215. The loan has been renegotiated at a rate of 9% with payments of
$19,615, plus escrow of taxes and hazard insurance over a term of 177
months. The loan was extended for three years, until February 1, 1996.
Discussions are underway with the lender to allow a partial payment of the
loan with an extension of the maturity date.
The property was 71% and 78% occupied at December 31, 1995 and 1994.
HERITAGE SQUARE SHOPPING CENTER - Heritage Square is an office/retail plaza
consisting of 26,600 square feet located directly across the street from
Town Center on Marco Island, Florida.
6
The Partnership acquired Heritage Square on March 11, 1988. The Partnership
has capitalized the following costs associated with the acquisition of
Heritage Square.
Purchase Price $1,600,000
Acquisition Fee 80,000
Appraisal 5,000
Title Insurance 2,955
Attorney Fees 2,750
Survey 2,350
Other Capitalized Costs 1,742
Less: Guaranteed Rent (30,000)
----------
$1,664,797
==========
The terms of the purchase were all cash. When purchased the property was
65% occupied. The purchase agreement contained a $30,000 rent guarantee to
cover vacant space. The rent guarantee has been received. As of December
31, 1995 and 1994, the property was 93% and 92% occupied.
The Partnership encumbered this property with a loan from a financial
institution of up to $500,000 that was paid off with refinance proceeds
(see Broadway Medical).
The Partnership sold Heritage Square to Heritage Square Real Estate, L.L.C.
on January 16, 1996 at a price of $1,950,000. An 8-K was filed with the
U.S. Securities and Exchange Commission describing this transaction in
detail. The filing date of this 8-K was 1/30/96. Closing costs totaled
$97,690 which included a selling commission of $83,500 paid to an
independent third party.
From the closing proceeds, the partnership paid in full a loan from
NationsBank with an approximate principal balance of $594,000 plus accrued
interest. That loan was secured by a second mortgage on three properties
known as Heritage Square, Broadway Medical Center and Town Center. The
partnership also intends to use additional closing proceeds in the
approximate amount of $1,200,000 to make a prepayment against additional
partnership debt which matures later in 1996 and is secured by the Manatee
West Shopping Center.
PINEBROOK COMMONS - Pinebrook Commons is a 33,334 square foot retail
shopping center located on approximately 4.95 acres of land. The center is
five years old and is located in Bradenton, Florida.
The Partnership acquired Pinebrook Commons on August 3, 1988. The
Partnership has capitalized the following costs associated with the
acquisition of Pinebrook Commons:
Contract Purchase Price $3,190,000
Acquisition Fee 84,350
Audit 5,000
Survey, Inspection Appraisal 6,630
----------
$3,285,980
==========
7
The terms of the purchase were $735,480 cash and a first mortgage of
$2,550,000 obtained from a life insurance company. The current interest
rate is 8.75% with monthly payments of $20,060 and a balloon payment at
maturity on August 1, 1998.
The loan can not be prepaid before August 1, 1996, and after that the
prepayment penalty is 2% in year 4 and 1% in year 5.
Pinebrook Commons is adjoined with Frank's Nursery, a national chain.
Frank's Nursery was not included in the purchase, however, it acts as an
excellent anchor and it pays 32.4% of certain common area expenses
associated with operating the property.
When purchased, the property was 97% occupied. As of December 31, 1995 and
1994, the property was 97% and 94% occupied.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not a party to nor is any of the Partnership's property the
subject of any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
PART II
ITEM 5. MARKET FOR REGISTRANTS'S PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS
The units are not traded on any public market and it is not contemplated for
these units to be traded on any public market in the future. As of December 31,
1995, there were 622 Limited Partners.
The Partnership commenced paying quarterly cash distributions in January 1987.
During 1995, 1994 and 1993, the total cash distributions were $224,316, $504,711
and $829,939, respectively. Distributions were not made in 1986, except for
escrow interest, because the Partnership was still raising money and had not
invested in commercial real estate until December 1986. The Partnership intends
to distribute operating cash produced by the Partnership on a quarterly basis in
1996 and the upcoming years.
ITEM 6. SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991
--------- ----------- ----------- ----------- -----------
Operating revenues (including
interest of $4,103, $2,168, $8,199,
$11,780, $15,570 for 1995, 1994,
1993, 1992, and 1991) 2,793,966 $ 3,219,726 $ 3,552,989 $ 3,325,846 $ 3,170,602
Net income 15,672 263,783 433,495 330,161 195,628
Net income per weighted average
Limited Partnership unit 1.39 23.52 38.65 29.44 17.44
Total assets 16,428,940 16,923,891 18,709,023 19,454,467 19,403,121
Mortgages and notes payable 10,596,357 10,816,526 12,375,950 12,868,246 12,202,648
Distributions to Limited Partners 213,100 479,475 788,442 889,714 788,245
Distributions per Limited
Partnership unit 20.00 45.00 74.00 83.50 73.98
Partners' equity 5,447,049 5,685,693 5,926,621 6,323,065 6,929,444
Book value per Limited
Partnership unit 530.34 548.94 570.43 605.77 659.84
Also, refer to Item #8 and the audited Financial Statements referred to herein.
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY - The principal sources of the Partnership's liquidity are income on
commercial real estate purchased for the Partnership's portfolio (as described
in Results of Operations), and the cash reserves held in interest-bearing
accounts.
The Managing General Partner has prepared sales packages on all of the
properties and has offered all of the properties for sale. The properties are
offered for sale above their current carrying value. A sale of all or some of
the properties would increase cash to the Partnership, however, future cash
flow from operations would decline due to any property sales.
On January 16, 1996, the partnership sold Heritage Square Shopping Center for
$1,950,000. The sale produced net proceeds of $1,852,000. From that amount,
approximately $594,000 was used to pay off a loan which was collateralized by
a second mortgage on Town Center, Heritage Square and Broadway Medical. The
remaining funds will be used to pay down additional debt.
The partnership has a loan from a life insurance company in the approximate
amount of $1,700,000 which is due on April 1, 1996. It is collateralized by a
first mortgage on Manatee West. The general partner is negotiating with the
lender to permit a partial payment of approximately $1,200,000 to reduce the
loan balance to $500,000 with an extension of the maturity date until June 1,
1996. The general partner has received verbal approval of the loan modification
from the lender's servicing agent and expects to formally extend the loan.
