UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
EXCHANGE ACT OF 1934
For
the quarterly period ended
OR
EXCHANGE ACT OF 1934
For the transition period from to
Commission
file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
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 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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ☐ Accelerated filer ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
The aggregate market value of the voting securities held by non-affiliates of the Registrant: The aggregate market value of limited partnership interests held by non-affiliates is not determinable since there is no public trading market for the limited partnership interests.
As of November 10, 2023 the registrant had units issued and outstanding.
TABLE OF CONTENTS
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
FORM 10-Q
FOR THE PERIODS ENDED SEPTEMBER 30, 2023
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
September 30, 2023 and December 31, 2022
ASSETS
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| INVESTMENT PROPERTIES: (Note 3) | ||||||||
| Land | $ | $ | ||||||
| Buildings | ||||||||
| Accumulated depreciation | ( | ) | ||||||
| Net investment properties | ||||||||
| Properties held for sale | ||||||||
| OTHER ASSETS: | ||||||||
| Cash and cash equivalents | ||||||||
| Investments held in Indemnification Trust (Note 7) | ||||||||
| Security deposits escrow | ||||||||
| Rents and other receivables | ||||||||
| Prepaid state income tax | ||||||||
| Deferred closing costs | ||||||||
| Prepaid insurance | ||||||||
| Deferred charges, net | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
The accompanying notes to the financial statements are an integral part of these statements.
| 3 |
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
September 30, 2023 and December 31, 2022
LIABILITIES AND PARTNERS’ CAPITAL
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | ||||||||
| LIABILITIES AND PARTNERS’ CAPITAL | ||||||||
| LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued state income taxes | ||||||||
| Due to General Partner (Note 5) | ||||||||
| Security deposits | ||||||||
| Unearned rental income | ||||||||
| Total liabilities | ||||||||
| CONTINGENCIES AND COMMITMENTS (Notes 6 and 7) | ||||||||
| PARTNERS’ CAPITAL: (Notes 1 and 4) | ||||||||
| General Partner - | ||||||||
| Cumulative net income (retained earnings) | ||||||||
| Cumulative cash distributions | ( | ) | ( | ) | ||||
| Total general partners’ capital | ||||||||
| Limited Partners ( | ||||||||
| Capital contributions | ||||||||
| Offering costs | ( | ) | ( | ) | ||||
| Cumulative net income (retained earnings) | ||||||||
| Cumulative cash distributions | ( | ) | ( | ) | ||||
| Total limited partners’ capital | ||||||||
| Former General Partner - | ||||||||
| Cumulative net income (retained earnings) | ||||||||
| Cumulative cash distributions | ( | ) | ( | ) | ||||
| Total former general partners’ capital | ( | ) | ( | ) | ||||
| Total partners’ capital | $ | $ | ||||||
| Total liabilities and partners’ capital | $ | $ | ||||||
The accompanying notes to the financial statements are an integral part of these statements.
| 4 |
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF INCOME
For the Three and Nine Month Periods Ended September 30, 2023 and 2022
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| OPERATING REVENUES: | ||||||||||||||||
| Rental income (Note 3) | $ | $ | $ | $ | ||||||||||||
| TOTAL OPERATING REVENUES | $ | $ | $ | $ | ||||||||||||
| EXPENSES: | ||||||||||||||||
| Partnership management fees (Note 5) | $ | $ | $ | $ | ||||||||||||
| Insurance | ||||||||||||||||
| General and administrative | ||||||||||||||||
| State income tax expense | ||||||||||||||||
| Advisory Board fees and expenses | ||||||||||||||||
| Professional services | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Amortization | ||||||||||||||||
| TOTAL OPERATING EXPENSES | $ | $ | $ | $ | ||||||||||||
| OTHER INCOME | ||||||||||||||||
| Other income | ||||||||||||||||
| Other interest income | ||||||||||||||||
| Gain on sale of property | ||||||||||||||||
| TOTAL OTHER INCOME | ||||||||||||||||
| NET INCOME | $ | $ | $ | $ | ||||||||||||
| NET INCOME ALLOCATED- GENERAL PARTNER | ||||||||||||||||
| NET INCOME ALLOCATED- LIMITED PARTNERS | ||||||||||||||||
| PER LIMITED PARTNERSHIP INTEREST, | ||||||||||||||||
| Based on | ||||||||||||||||
| NET INCOME PER LIMITED PARTNERSHIP INTEREST | $ | $ | $ | $ | ||||||||||||
The accompanying notes to the financial statements are an integral part of these statements.
