10-K 1 pen2_20001231-10k.txt 2000 ANNUAL REPORT ON FORM 10-K 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 the Fiscal Year Ended Commission File Number December 31, 2000 0-14188 ----------------- ------- I.R.E. PENSION INVESTORS, LTD. - II (Exact Name of Registrant as Specified in its Certificate of Limited Partnership) Florida 59-2582239 ------- ---------- (State of Organization) (I.R.S. Employer Identification Number) 1750 E. Sunrise Boulevard Fort Lauderdale, Florida 33304 ------------------------ ----- (Address of Principal Executive Office) (Zip Code) Registrant's telephone number, including area code: (954) 760-5200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units, $250 Per Unit Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [X] Documents Incorporated by Reference Portions of the Prospectus of the Registrant, dated October 4, 1985, are incorporated by reference into Part IV. Except for historical information contained herein, the matters discussed in this report are forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These forward-looking statements are based largely on the Partnership's expectations and are subject to a number of risks and uncertainties, including but not limited to, economic matters (both as a general matter and in particular in the area where the Partnership owns real estate), competitive and other factors affecting the Partnership's operations, markets, property values and other factors including factors associated with the continued ownership and operation of real estate and the factors identified in documents filed by the Partnership with the Securities and Exchange Commission. Many of these factors are beyond the Partnership's control. Actual results could differ materially from these forward-looking statements. In light of these risks and uncertainties, there is no assurance that the results discussed in such forward-looking statements contained in this report will, in fact, occur. The Partnership does not undertake any obligation to publicly release the results of any revisions to these forward-looking statements to reflect future events or circumstances. PART I ITEM 1. BUSINESS ---------------- I.R.E. PENSION INVESTORS, LTD.-II, a limited partnership organized under the laws of the State of Florida in 1985, is primarily engaged in the business of operating and holding for investment, income producing real properties. The Partnership did not utilize borrowings in connection with the purchase of its properties. The Partnership commenced a public offering of its units of limited partnership interest in October 1985. The required escrow relative to the Partnership was reached and subscription funds were transferred to the Partnership on December 26, 1985 ("Inception"). The Partnership closed the offering in October 1987, having raised $12,373,750 in capital and issued 49,491 units of limited partnership interests at $250 per unit. Galleria Professional Building and a minority interest in One West Nine Mile Joint Venture were acquired during 1986 and the Federal Express Distribution Center was acquired during 1987. In December 1991, the One West Nine Mile Joint Venture was sold and in June 1999, the Federal Express Distribution Center was sold. Uninvested cash of the Partnership is deposited in demand accounts with commercial banks and may be invested temporarily in U.S. Treasury Bills, certificates of deposit or other interest bearing accounts or investments. Alan B. Levan and I.R.E. Pension Advisors II, Corp. are the general partners of the Partnership. I.R.E. Pension Advisors II, Corp., as Managing General Partner, manages and controls the Partnership's affairs and has general responsibility and the ultimate authority in all matters affecting the Partnership's business. Affiliates of the general partners of the Partnership also own and operate their own improved real estate and may have investment objectives and policies similar to those of the Partnership. The Partnership may be in competition with other limited partnerships served by affiliates of the Managing General Partner or other companies affiliated with the general partner. On December 31, 2000, the Partnership had no employees. The balance of information required in Item 1 is either inapplicable or not material to an understanding of the Partnership's business. ITEM 2. PROPERTIES ------------------ The property listed below is not utilized by the Partnership but is held for investment. It is zoned for its current use. Galleria Professional Office Building 60,965 square owned Fort Lauderdale, FL feet leasable ITEM 3. LEGAL PROCEEDINGS -------------------------- None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ----------------------------------------------------------- None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP INTEREST AND RELATED SECURITY HOLDER MATTERS ------------------------------------------------------------------------- a) There is no established public trading market for the Partnership's units of limited partnership interest. b) There are approximately 1,630 holders of units of limited partnership interest as of March 15, 2001. c) See Item 6. -Selected Financial Data regarding the Partnership's distributions, incorporated herein by reference as if set forth herein. I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) ITEM 6. SELECTED FINANCIAL DATA ------------------------------- For the five years ended December 31, 2000.