Management believes that proceeds from the sale of Town Center will be available
to fully pay off the remaining balance due June 1, 1996.
The partnership has a loan in the approximate amount of $5,787,000 which is due
on September 6, 1996. It is collateralized by a mortgage on Town Center and
Broadway Medical. The plan is to pay this loan from proceeds to be received from
the sale of Town Center which is currently under contract as discussed in item 2
hereof. In the event that this sale does not close, management is confident that
it can find alternative financing due to the low ratio of the loan balance to
the properties' value.
If the sale of the Town Center does not occur, management believes that
distribution levels will be similar to 1995. However the sale of the property
would result in reductions in partnership debt and an increase in capital
distributions to the limited partners. It would also result in a reduction in
partnership assets and revenues which would have a negative effect on future
distributions.
CAPITAL RESOURCES - As of December 31, 1995, the Partnership had $147,521 in
cash and interest-bearing deposits.
Land and buildings (net of accumulated depreciation of $4,048,938) were carried
at $15,984,294.
The Partnership paid $143,400 for capital improvements in 1995. Factors that
could effect the level of capital expenditures are unexpected vacancies,
unanticipated capital improvements and general property conditions.
10
RESULTS OF OPERATIONS
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994
During the years ended December 31, 1995 and 1994 the Partnership's principal
sources of revenue were rental income of $2,269,729 and $2,609,123, and expense
reimbursements from tenants of $520,134 and $608,435. Total revenue decreased by
$339,392 due to the following conditions:
Broadway Medical decreased $9,734, Laurel Medical Center decreased $76,689,
Pinebrook Commons increased $39,538, Town Center decreased $47,827, Heritage
Square decreased $1,029 and Manatee West decreased $112,355. Broadway Medical's
rent decrease was due to a vacancy occurring in the center. Laurel Medical
Center rent decreased because 1994 included four months of operations whereas
1995 had no activity. Pinebrook Commons rent increased due to an increase in
occupancy. Town Center's revenue decreased due to vacancies during 1995.
Heritage Square's revenue decreased slightly due to a tenant vacating the center
for part of 1995. The space has been re-leased. Manatee West decreased in 1995
because of higher vacancy.
Income recognized from deferred rent changed from an increase in income in 1994
of $68,592 to a reduction in income of $62,706. The decrease in income
recognized from deferred rent for 1995 was attributed to charges in the deferred
rent balance of the following properties: Broadway Medical decreased $17,057,
Town Center decreased $2,261, Heritage Square decreased $29,939, Manatee West
decreased $14,134 and Pinebrook Commons increased $685.
Broadway Medical decreased due to the long term leases coming to maturity, Town
Center decreased due to vacancies occuring in the center, Heritage Square
decreased due to a vacancy occurring in the center, Manatee West decreased due
to vacancies in the center and Pinebrook increased due to a new lease being
signed.
Tenant reimbursements have decreased $88,301 from 1995 to 1994. Town Center was
down $58,698 and Manatee West decreased $35,900.
Interest income increased 1,935.
Property operating expenses have increased $62,568 due to Broadway decreased
$6,021, Laurel Center decreased $1,557, Heritage Square decreased $1,751 and
Pinebrook Commons increased $15,626.
Depreciation expense decreased $56,320 due to Laurel Center and also due to
fixed assets being fully depreciated in 1995.
Interest expense decreased $27,373 due to principal pay down of the
Partnership's debt by $220,169. The Partnership's outstanding debt decreased
from $10,816,526 at December 31, 1994, to $10,596,357 at December 31, 1995. This
reduction was due to normal principal amortization during the year.
Property taxes decreased $39,250 due to Laurel Center not being in the portfolio
and closely monitoring real estate tax assessments on other properties.
Bad Debt expense declined from 1994. Management continues to closely monitor all
tenants in order to reduce this further.
11
The abandoned property expense of $87,150 from 1994 is a one time loss
associated with Laurel Medical Center.
Management is uncertain as to the 1996 operating results because of its intent
to dispose of its properties.
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1994 AND 1993
During the years ended December 31, 1994 and 1993, the Partnership's principal
sources of revenue were rental income of $2,609,123 and $2,897,522, interest
income of $2,168 and $8,199 and expense reimbursements from tenants of $608,435
and $647,268. Total revenue decreased by $288,399 due to the following
conditions:
Broadway Medical increased $8,496, Laurel Medical Center decreased $165,422,
Pinebrook Commons decreased $65,332, Town Center decreased $45,823, Heritage
Square decreased $33,361 and Manatee West increased $13,043. Broadway Medical's
rent increase was due to stated rent increases in the leases. Laurel Medical
Center rent decreased because 1994 only included four months of operations
whereas 1993 included twelve months. Pinebrook Commons rent decreased due to the
remaining rent guarantee being recognized as income at December 31, 1993. That
amount was $50,624. The remaining decrease at Pinebrook was due to vacancy which
occurred in 1994. Town Center's revenue decreased due to vacancies during 1994.
Heritage Square's revenue decreased due to a tenant vacating the center for part
of 1994. The space has been re-leased. Manatee West increased in 1994 because of
higher occupancy.
Income recognized from deferred rent increased $68,592 in 1994. The increase in
income recognized from deferred rent for 1994 was attributed to changes in the
deferred rent balance of the following properties: Broadway Medical decreased
$12,007, Laurel Medical Center decreased $11,063, Town Center increased $56,881,
Heritage Square increased $34,022, Manatee West decreased $2,206, and Pinebrook
Commons increased $2,963.
Broadway Medical decreased due to the long term leases coming to maturity,
Laurel Medical Center decreased due to the property being deeded back to the
lender in 1994, Town Center increased due to new leases being signed and long
term leasess being in the early portion of their lease, Heritage Square
increased due to a new lease being signed in 1994 on previously vacant space,
Manatee West decreased due to leases nearing expiration and Pinebrook Commons
increased due to new leases in 1994 and leases being in the early part of their
lease life.