1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- Revenues $ 595,779 611,804 476,576 1,236,389 274,232 =========== ========= ========= ========= ========== Net income (loss) $ (6,107) 123,200 (73,884) (408,444) (124,017) =========== ========= ========= ========= ========== Net income (loss) per weighted average limited partnership unit outstanding $ (.12) 2.49 (1.49) (8.25) (2.50) =========== ========= ========= ========= ========== Total assets $ 5,818,603 5,676,601 5,295,139 2,068,289 1,662,354 =========== ========= ========= ========= ========== Partners' capital $ 5,612,362 5,490,357 5,171,268 1,967,487 1,598,305 =========== ========= ========= ========= ========== Distributions per weighted average limited partnership unit outstanding $ 5.00 5.00 5.00 57.00 5.00 =========== ========= ========= ========= ==========
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF I.R.E. PENSION INVESTORS, LTD. - II -------------------------------------------------------------------------------- A description of the Partnership's investment properties during 1999 and 2000 follows: * Galleria Professional Building ("Galleria") - A 61,000 square foot office building located in Fort Lauderdale, Florida. * Federal Express Distribution Center ("Federal Express") - A 38,000 square foot warehouse building located in Jacksonville, Florida. In June 1999, the Partnership sold the property for approximately $918,500. The Partnership was organized in September 1985 and is engaged in the business of operating and holding for investment, income producing real properties. In December 1986, the Partnership acquired Galleria and in December 1987, the Partnership acquired Federal Express. The Galleria Professional Building is net leased to a tenant. The Federal Express Distribution Center was occupied solely by Federal Express Corporation pursuant to a lease that expired May 31, 1998. Federal Express Corporation vacated the property on that date. In June 1999, the property was sold for approximately $918,500. Proceeds received, net of selling costs were approximately $811,000 and a net gain on the sale of real estate of approximately $8,000 was recognized in 1999. Rental income decreased for the year ended December 31, 1999 as compared to the 1998 period as a result of the vacancy of the Federal Express building, effective May 31, 1998. The Federal Express building was sold in June 1999. The decreases in interest income for the years ended December 31, 2000 and 1999 as compared to the 1998 period is due to decreases in investable funds. Depreciation expense decreased approximately $42,000 for the year ended December 31, 2000 as compared to the same period in 1999, and $46,000 for the year ended December 31, 1999 as compared to the same period in 1998 due to the sale of Federal Express in June 1999. In 1998 the carrying value of Federal Express was reduced by approximately $38,000 to its estimated fair value. After an auction in April 1999, the Partnership entered into a contract to sell the Federal Express property and based upon anticipated proceeds from the sale, the Partnership further reduced the carrying value of the property by approximately $280,000. In June 1999, the property was sold to an unaffiliated third party for approximately $918,500. Other property operations decreased for the year ended December 31, 2000 as compared to the same period in 1999 primarily due to decreases in insurance, property taxes and maintenance as a result of the sale of Federal Express in June 1999. Other general and administrative expenses decreased approximately $12,000 for the year ended December 31, 1999 as compared to the same period in 1998 primarily due to a reduction in professional fees associated with the elimination of the Federal Express appraisal and the 1997 appraisal fees paid in 1998 for Galleria and Federal Express. When the Partnership acquired the Galleria Professional Building in 1986, it executed a net lease with the seller, leasing the property back to the seller on a totally net basis. The lease, which expires in 2016, requires a minimum annual rental of $217,000 per annum plus 10% of the property income, as defined, between $217,000 and $467,000 and 50% of the property income in excess of $467,000. Based on operations of the property reflected in information provided by the tenant, no percentage rent was paid in 2000. Commencing 2002, the Partnership and the tenant have a buy/sell option for this property, which may be exercised by either the Partnership or the tenant. In essence, this option gives the tenant the right to purchase the property at its then fair market value or allows the Partnership to terminate the tenant lease. Pursuant to this option, the Partnership can offer to sell the property to the tenant for $6,000,000 plus the excess between approximately $100,000 per month and actual rent paid during the lease term (less certain defined offsets). If the Partnership makes such an offer and if the tenant fails to purchase the property at such price, the lease would be terminated. At December 31, 2000, the Galleria Professional Building was 100% occupied, with an average lease rate of approximately $17.30 per square foot. As indicated above, the lessee is responsible for any and all costs associated with the property. Galleria Professional Building is located in Fort Lauderdale Florida on the Middle River Waterway. There are several mid-rise office buildings in the area. Galleria Mall, a large regional shopping center, is located east of this property. Rental rates of the mid-rise office buildings in close proximity to the Galleria Professional Building were similar to those being charged by the Galleria Professional Building. At December 31, 2000, the Partnership had approximately $405,000 of cash and cash equivalents. The Partnership has annually been paying distributions of $5.00 per limited partnership unit ($1.25 quarterly) since the fourth quarter of 1990. In addition, during 1999, the Partnership also paid a special distribution of $52 per limited partnership unit. The Partnership's long term prospects will be primarily affected by future net income at the Galleria Professional Building. Due to the uncertainties involving the real estate market, management cannot reasonably determine the Partnership's long term liquidity position. However, management believes the Partnership currently has sufficient liquidity for operations and to meet its obligations and commitments for the foreseeable future I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) ITEM 8. INDEX TO FINANCIAL STATEMENTS ------------------------------------- Independent Auditors' Report Financial Statements: Balance Sheets - December 31, 1999 and 2000 Statements of Operations - For each of the Years in the Three Year Period ended December 31, 2000 Statements of Partners' Capital - For each of the Years in the Three Year Period ended December 31, 2000 Statements of Cash Flows - For each of the Years in the Three Year Period ended December 31, 2000 Notes to Financial Statements ITEM 14. FINANCIAL STATEMENT SCHEDULES -------------------------------------- III. Properties and Accumulated Depreciation - December 31, 2000. All other schedules are omitted as the required information is either not applicable or is presented in the financial statements and related notes. INDEPENDENT AUDITORS' REPORT The Partners I.R.E. Pension Investors, Ltd. - II: We have audited the financial statements of I.R.E. Pension Investors, Ltd. - II (a Florida Limited Partnership), as listed in the accompanying index. In connection with our audits of the financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These financial statements and financial statement schedule are the responsibility of I.R.E. Pension Investors, Ltd. - II's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 I.R.E. Pension Investors, Ltd. - II, at December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP Fort Lauderdale, Florida March 2, 2001 I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) Balance Sheets December 31, 1999 and 2000 Assets 1999 2000 ---- ---- Cash and cash equivalents $ 484,362 405,252 Investments in real estate: Office building 5,782,761 5,782,761 Less accumulated depreciation (4,201,927) (4,525,759) ----------- ----------- 1,580,834 1,257,002 Other assets, net 3,093 100 ----------- ----------- $ 2,068,289 1,662,354 =========== =========== Liabilities and Partners' Capital Accounts payable $ 28,420 25,546 Other liabilities 67,619 33,791 Due to affiliates 4,763 4,712 ----------- ----------- Total liabilities 100,802 64,049 Partners' capital: 49,041 limited partnership units issued and outstanding 1,967,487 1,598,305 ----------- ----------- $ 2,068,289 1,662,354 =========== =========== See accompanying notes to financial statements. I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) Statements of Operations For each of the Years in the Three Year Period ended December 31, 2000 1998 1999 2000 ---- ---- ---- Revenues: Rental income $ 362,398 250,830 250,830 Interest income 113,558 67,059 23,402 Sale of real estate -- 918,500 -- Other income 620 -- -- ---------- ---------- ---------- Total revenues 476,576 1,236,389 274,232 ---------- ---------- ---------- Costs and expenses: Cost of sale -- 910,669 -- Depreciation 412,602 366,243 323,832 Impairment loss on real estate 38,000 280,000 -- Property operations: Property management fees to affiliate 