Reimbursement has decreased $38,833 from 1994 to 1993. The decrease is primarily
at two properties. Town Center was down $30,251 and Heritage Square decreased
$7,824. These properties were down due to vacancies that did not occur in 1993.
Interest income decreased due to lower interest rates and lower funds invested.
Property operating expenses have decreased $38,571 due to operating Laurel
Center for four months in 1994 as compared to twelve months in 1993.
Depreciation expense decreased $12,894 due to Laurel Center and also due to
fixed assets being fully depreciated in 1994.
Interest expense decreased $144,793 due to Laurel Center only having interest
charged for 4 months in 1994. The savings as compared to 1993 was $98,992. The
remaining difference was due to pay down of the principal on the Partnership's
outstanding debt. The Partnership's outstanding debt decreased from $12,375,950
at December 31, 1993, to $10,816,526 at December 31, 1994. This reduction was
due to the Laurel Center loan reduction of $1,342,727 and $216,697 of principal
reduction during the year.
Property taxes decreased $6,976 due to Laurel Center and closely monitoring real
estate tax assessments on other properties.
12
Bad Debt expense declined from 1993. Management continues to closely monitor all
tenants in order to reduce this further.
The abandoned property expense of $87,150 is a one time loss associated with
Laurel Medical Center.
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1993 AND 1992
During the years ended December 31, 1993 and 1992 the Partnership's principal
sources of revenue were rental income of $2,897,522 and $2,713,879, interest
income of $8,199 and $11,780 and expense reimbursements from tenants of $647,268
and $600,187. Increases in revenue for 1993 were partially offset by increases
in property operating expenses, depreciation, property taxes and bad debt
expense. Interest expense decreased due to the $300,000 line of credit being
paid off and also due to a decrease in notes payable as a result of monthly
principal payments.
The Partnership generated net income of $336,372 and $330,161 for 1993 and 1992,
respectively, that was allocated 95% to the Limited Partners and 5% to the
General Partners, as provided in the Partnership Agreement.
INFLATION - At the present time, inflation and changing prices have not had a
significant impact on operations, however the impact on future operations is not
currently determinable.
CHANGING RETAIL CONDITIONS - The Florida retail market continues to be highly
competitive with the trend toward super stores among the giant retailers.
Management expects this trend to continue into the next decade.
These super stores offer most of the products that are offered by the small
retailers. They are able to do so at highly competitive prices which has driven
many of the smaller retailers out of business or forced them to seek rent relief
in order to stay in business. This competition has also begun to hurt the larger
retailers, the most notable being K-Mart which is experiencing significant
financial difficulties.
This trend has had a negative effect on both occupancies and rental rates at
properties such as those held by the Fund. Management has had to compete with
other properties for dwindling supply of small retailers. Management expects
this trend to continue but believes that this negative effect has bottomed out
since few competing properties have been built over the past few years while the
economy has strengthened.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of Independent Accountants dated February 19, 1996, the Balance
Sheets of the Partnership as of December 31, 1995 and 1994 and the Statements of
Income, Statements of Partner's Capital and Statements of Cash Flows of the
Partnership for each of the three years in the period ended December 31, 1995,
as well as the Notes to Financial Statements and Schedule III and the Report of
Independent Accountants there on, dated February 19, 1996, are set forth herein:
13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Florida Income Fund II, Limited Partnership
We have audited the accompanying balance sheets of Florida Income Fund II,
Limited Partnership, as of December 31, 1995 and 1994, and the related
statements of income, partners' capital, and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements 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 Florida Income Fund II,
Limited Partnership, as of December 31, 1995, and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Myers, Florida
February 19, 1996
14
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS 1995 1994
------ ---- ----
CURRENT ASSETS
Cash and cash equivalents, including restricted cash of $3,232
and $43,285 at December 31, 1995 and 1994, respectively $ 147,521 $ 93,321
Accounts receivable, trade, net of allowance for doubtful accounts
of $38,181 and $23,535 for 1995 and 1994, respectively 65,238 87,049
Notes receivable 52,854 88,719
Prepaid expenses and other 132,608 195,815
------------------- -------------------
Total current assets 398,221 464,904
------------------- -------------------
RENTAL PROPERTIES, net 15,984,294 16,375,160
------------------- -------------------
INTANGIBLE ASSETS
Deferred loan costs, net 46,425 83,827
------------------- -------------------
Total assets $16,428,940 $16,923,891
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Current maturities of notes and mortgages payable $ 8,116,010 $ 6,606,330
Accounts payable, trade 86,330 104,702
Accrued expenses 86,724 120,374
Customer and security deposits 182,480 196,596
------------------- -------------------
Total current liabilities 8,471,544 7,028,002
------------------- -------------------
NOTES AND MORTGAGES PAYABLE, less current
maturities 2,480,347 4,210,196
------------------- -------------------
PARTNERS' CAPITAL
General partners deficiency (173,745) (163,312)
Limited partners, 15,000 limited partnership units authorized;
10,655 issued and outstanding in 1995 and 1994 5,650,794 5,849,005
------------------- -------------------
Total partners' capital 5,477,049 5,685,693
------------------- -------------------
Total liabilities and partners' capital $ 16,428,940 $ 16,923,891
=================== ===================
The accompanying notes are an integral part of these financial statements.
15
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
STATEMENTS OF INCOME
years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Revenues
Rental income $ 2,269,729 $ 2,609,123 $ 2,897,522
Tenant reimbursements 520,134 608,435 647,268
Interest income 4,103 2,168 8,199
---------------- ---------------- -----------------
2,793,966 3,219,726 3,552,989
---------------- ---------------- -----------------
Expenses
Property operating expenses 909,202 846,634 885,205
Interest expense 1,089,115 1,116,488 1,261,281
Depreciation 534,266 590,586 603,480
Property taxes 214,362 253,612 260,588
Bad debt expense 31,349 61,473 108,940
Abandoned property expense 0 87,150 0
---------------- ---------------- -----------------
2,778,294 2,955,943 3,119,494
---------------- ---------------- -----------------
Net income $ 15,672 $ 263,783 $ 433,495
================ ================ =================
Net income allocated to general partners $ 783 $ 13,189 $ 21,675
================ ================ =================
Net income allocated to limited partners $ 14,889 $ 250,594 $ 411,820
================ ================ =================
Net income per limited partner unit $ 1.39 $ 23.52 $ 38.65
================ ================ =================
Distributions per limited parnter unit $ 20.00 $ 45.00 $ 74.00
================ ================ =================
Weighted average limited partner units outstanding 10,655 10,655 10,655
================ ================ =================
RM80
The accompanying notes are an integral part of these financial statements.
16
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
years ended December 31, 1995, 1994, and 1993
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
---------------- ---------------- ----------------
Balances, January 1, 1993 $ (131,443) $ 6,454,508 $ 6,323,065
Cash distributions (41,497) (788,442) (829,939)
Net income 21,675 411,820 433,495
---------------- ---------------- ----------------
Balances, December 31, 1993 (151,265) 6,077,886 5,926,621
Cash distributions (25,236) (479,475) (504,711)
Net income 13,189 250,594 263,783
---------------- ---------------- ----------------
Balances, December 31, 1994 (163,312) 5,849,005 5,685,693
Cash distributions (11,216) (213,100) (224,316)
Net income 783 14,889 15,672
---------------- ---------------- ----------------
Balances, December 31, 1995 $ (173,745) $ 5,650,794 $ 5,477,049
================ ================ ================
The accompanying notes are an integral part of these financial statements.
17
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
years ended December 31, 1995, 1994 and 1993
RM132
1995 1994 1993
---------------- ---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,672 $ 263,783 $ 433,495
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 534,266 590,586 603,480
Amortization of loan costs 74,372 78,090 63,867
Abandoned property expense 0 87,150 0
(Increase) decrease in:
Accounts receivable, net 21,811 (33,657) 36,503
Notes receivable 35,865 (17,494) (42,726)
Prepaid expenses and other 63,207 (82,484) 31,399
Increase (decrease) in:
Accounts payable and accrued expenses (52,022) 19,344 137,521
Customer and security deposits (14,116) (4,124) 5,775
---------------- ---------------- ----------------
Net cash provided by operating activities 679,055 901,194 1,269,314
---------------- ---------------- ----------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Improvements to rental properties (143,400) (174,037) (323,950)
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes and mortgages payable (220,169) (216,697) (492,296)
Loan origination fees paid (36,970) (4,004) (116,041)
Partner distributions paid (224,316) (504,711) (829,939)
---------------- ---------------- ----------------
Net cash used in financing activities (481,455) (725,412) (1,438,276)
---------------- ---------------- ----------------
Net increase (decrease) in cash and cash equivalents 54,200 1,745 (492,912)
Cash and cash equivalents at beginning of year 93,321 91,576 584,488
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 147,521 $ 93,321 $ 91,576
================ ================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for interest on borrowings $ 1,089,310 $ 1,116,770 $ 1,197,414
================ ================ ================
NONCASH INVESTING AND FINANCING ACTIVITIES:
Building and Improvements net of accumulated depreciation and land in the amount of $1,428,878
were exchanged for forgiveness of a mortage payable in the amount of $1,342,727 during 1994.
The accompanying notes are an integral part of these financial statements.
18
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Florida Income Fund II, Limited Partnership (the Partnership) was
formed on March 26, 1986, by the filing of a Certificate and
Agreement of Limited Partnership (Partnership Agreement) under the
laws of the State of Ohio. The general partners, MCD Real Estate,
Inc. (MCD) and Mariner Capital Management, Inc. (MCM), also the
managing general partner, contributed $20,000 and the initial
limited partner contributed $5,000 in the initial capitalization of
the Partnership. The Partnership was formed for the purpose of
investing in a diversified portfolio of income-producing commercial
and residential real estate properties located in Florida.
The Partnership owned Heritage Square, Manatee West, Pinebrook
Commons, Town Center (four retail shopping centers), Laurel Center
and Broadway Medical Center (two medical complexes). During 1994,
the Partnership deeded the Laurel Medical Center assets and assigned
all rents to Ohio National Life Insurance Company in lieu of
foreclosure and full satisfaction of the loan outstanding on the
property in the amount of $1,342,727. In September 1995, the
Partnership entered into a contract to sell Towne Center and in
January 1996 sold Heritage Square (See Notes 2 and 7).
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies of the Partnership
follows:
RENTAL INCOME: The Partnership leases space in its retail centers.
These leases range from one to 15 years and include provisions for
minimum rent increases at stated amounts or the Consumer Price
Index. Rental income is recognized by amortizing the total contract
minimum rent on a straight-line basis over the life of the lease.
The difference between rental income recognized and actual rental
receipts is accumulated as deferred rent incentives and included as
prepaid expenses and other in the accompanying balance sheets.
ALLOCATION OF NET INCOME: In accordance with the Partnership
Agreement, net income (loss), prior to recoupment (as defined in the
prospectus) of the partners' original capital investment, is
allocated five percent (5%) to the general partners and ninety-five
percent (95%) to the limited partners as a class. Subsequent to
recoupment, income (loss) is allocated twenty percent (20%) to the
general partners and eighty percent (80%) to the limited partners as
a class.
19
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RENTAL PROPERTIES: In March 1995, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (SFAS 121). The Statement
requires that long-lived assets and certain identifiable intangibles
to be held and used be reviewed for impairment whenever events or
changes in circumstances indicate that their carrying amount may not
be recoverable. In assessing recoverability, estimates of future
cash flows expected to result from the use of the asset and its
eventual disposition should be used. If the sum of the expected
future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the asset, an impairment loss
should be recognized based on the value of the asset. SFAS 121 is
effective for financial statements for fiscal years beginning after
December 15, 1995 with earlier application encouraged. Management
has reviewed its property holdings and believes no impairment exists
at December 31, 1995.
Depreciation is computed principally under the straight-line method
over the estimated useful lives of the assets. Repairs and
maintenance are included in operating expenses and improvements are
capitalized.
Upon the sale or retirement of depreciable assets, the cost and
related accumulated depreciation are removed from the accounts and
the difference between the carrying value and any proceeds realized
on sale is included in the determination of net income.