3,624 2,509 2,509 Other 17,640 16,885 3,606 General and administrative: To affiliates 32,490 34,649 33,025 Other 46,104 33,878 35,277 ---------- ---------- ---------- Total costs and expenses 550,460 1,644,833 398,249 ---------- ---------- ---------- Net loss $ (73,884) (408,444) (124,017) ========== ========== ========== Net loss per weighted average limited partnership unit outstanding $ (1.49) (8.25) (2.50) ========== ========== ========== See accompanying notes to financial statements. I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) Statements of Partners' Capital For each of the Years in the Three Year Period ended December 31, 2000 Limited General Partners Partners Total -------- -------- ----- Balance at December 31, 1997 $ 5,491,826 (1,469) 5,490,357 Limited partner distributions (245,205) -- (245,205) Net loss (73,145) (739) (73,884) ----------- ----------- ----------- Balance at December 31, 1998 5,173,476 (2,208) 5,171,268 Limited partner distributions (2,795,337) -- (2,795,337) Net loss (404,360) (4,084) (408,444) ----------- ----------- ----------- Balance at December 31, 1999 1,973,779 (6,292) 1,967,487 Limited partner distributions (245,165) -- (245,165) Net loss (122,777) (1,240) (124,017) ----------- ----------- ----------- Balance at December 31, 2000 $ 1,605,837 (7,532) 1,598,305 =========== =========== =========== See accompanying notes to financial statements. I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) Statements of Cash Flows For each of the Years in the Three Year Period Ended December 31, 2000
1998 1999 2000 ---- ---- ---- Operating Activities: Net loss $ (73,884) (408,444) (124,017) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 412,602 366,243 323,832 Impairment loss on real estate 38,000 280,000 -- Non-cash portion of rental income (33,828) (33,828) (33,828) Gain on sale of real estate, net -- (7,831) -- Changes in operating assets and liabilities: (Decrease) increase in accrued expenses, accounts payable, other liabilities and due to affiliates (28,545) 10,759 (2,925) (Increase) decrease in other assets, net (27,257) 26,670 2,993 ------------ ------------ ------------ Net cash provided by operating activities 287,088 233,569 166,055 ------------ ------------ ------------ Investing Activities: Redemption and sale of securities available for sale 11,714,710 -- -- Purchase of securities available for sale (10,041,003) -- -- Proceeds on sale of real estate, net -- 810,862 -- ------------ ------------ ------------ Net cash provided by investing activities 1,673,707 810,862 -- ------------ ------------ ------------ Financing Activities: Limited partner distributions (245,205) (2,795,337) (245,165) ------------ ------------ ------------ Net cash used by financing activities (245,205) (2,795,337) (245,165) ------------ ------------ ------------ Increase (decrease) in cash and cash equivalents 1,715,590 (1,750,906) (79,110) Cash and cash equivalents at beginning of year 519,678 2,235,268 484,362 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 2,235,268 484,362 405,252 ============ ============ ============
See accompanying notes to financial statements. I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) Notes to Financial Statements (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General I.R.E. Pension Investors, Ltd. - II (the "Partnership") was organized in 1985 in accordance with the provisions of the Florida Uniform Limited Partnership Act to invest in, hold and manage income producing real estate. The Managing General Partner has complete authority in the management and control of the Partnership. I.R.E. Pension Advisors II, Corp. is the Managing General Partner and Alan B. Levan is the individual General Partner of the Partnership. The General Partners may serve in the same capacity for other entities having similar investment objectives. Should any conflicts of interest arise among these entities, the management of the managing general partners will, at their sole discretion, resolve such conflicts. Basis of Financial Statement Presentation - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and statements of operations for the periods presented. Actual results could differ significantly from those estimates. A material estimate that is susceptible to significant change in the next year relates to the determination of the impairment loss on real estate. Compensation or Reimbursements to General Partners and Affiliates The General Partners and/or their affiliates are entitled to receive compensation or reimbursements only as specified by the Partnership Agreement. The determination of amount and timing of payment is subject to certain limitations and to cash distribution preferences of limited partners. Following is a brief description of such compensation and the services to be rendered: Property Management Fee: Due for services in connection with the continuing professional property management of the Partnership