TENANT REIMBURSEMENTS: Common area maintenance, property tax and
utilities expenses for the rental properties are reimbursed to the
fund through tenant assessments. These costs are included in
property operating expenses and property tax expense.
DEFERRED LOAN COSTS: Loan costs incurred from financing and
refinancing the various property acquisitions have been capitalized
at cost and are being amortized over the lives of the related loans.
Amortization of loan costs is included with interest expense in the
income statements.
INCOME TAXES: The accompanying financial statements do not show a
provision or liability for Federal or State income taxes because the
partners are taxed individually on their share of Partnership
earnings.
PER UNIT INCOME: Per unit income is based on the weighted average
number of units outstanding for the years ended December 31, 1995,
1994 and 1993.
CASH EQUIVALENTS: For purposes of the statement of cash flows, the
Partnership considers all highly liquid investments with a maturity
of three months or less to be cash equivalents.
20
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FAIR VALUE OF FINANCIAL INSTRUMENTS: Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments," requires that the Partnership disclose
estimated fair values of financial instruments. The recorded value
for cash and cash equivalents approximates fair value because of the
short maturity of these instruments. The fair value of the
Partnership's short- and long-term notes and mortgages payable at
December 31, 1995, based upon market rates, approximates the amounts
disclosed in Footnote 4.
MANAGEMENT'S USE OF ESTIMATES: The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
2. RENTAL PROPERTIES:
Rental properties consisted of the following at December 31:
1995 1994
---------------- ----------------
Land $ 7,185,362 $ 7,185,362
Buildings and improvements 12,847,870 12,704,472
---------------- ----------------
20,033,232 19,889,834
Accumulated depreciation (4,048,938) (3,514,674)
---------------- ----------------
$ 15,984,294 $ 16,375,160
================ ================
RM80
Management listed all of its properties for sale and, as disclosed in
Note 7, sold Heritage Square on January 16, 1996. In addition,
management has entered into a contract to sell Town Center for a price
in excess of the property's carrying value. A $100,000 non-refundable
deposit has been received. The carrying values of the Heritage Square
and Town Center were $1,521,790 and $7,333,515, respectively, at
December 31, 1995.
Depreciation expense was $534,266, $590,586 and $603,480 for the
periods ended December 31, 1995, 1994 and 1993, respectively.
21
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. RENTAL PROPERTIES, CONTINUED
Based on the Partnership's noncancelable leases with terms in excess of
one year in existence at December 31, 1995, future minimum annual
rentals from these leases over the next five years, and in the
aggregate, will be approximately as follows:
1996 $ 2,031,895
1997 1,744,086
1998 1,159,254
1999 730,435
2000 579,531
Thereafter 1,073,241
----------------
$ 7,318,442
================
3. INTANGIBLE ASSETS:
Intangible assets at December 31 are as follows:
1995 1994
---------------- ----------------
Deferred loan costs $ 98,132 $ 256,544
Accumulated amortization (51,707) (172,717)
---------------- ----------------
$ 46,425 $ 83,827
================ ================
Additions to deferred loan costs relate to modifications of note terms
and other refinancing transactions during the years ended December 31,
1995 and 1994. Certain loan costs became fully amortized during the
years ended December 31, 1995 and 1994 and, therefore, were written
off. Amortization expense was $74,372 and $58,949 for the periods
ending December 31, 1995 and 1994, respectively.
22
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. NOTES AND MORTGAGES PAYABLE:
Notes and mortgages payable consisted of the following at December 31:
1995 1994
---------------- ----------------
Notes and mortgages payable to banks:
Mortgage payable with monthly payments of $4,561 plus
interest at prime plus 1%, principal balloon payment of
approximately $5,750,000 due September 1996, prime
rate at December 31, 1995 was 8.5% $ 5,786,979 $ 5,850,201
Mortgage payable with monthly payments of $4,978 plus
interest at prime plus 1%, principal balloon payment of
approximately $560,000 due september 1996, prime
rate at December 31, 1995 was 8.5% 599,613 657,657
Mortgages payable to life insurance companies:
Monthly payments of $19,615, including interest at 9%, principal
balloon payment of approximately $1,694,000 due April
1996 1,706,954 1,785,118
Monthly payments of $20,061 including interest at 8.75%,
principal balloon payment of approximately $2,442,320
due August 1998 2,502,811 2,523,550
---------------- ----------------
10,596,357 10,816,526
Less current maturities (8,116,010) (6,606,330)
---------------- ----------------
$ 2,480,347 $ 4,210,196
================ ================
Notes and mortgages payable are scheduled to mature approximately as
follows:
1997 $ 24,510
1998 2,455,837
----------------
$ 2,480,347
================
All rental properties are pledged as collateral for notes and mortgages
payable, as well as rents and receivables related to Pinebrook Commons.
See Note 6 regarding additional collateral pledged for the Pinebrook
Commons mortgage.
During 1994, the Partnership deeded Laurel Medical Center's assets,
with an original cost of $1,869,063 and a net book value of $1,429,878
on the date of the transaction, together with assigned rents, to Ohio
National Life Insurance Company in full satisfaction of the loan
outstanding on the property in the amount of $1,337,812. The transfer
resulted in net abandoned property expense of $87,150, which is
recorded separately with the statement of income for 1994.
23
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. RELATED PARTY TRANSACTIONS:
The Partnership participated in the following related party
transactions:
The general partners and their affiliates are entitled to receive
compensation for leasing and managing the properties in an amount
not to exceed 6% of gross revenues produced by commercial
Partnership properties. For the years ending December 31, 1995, 1994
and 1993, the general partners and their affiliates received fees of
$175,411, $180,427 and $207,619, respectively.
The general partners and their affiliates are also entitled to
reimbursement of costs (including amounts of any salaries paid to
employees and officers of a general partner or its affiliates)
directly attributable to the operation of the Partnership which
could have been performed by independent parties. Expenses amounting
to $259,916, $295,941 and $275,877 were incurred during the periods
ending December 31, 1995, 1994 and 1993, respectively, of which
$13,375, $28,752 and $36,921 were included in accounts payable for
the years ending December 31, 1995, 1994, and 1993, respectively.
6. RESTRICTED CASH:
Pursuant to an agreement between the Partnership and one of its
insurance company lenders, the Partnership deposited approximately
$114,500 into escrow resulting from the settlement of a major tenant's
early lease termination in 1993.
The escrow account, in compliance with the terms of the agreement, was
managed by the lender's servicing agent. The escrow balance is applied
to tenant improvements, leasing commissions and debt service related to
the vacated space, as governed by the agreement. During 1995 and 1994,
the lender released approximately $40,100 and $10,500, respectively, to
the Partnership, which is included in Partnership rental income. The
restricted balance related to the escrowed lease settlement was $0 and
$40,100 at December 31, 1995 and 1994, respectively.
Certain tenants have required security deposits be maintained in a
restricted account not available to the Partnership for operating
activities. Restricted security deposit balances were $3,232 and $3,185
for December 31, 1995 and 1994, respectively.
7. SUBSEQUENT EVENT:
The Partnership sold Heritage Square on January 16, 1996 at a price of
$1,950,000. The carrying value of the property was $1,521,790 at
December 31, 1995. Selling expenses totaled $97,690, resulting in a
gain of approximately $330,000. Closing proceeds of approximately
$594,000 were used to pay the remaining principal on the mortgage.
24
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the financial statements of Florida Income Fund II, Limited
Partnership, is included on page 14 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 35 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Fort Myers, Florida
February 19, 1996
25
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER, 31, 1995
COL. A COL. B COL. C COL. D COL. E
COST CAPITALIZED GROSS AMT AT WHICH
INITIAL COST SUBSEQUENT TO CARRIED AT CLOSE
TO PARTNERSHIP ACQUISITION OF PERIOD
-------------- ---------------- ------------------
BLDGS. & CARRYING BLDGS &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS LAND IMPROVEMENTS TOTAL
- ----------- ------------ ---- ------------ ------------ -------- ---- ------------ -----
Broadway Medical (1)
Center
Ft. Myers, FL $ 554,995 $ 450,450 $ 874,404 $ 76,657 $-0- $ 450,450 $ 951,061 $ 1,401,511
Town Centre (1)
Retail Shop. Ctr.
Marco Is., FL $ 5,260,636 $3,157,662 $4,246,852 $1,865,675 $-0- $3,157,662 $ 6,112,527 $ 9,270,189
Heritage Square (1)
Office/Retail
Marco Isl., FL $ 570,961 $ 736,000 $ 928,797 $ 296,332 $-0- $ 736,000 $ 1,225,129 $ 1,961,129
Pinebrook Commons
Retail Shop. Ctr.
Bradenton, FL $ 2,502,811 $1,196,250 $2,089,730 $ 83,146 $-0- $1,196,250 $ 2,172,876 $ 3,369,126
Manatee West
Retail Shop. Ctr.
Bradenton, FL $ 1,706,954 $1,645,000 $1,849,611 $ 536,666 $-0- $1,645,000 $ 2,386,277 $ 4,031,277
----------- ---------- ---------- ----------- ---- ---------- ----------- -----------
TOTALS $10,596,357 $7,185,362 $9,989,394 $2,858,476 $-0- $7,185,362 $12,847,870 $20,033,232
=========== ========== ========== ========== ==== ========== =========== ===========
COL. A COL. F COL. G COL. H COL. I
LIFE IN WHICH
DEPRECIATION IN
LATEST INCOME
ACCUMULATED DATE OF DATE STATEMENT IS
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- ----------- ------------ ------------ -------- ---------------
Broadway Medical (1)
Center
Ft. Myers, FL $ 293,954 1975 12/15/86 30 years
Town Centre (1)
Retail Shop. Ctr. 1970-
Marco Is., FL $1,936,674 1986 04/09/87 30 years
Heritage Square (1)
Office/Retail
Marco Isl., FL $ 439,339 1979 03/11/88 30 years
Pinebrook Commons
Retail Shop. Ctr.
Bradenton, FL $ 542,586 1987 08/03/88 30 years
Manatee West
Retail Shop. Ctr.
Bradenton, FL $ 836,385 1984 11/04/87 30 years
----------
TOTALS $4,048,938
==========
<FN>
SEE ACCOMPANYING NOTES TO SCHEDULE III
(1) = $6,386,952 - first and second mortgages collateralized by these
properties.
</FN>
26
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1995
REAL ESTATE AND ACCUMULATED DEPRECIATION
Balance as of 12/31/92 $21,242,220
Additions During 1993:
Acquisitions through foreclosures $ 0
Other Acquisitions 0
Improvements, etc. 323,950
Other 0 $ 323,950
---------- -----------
Balance as of 12/31/93 $21,566,170
Additions During 1994:
Acquisitions through foreclosures $ 0
Other Acquisitions 174,037
Improvements, etc. 0
Other 0 174,037
---------- -----------
Deductions During 1994:
Cost of real estate sold $ 0
Other cost of real estate
deeded to lender 1,850,373 (1,850,373)
---------- -----------
Balance as of 12/31/94 $19,889,834
Additions During 1995:
Acquisitions through foreclosures $ 0
Other Acquisitions 143,398
Improvements, etc. 0
Other 0 143,398
---------- -----------
Balance as of 12/31/95: $20,033,232
===========
27
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1995
REAL ESTATE AND ACCUMULATED DEPRECIATION
Balance as of 12/31/92 $2,741,104
Depreciation expense for 1993 $ 603,480 603,480
--------- ----------
Balance as of 12/31/93 $3,344,584
Accumulated depreciation on
disposal of fixed assets (420,496)
Depreciation expense for 1994 $ 590,586 170,090
--------- ----------
Balance as of 12/31/94 $3,514,674
Depreciation expense for 1995 $ 534,264 534,264
--------- ----------
Balance as of 12/31/95 $4,048,938
==========
28
FLORIDA INCOME FUND II LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1995
REAL ESTATE AND ACCUMULATED DEPRECIATION
(A) The aggregate cost of land and buildings is the same for Federal
Income Tax purposes, except for Town Centre, Manatee West and Heritage
Square. The guaranteed rent received of $190,000, $200,000 and
$30,000, respectively, is considered taxable income, whereas these
amounts are accounted for as basis reductions for financial statement
reporting purposes.