properties. Partnership Management Fee: Due for services rendered in evaluating and selecting properties for the Partnership, reviewing cash requirements including the determination of the amount and timing of distributions, if any, making decisions as to the nature and terms of the acquisition and disposition of such properties, selecting, retaining and supervising consultants, contractors, architects, engineers, lenders, borrowers, agents and others and otherwise generally managing the day-to-day operations of the Partnership. Subordinated Real Estate Commissions: Related to sales of Partnership properties. Interest in Cash from Sales or Financing: Due also for services as listed under "Partnership Management Fee". Interest in Net Income and Net Loss as Determined for Federal Income Tax Purposes: 1% of net losses and the greater of (a) 1% of net income or (b) an amount of such net income which is in proportion to the percentage of cash distributed to the General Partners as a Partnership Management Fee or for their Interest in Cash From Sales or Financing. Cash and cash equivalents Cash equivalents include liquid investments with a maturity of three months or less. Properties The properties are assets to be held and used and are stated at cost in the accompanying balance sheets. The office building is depreciated using the straight-line method over an estimated useful life of 20 years. Long-lived assets to be held and used by the Partnership are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In performing the review for recoverability, the Partnership estimates the future cash flows expected to result from the use of the asset and its eventual disposition. 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 is recognized and the property's cost basis is reduced. Measurement of an impairment loss for long-lived assets that the Partnership expects to hold and use is based on the fair value of the asset. Income Taxes The payment of income taxes is the obligation of the individual partners; therefore, there is no provision for income taxes in the accompanying financial statements. The Partnership's tax returns have not been examined by Federal or state taxing authorities. Net income or loss reported for income tax purposes involves, among other things, various determinations relating to properties purchased. Although management of the Partnership believes that such determinations are appropriate, there can be no assurance that the Internal Revenue Service will not contest the Partnership's tax treatment of various items or, if contested, such treatment will be sustained by the Courts. Further, there is a possibility that the Treasury will amend existing regulations or promulgate new regulations, and such action may be retroactive. Accordingly, the tax status of the Partnership and the availability of prior and future income tax benefits to limited partners may be adversely affected. Rental Income Rental income is recognized under the operating method whereby aggregate rentals are reported as income over the life of the lease and the costs and expenses are charged against such revenue. Rental income, from leases with non-level payments, is recognized ratably over the term of the lease. (2) PROPERTIES Following is a brief description of the property investments made by the Partnership. Galleria Professional Building On December 31, 1986, the Partnership purchased a six story office building containing 60,965 square feet of net leasable area in Fort Lauderdale, Florida. The Partnership owns a leasehold interest in a long-term ground lease for two parcels of land which encompass the building site and parking areas. The lease commenced in 1955 and expires in 2054. Ground rent is approximately $37,368 annually. Every 20 years the ground rent is adjusted to be equal to five percent of the then current appraised value of the land. The Partnership also purchased the rights to the parking agreement with the Galleria Mall. The agreement requires rental payments and common area maintenance charges which currently aggregate approximately $25,000 annually. The parking agreement and ground lease have concurrent terms. Simultaneous with the acquisition of the property, the Partnership executed a net lease with the seller, leasing the Property back to the Seller on a totally net basis. The terms of the lease, which expires in 2016, require a minimum annual rental of $217,000 per annum plus 10% of the property income, as defined, between $217,000 and $467,000 and 50% of the property income in excess of $467,000. In accordance with accounting principles generally accepted in the United States of America, the rental income will be recognized ratably over the term of the lease. The ratable minimum rent through 2001 (the date of the buy/sell option discussed below) after the modification of the lease in September 1990 is $250,830 per year and such amount is recognized annually for financial statement purposes. The