(B) Included in the acquisitions of 1988, 1987 and 1986 are $164,350,
$395,300 and $145,750 of acquisition fees and expenses paid to the
General Partner in connection with acquiring the properties.
(C) See Note 1 to the Financial Statements for depreciation method.
(D) See Note 4 to the Financial Statements for further information on debt
obligations.
29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(A) AND (B) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Partnership, as an entity, does not have any directors or officers. The
Managing General Partner is Mariner Capital Management, Inc. (located at 12800
University Dr., Ste. 675, Fort Myers, Florida 33907), a Florida corporation
formed for the purpose of becoming the general partner in limited partnerships
formed principally to invest in real estate. The Managing General Partner is a
wholly owned subsidiary of The Mariner Group, Inc., an Ohio corporation
(referred to herein as "Mariner Group"). The executive officers/directors of the
Managing General Partner as of December 31, 1994 were as follows: Robert M.
Taylor, Timothy R. Bogott, Lawrence A. Raimondi and Michael J. Scullion.
Each of the officers named above, except Michael J. Scullion, has served as an
officer of the Mariner Capital Management, Inc., since its incorporation on July
11, 1983. Michael J. Scullion replaced Richard S. McKinlay as a
Secretary/Treasurer as of September 1, 1987.
MCD Real Estate, Inc. (locate at 2100 Society Building, Cleveland, Ohio 44114)
(referred to herein as "MCD") is a Co-General Partner. MCD is an Ohio
corporation and a wholly owned subsidiary of McDonald & Company Securities,
Inc., the Managing Dealer of the offering. McDonald & Company Securities, an
Ohio corporation, is a wholly owned subsidiary of McDonald & Company
Investments, Inc., a publicly-traded Delaware corporation listed on the New York
Stock Exchange. MCD was formed in February of 1981 for the principal purpose of
becoming the general partner of limited partnerships formed to provide equity
financing for various real estate projects. The directors and officers of MCD as
of December 31, 1994, were as follows: James C. Redinger, Thomas M. O'Donnell,
Richard R. Cundiff, and Gordon A. Price.
(C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
Not applicable
(D) FAMILY RELATIONSHIP
Not applicable
30
(E) BUSINESS EXPERIENCE
ROBERT M. TAYLOR: Age 54, is Chairman of the Board and a Director of
the Managing General Partner. He founded Mariner Group in 1971 and
served as its President until his election as Chairman and Chief
Executive Officer of Mariner Group in 1979. He also serves as an
officer or director of various other Affiliates of Mariner Group. Mr.
Taylor is a Director of Acme-Cleveland Corporation, Cleveland, Ohio, a
manufacturer of machine tools; Barnett Bank of Fort Myers, Fort Myers,
Florida; MIL- COM Electronics Corporation, San Antonio, Texas; Florida
Council of 100; the Fort Myers Chamber of Commerce, and Chairman of
the Business Development Corporation of Southwest Florida, Fort Myers,
Florida. Since 1971, Mr. Taylor has directed the completion of over 30
real estate developments in Lee County, Florida. Prior to 1971, Mr.
Taylor was a management consultant employed by McKinsey & Company,
Inc., Cleveland, Ohio.
TIMOTHY R. BOGOTT: Age 49, is a Director and the former President of
the Managing General Partner. He was involved in all aspects of the
organization and management of Florida Income Fund, L.P., Florida
Income Fund II and Florida Income Fund III until January 1994 when he
became President of South Seas Resorts Company. He joined Mariner
Group in 1976 and has held the positions of Project Manager and
Director of Administration and Secretary/Treasurer. Prior to 1976, Mr.
Bogott was employed as an Assistant Vice President of Palmetto Federal
Savings and Loan Association, Fort Myers, Florida (1974-1976) and held
various management positions with the First National Bank of Fort
Myers (1970-1974). Mr. Bogott was elected Secretary/Treasurer of
Mariner Group in 1979 and Vice President -Finance in 1983. Mr. Bogott
is also President of Mariner Capital Investment Corporation and is an
officer or director of various other Affiliates of Mariner Group.
LAWRENCE RAIMONDI: Age 48, is President and Director of the Managing
General Partner. He became President in January 1994 after serving as
Executive Vice President in charge of property acquisitions and
financing of partnership debt. He was involved in all property
acquisitions for Florida Income Fund, L.P., Florida Income Fund II and
Florida Income Fund III. He joined Mariner Group in 1981 and served as
Director of Project Finance until joining the general partner. He was
employed in the Real Estate Department of Mellon Bank from 1969 to
1981 in various capacities with his most recent position being a
Commercial Mortgage Officer.
MICHAEL SCULLION: Age 40 is the Secretary/Treasurer of the Managing
General Partner. Mr. Scullion has been a Certified Public Accountant
since 1981. He is a member of the American Institute of Certified
Public Accounts (AICPA), and a member of the Florida Institute of
Certified Public Accountants (FICPA). Mr. Scullion joined Mariner
Group in 1983. Mr. Scullion was employed by Coopers & Lybrand, CPA's
(1980-1983) prior to that time.
31
JAMES C. REDINGER: Age 59. Mr. Redinger joined McDonald & Company (a
partnership that transferred all of its assets to McDonald & Company
Securities, Inc.) in March 1974, becoming a partner in 1977, working
in the area of corporate underwriting and syndication of real estate
and oil and gas ventures. He has had extensive experience in site
selection, cost projections of both commercial and residential real
estate projects and the syndication of such projects through limited
partnerships. Mr. Redinger has served as Chairman of the District Nine
Committee of the National Association of Securities Dealers, Inc., is
a Vice President and a Director of MCD Oil and Gas Company, Inc., a
Director of McDonald & Company Venture Capital, Inc., a Director of
McDonald & Company Securities, Inc., and a Managing Director of
McDonald & Company Securities, Inc.
THOMAS M. O'DONNELL: Age 60. Mr. O'Donnell joined McDonald & Company
in 1965 in the Corporate Finance Department. Mr. O'Donnell became a
partner of McDonald & Company in 1968 and has been a member of its
Policy Committee since 1971. Mr. O'Donnell is a Chartered Financial
Analyst and a member of the Cleveland Society of Security Analysts.
Mr. O'Donnell is a director of Seaway Food Town, Inc., Maumee, Ohio, a
grocery retailer. Mr. O'Donnell is Chief Executive Officer and
Chairman of the Board of McDonald & Company Investments, Inc., Chief
Executive Officer and Chairman of the Board of McDonald, which
operates an insurance agency; a Director of MCD Oil & Gas Company,
Inc., a Director of McDonald & Company Venture Capital, Inc.; and a
Director of McDonald Financial Services.
RICHARD R. CUNDIFF, III: Age 36. Mr. Cundiff joined McDonald & Company
in December 1982 and has assisted in the development of the Real
Estate and Specialty Finance Department. Specializing in real estate
and oil and gas investment banking, his responsibilities include
structuring, marketing and monitoring investments in these particular
areas. Mr. Cundiff is a First Vice President of McDonald & Company.
GORDON A. PRICE: Age 48. Mr. Price has been a Managing Director and
Chief Financial Officer of McDonald since April 1987. Prior thereto he
was Senior Vice President and Assistant Treasurer of McDonald. Mr.
Price is also an officer and director of various other affiliates of
MCD.
(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
No director or officer of the Managing General Partner was involved in
any event during the past five years which would be responsive to this
question.
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ITEM 11. EXECUTIVE COMPENSATION
(A) CURRENT REMUNERATION OF GENERAL PARTNERS, THEIR DIRECTORS AND
OFFICERS
No direct remuneration was paid or payable by the Partnership for the
period ended December 31, 1995, to directors or officers of the
General Partners.
In accordance with the Partnership Agreement, net income or loss,
prior to recoupment or the partner's original capital investment, is
allocated five percent (5%) to the General Partners and ninety-five
percent (95%) to the Limited Partners as a class. Subsequent to
recoupment, income or loss is allocated twenty percent (20%) to the
general partners and eighty percent (80%) to the limited partners as a
class.
The General Partners and their affiliates are entitled to
reimbursement of the actual cost to the General Partners or their
affiliates of goods, materials and services used for or by the
Partnership and obtained from unaffiliated entities and also the cost
of services performed by officers and employees of the General
Partners and their affiliates which could be performed directly for
the Partnership by independent parties. Expenses amounting to
$259,916, $295,941 and $275,877 have been charged for the years ending
December 31, 1995, 1994 and 1993, of which $13,375 and $28,752 were
included in accounts payable at December, 31, 1995, and 1994,
respectively. A portion of this amount is for the payment of insurance
premiums which are collected by Mariner Group, Inc. (for all Mariner
affiliates) and paid to the carrier on behalf of Florida Income Fund
II. The balance is for reimbursement for on- site property management
personnel and for reimbursement of other costs for services performed
by the general partner or affiliates which the Partnership would be
required to pay to third parties for comparable services in the same
geographical location
The General Partners and their affiliates are entitled to receive
compensation for leasing and management fees in an amount not to
exceed 5% of gross revenues from residential partnership properties or
6% of gross revenues produced by commercial partnership properties.
Management fees totalling $244,651, $180,427 and $207,619 were paid to
the Managing General Partner or its affiliates for the years ending
December 31, 1995, 1994 and 1993, respectively.
(B) PROPOSED REMUNERATION
Except for the payment of acquisition fees and the allocation of net
income or loss as described above, the Partnership has no ongoing plan
or arrangement to compensate the persons and entities named above.
However, the Managing General Partner or its affiliates may receive
leasing and management fees in connection with the management of the
Partnership's properties, subject to the limitations described herein
below.
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The Managing General Partner or its affiliates are entitled to receive
property management fees not to exceed 6% of the gross revenues from
commercial properties and 5% from residential properties. Other
expenses attributable to the operation of the Partnership may be
reimbursed to the General Partners or affiliates of the Managing
General Partner.
The Managing General Partner or its affiliates are entitled to one
half of the commissions paid as a result of the sale of Partnership
properties based on property sales prices, in an amount not to exceed
3% of such prices and subordinated to the right of the Limited
Partners to receive aggregate cash distributions from the Partnership
equal to their adjusted capital contribution plus the applicable
preference amount.
(C) REMUNERATION OF DIRECTORS
None.
(D) OPTIONS, WARRANTS AND RIGHTS
The Registrant has granted no options, warrants or rights.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person is known to the Partnership to be the beneficial owner of over 5% of
the outstanding Partnership units. For information on net income or loss
allocation see Item 11. (A).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
See Note 5, Related Party Transactions in Notes to the Financial Statements, on
page 24 in Item 8.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENT SCHEDULES
The following Financial Statement Schedules of the Partnership are
included in Part II, Item 8:
PAGE
----
Report of Independent Accountants 14
Balance Sheets as of December 31, 1995 and 1994 15
Statements of Income for the years ended
December 31, 1995, 1994 and 1993 16
Statements of Partners' Capital for the years
ended December 31, 1995, 1994 and 1993 17
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 18
Notes to Financial Statements 19 - 24
Report of Independent Accountants on Schedule III 25
Schedule III Real Estate and Accumulated Depreciation 26 - 29
Schedules Omitted:
Other schedules have been omitted because of the absence of
conditions under which they are required or because the
required information is included in the Financial Statement
and Notes thereto.
(A) 2. EXHIBITS
27 Financial Data Schedule (for SEC use only)
99 Form 8-K
(A) 3. REPORTS ON FORM 8-K
None.
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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.
FLORIDA INCOME FUND II, LIMITED PARTNERSHIP
(Registrant)
March 29, 1996
By: /s/ LAWRENCE A. RAIMONDI
----------------------------------------
LAWRENCE A. RAIMONDI
President, Director and CEO
Mariner Capital Management, Inc.
(Principal Executive Officer)
By: /s/ MICHAEL J. SCULLION
----------------------------------------
MICHAEL J. SCULLION
Mariner Capital Management, Inc.
(Principal Financial and Accounting Officer)
36