seller, as lessee, is responsible for any and all costs associated with the property, including but not limited to operating expenses, insurance, taxes, the ground lease and parking agreement payments. Commencing 2002, the Partnership and the tenant have a buy/sell option for this property, which may be exercised by either the Partnership or the tenant. In essence, this option gives the tenant the right to purchase the property at its then fair market value or allows the Partnership to terminate the tenant lease. Pursuant to this option, the Partnership can offer to sell the property to the tenant for $6,000,000 plus the excess between approximately $100,000 per month and actual rent paid during the lease term (less certain defined offsets). If the Partnership makes such an offer and if the tenant fails to purchase the property at such price, the lease would be terminated. At December 31, 2000, the Galleria Professional Building was 100% occupied, with an average lease rate of approximately $17.30 per square foot. As indicated above, the lessee is responsible for any and all costs associated with the property. Galleria Professional Building is located in Fort Lauderdale Florida on the Middle River Waterway. There are several mid-rise office buildings in the area. Galleria Mall, a large regional shopping center, is located east of this property. Rental rates of the mid-rise office buildings in close proximity to the Galleria Professional Building were similar to those being charged by the Galleria Professional Building. Following is summarized financial information with respect to operations at the Galleria office building. The following information is unaudited because the Partnership has no contractual right to require the lessee of the property to provide audited information. Years ended December 31, ------------------------ 1998 1999 2000 ---- ---- ---- (Unaudited) Rental income $1,000,104 1,048,292 1,028,876 Other income 11,630 7,543 11,580 ---------- ---------- ---------- 1,011,734 1,055,835 1,040,456 ---------- ---------- ---------- Property operating expenses 696,798 700,068 715,880 Ground rent 37,365 37,368 37,367 ---------- ---------- ---------- 734,163 737,436 753,247 ---------- ---------- ---------- Operating income $ 277,571 318,399 287,209 ========== ========== ========== Federal Express Distribution Center On December 15, 1987, the Partnership purchased, from an unaffiliated seller, a one story 37,500 square foot office/warehouse building in Jacksonville, Florida. The building was designed for and was occupied solely by Federal Express Corporation pursuant to a lease which expired May 31, 1998. Federal Express Corporation vacated the property on that date. During 1998, the carrying value of this property was reduced by approximately $38,000 to its estimated fair value. After an auction in April 1999, the Partnership entered into a contract to sell the property. Based upon the proceeds anticipated to be received, the Partnership further reduced the carrying value of the property by approximately $280,000. In June 1999, the Partnership sold the property to an unaffiliated third party for approximately $918,500. Proceeds received on the sale, net of selling cost were approximately $811,000 and a net gain on the sale of real estate of approximately $8,000 was recognized in 1999. Leases The aggregate sum of the minimum lease rental payments to be received for the Galleria Professional Building over the five succeeding years is approximately as follows: Year ending December 31, ------------------------ 2001 2002 2003 2004 2005 ---- ---- ---- ---- ---- $ 217,000 217,000 217,000 217,000 217,000 ======= ======= ======= ======= ======= (3) COMPENSATION OR REIMBURSEMENTS TO GENERAL PARTNERS AND AFFILIATES During the year ended December 31, 1998, 1999 and 2000 compensation to general partners and affiliates was as follows: 1998 1999 2000 ---- ---- ---- Reimbursement for administrative and accounting services $32,490 34,649 33,025 Property management fees (a) 3,624 2,509 2,509 ------- ------- ------- Total $36,114 37,158 35,534 ======= ======= ======= (a) Property management fees are computed as 1% of rental income. (4) RECONCILIATION OF NET INCOME (LOSS) AND PARTNERS' CAPITAL The following reconciliation provides details of the nature and amount of differences between net income (loss) and partners' capital per the accompanying financial statements and the Partnership tax return.
1998 1999 2000 ---- ---- ---- Net income (loss): Amount reported for financial statement purposes $ (73,884) (408,444) (124,017) Difference in financial statement/tax depreciation expense 202,722 179,897 154,024 Difference between accrual basis of accounting used for financial statements and the method used for income tax purposes (55,900) (958,630) (28,490) Adjustment due to fair value considerations in the carrying value of real estate for financial statement purposes 38,000 280,000 -- ----------- ----------- ----------- Amount reported for income tax purposes $ 110,938 (907,177) 1,517 =========== =========== =========== 1998 1999 2000 ---- ---- ---- Partners' capital: Amount reported for financial statement purposes $ 5,171,268 1,967,487 1,598,305 Difference in financial statement/tax depreciation expense 2,396,602 2,576,499 2,730,523 Difference between accrual basis of accounting used for financial statements and the method used for income tax purposes 101,464 (857,166) (885,656) Difference due to fair value considerations in the carrying value of real estate for financial statement and income tax purposes 824,000 1,104,000 1,104,000 Cost of raising capital, deducted from partners' capital for financial statements and included in other assets for income tax purposes 1,501,488 1,501,488 1,501,488 ----------- ----------- ----------- Amount reported for income tax purposes $ 9,994,822 6,292,308 6,048,660 =========== =========== ===========
(5) OTHER LIABILITIES Other liabilities at December 31, 1999 and 2000 consisted primarily of unearned rental income, which arises from leases with non-level payments being recognized ratably over the term of the lease. SCHEDULE III I.R.E. Pension Investors, Ltd. - II Property and Accumulated Depreciation December 31, 2000 Galleria Professional Office Bldg. Ft. Lauderdale Florida Acquisition Date 12/86 Encumbrances $ -- =========== Initial Costs: Building and Improvements $ 6,285,472 ----------- 6,285,472 Improvements: Costs capitalized subsequent to acquisition: Building and Improvements $ 183,289 ----------- 183,289 Allowance to state real estate at fair value $ (686,000) ----------- (686,000) Gross Amount: Building and Improvements $ 5,782,761 ----------- Total $ 5,782,761 =========== Accumulated Depreciation $ 4,525,759 =========== Life on which depreciation is computed 20 years =========== SCHEDULE III Continued I.R.E. Pension Investors, Ltd. - II Reconciliation of Cost and Accumulated Depreciation For each of the Years in the Three Year Period ended December 31, 2000 1998 1999 2000 ---- ---- ---- Cost: Balance at beginning of period $ 7,930,028 7,892,028 5,782,761 Deletions: Sale of real estate -- (1,829,267) -- Impairment loss on real estate (38,000) (280,000) -- ----------- ----------- ----------- Balance at end of period $ 7,892,028 5,782,761 5,782,761 =========== =========== =========== Accumulated Depreciation: Balance at beginning of period $ 4,449,318 4,861,920 4,201,927 Additions: Depreciation 412,602 366,243 323,832 Deletions: Sale of real estate -- (1,026,236) -- ----------- ----------- ----------- Balance at end of period $ 4,861,920 4,201,927 4,525,759 =========== =========== =========== The aggregate basis for Federal income tax purposes (not reduced by accumulated depreciation) of the above properties was approximately $6,468,761 at December 31, 2000. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. ----------------------------------------------------------------------- None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP ------------------------------------------------------------ The Partnership has no directors or officers. a) Directors. ---------- Listed below are the directors of I.R.E. Pension Advisors II, Corp., Managing General Partner of the Partnership, all of whom are to serve until the election and qualification of their respective successors unless sooner removed from office: NAME AGE POSITIONS HELD ---- --- -------------- Alan B. Levan 56 Director since 1985 Earl Pertnoy 74 Director since 1985 Carl E. B. McKenry, Jr. 71 Director since 1985 b) Executive Officers. ------------------- Listed below are the executive officers of I.R.E. Pension Advisors II, Corp., all of whom are to serve until they resign or are replaced by the Board of Directors: NAME AGE POSITIONS HELD ---- --- -------------- Alan B. Levan 56 President since 1985 Glen R. Gilbert 56 Executive Vice President since July 1997, Senior Vice President from 1985 to July 1997; Chief Financial Officer since 1987; Secretary since 1988 c) Certain Significant Employees. ------------------------------ Not applicable. d) Family Relationships. --------------------- Not applicable. e) Business Experience. -------------------- ALAN B. LEVAN formed the I.R.E. Group in 1972. Since 1978, he has been the Chairman of the Board, President, and Chief Executive Officer of BFC Financial Corporation (or its predecessor companies), a financial services and unitary savings bank holding company. He is also Chairman of the Board and President of I.R.E. Realty Advisors, Inc., I.R.E. Properties, Inc., I.R.E. Realty Advisory Group, Inc., U.S. Capital Securities, Inc., and Florida Partners Corporation. Mr. Levan is also Chairman of the Board and Chief Executive Officer of BankAtlantic Bancorp, Inc. Mr. Levan is also an individual general partner and an officer and a director of the corporate general partner of the Partnership. GLEN R. GILBERT has been Executive Vice President of BFC Financial Corporation since July 1997, Chief Financial Officer since 1987 and Secretary since 1988. From 1985 through July 1997 he served in the position of Senior Vice President of BFC Financial Corporation. Mr. Gilbert has been a certified public accountant since 1970. Mr. Gilbert serves as an officer of Florida Partners Corporation and of the corporate general partner of the Partnership. EARL PERTNOY has been for more than the past five years a real estate investor and developer. He has been a director of BFC Financial Corporation and its predecessor companies since 1978. He is a director of the corporate general partner of the Partnership. CARL E. B. McKENRY, JR. is the Director of the Small Business Institute at the University of Miami in Coral Gables, Florida. He has been associated in various capacities with the University since 1955. He has been a director of BFC Financial Corporation since 1981 and is a director of the corporate general partner of the Partnership. f) Certain Legal Proceedings. ------------------------- None. ITEM 11. EXECUTIVE COMPENSATION ------------------------------- a) Cash Compensation. ------------------ The Partnership has no officers or directors. The Partnership did not pay salaries or expenses of the officers and directors of the general partner of the Partnership in 2000. b) Compensation Pursuant to Plans. ------------------------------- The Partnership has no annuity, pension or retirement plan for any director, officer or employee. c) Other Compensation. ------------------- Not applicable. d) Compensation of Directors. -------------------------- The Partnership has no directors. e) Termination of Employment and Change of Control Arrangement. ------------------------------------------------------------ Not applicable. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ----------------------------------------------------------------------- a) No person owns 5% or more of the Partnership's voting securities. b) The Partnership has no officers or directors. The following information is provided with respect to units owned by directors and officers of the managing general partner. (3) Amount and (2) Nature of (4) (1) Name And Address Of Beneficial Percent Title Of Class Beneficial Owner Ownership Of Class -------------- ---------------- ---------- -------- (i) Units of Limited Alan B. Levan 20 Direct 0% (approx.) Partnership 1750 E. Sunrise Blvd. Interest Fort Lauderdale, FL 33304 All other directors and officers of the Managing General Partner as a group 0 Direct .0% --------- --- TOTAL 20 Direct .0% (approx.) ========= === (i) Alan B. Levan is a general partner of the Partnership and is President and Director of the Managing General Partner. c) The Partnership knows of no contract or other arrangement that could result in a change in control of the Partnership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ------------------------------------------------------- a) & b) During the year ending December 31, 2000, the following entities received the fees and payments indicated for services rendered with respect to the Partnership: NAME AND RELATIONSHIP TO THE PARTNERSHIP TRANSACTION AMOUNT BFC Financial Corporation Reimbursement for or subsidiaries, administrative and Affiliates of the General accounting services $ 33,025 Partners Property management fees $ 2,509 c) Indebtedness of Management. --------------------------- None. d) Transactions with Promoters. ---------------------------- Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ------------------------------------------------------------------------ A-1. See Item 8. Financial Statements and Supplementary Data. A-2. See Item 8. Financial Statements and Supplementary Data. A-3. Exhibits: Exhibit 3 Articles of incorporation and by-laws. Limited Partnership Agreement set forth as Exhibit A to the Prospectus of the Partnership dated October 4, 1985, as filed with the Commission pursuant to Rule 424(c), is hereby incorporated herein by reference. B. REPORTS ON FORM 8-K ------------------- No reports on Form 8-K have been filed during the last quarter of the period covered by this report. No annual report or proxy material for the year 2000 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. I.R.E. PENSION INVESTORS, LTD. - II Registrant By: I.R.E. Pension Advisors-II, Corp., Managing General Partner By: /S/ Alan B. Levan ------------------------ Alan B. Levan, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Managing General Partner on behalf of the Partnership and in the capacities and on the dates indicated. /S/ Alan B. Levan March 23, 2001 ------------------------------------------------------- Alan B. Levan, Director and Principal Executive Officer /S/ Earl Pertnoy March 23, 2001 ------------------------------------------------------- Earl Pertnoy, Director /S/ Carl E.B. McKenry, Jr. March 23, 2001 ------------------------------------------------------- Carl E. B. McKenry Jr., Director