| 5 |
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Month Periods Ended September 30, 2023 and 2022
| Nine Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | (unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash from operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Gain on sale of Properties | ( | ) | ( | ) | ||||
| Decrease in rents and other receivables | ||||||||
| Decrease (increase) in security deposit escrow | ( | ) | ||||||
| Decrease in prepaid insurance | ||||||||
| (Increase) decrease in deferred closing costs | ( | ) | ||||||
| Decrease in prepaid state income taxes | ||||||||
| Increase in accounts payable and accrued expenses | ||||||||
| Increase in unearned rental income | ||||||||
| Security deposit refund | ( | ) | ( | ) | ||||
| Decrease in due to General Partner | ( | ) | ( | ) | ||||
| Net cash from operating activities | ||||||||
| CASH FLOWS PROVIDED BY INVESTING ACTIVITIES: | ||||||||
| Proceeds from sale of Properties, net | ||||||||
| Interest applied to Indemnification Trust account | ( | ) | ( | ) | ||||
| Net cash provided by investing activities | ||||||||
| CASH FLOWS USED IN FINANCING ACTIVITIES: | ||||||||
| Cash distributions to Limited Partners | ( | ) | ( | ) | ||||
| Cash distributions to General Partner | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Noncash investing activities | ||||||||
| General Partner Distributions declared, not yet paid | $ | $ | ||||||
| Limited Partner Distributions declared, not yet paid | $ | $ | ||||||
The accompanying notes to the financial statements are an integral part of these statements.
| 6 |
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF PARTNERS’ CAPITAL (Unaudited)
For the Three and Nine Month Periods Ended September 30, 2023 and 2022
| General Partner | Limited Partners | |||||||||||||||||||||||||||||||||||
| Cumulative
Net Income | Cumulative
Cash Distributions | Total | Capital
Contributions, Net of Offering Costs | Cumulative
Net Income | Cumulative
Cash Distribution | Reallocation | Total | Total
Partners’ Capital | ||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2022 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
| Distributions declared | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2023 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
| Distributions declared | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2023 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
| Distributions declared | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2023 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2021 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
| Distributions declared | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2022 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
| Distributions declared | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2022 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||||||||||
| Distributions declared | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2022 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
The accompanying notes to the financial statements are an integral part of these statements.
| 7 |
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The condensed statements included herein have been prepared by the registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results of operations for the interim period, on a basis consistent with the annual audited statements. The adjustments made to these condensed statements consist only of normal recurring adjustments. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) have been condensed or omitted pursuant to such rules and regulations, although the registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in the registrant’s latest annual report on Form 10-K.
1. ORGANIZATION:
DiVall
Insured Income Properties 2 LP (the “Partnership”) was formed on November 20, 1987, pursuant to the Uniform Limited Partnership
Act of the State of Wisconsin. The initial capital, contributed during 1987, consisted of $
The
Partnership is currently engaged in the business of owning and operating its investment portfolio of commercial real estate properties
(each a “Property”, and collectively, the “Properties”). The Properties are leased on a triple net basis primarily
to, and operated by, franchisors or franchisees of national, regional, and local retail chains under primarily long-term leases. The
lessees are operators of fast food, family style, and casual/theme restaurants. As of September 30, 2023, the Partnership owned
The Limited Partnership Agreement, as amended from time to time (collectively, the “Partnership Agreement”), stipulates that the Partnership is scheduled to be dissolved on November 30, 2023, or earlier upon the prior occurrence of any of the following events: (a) the disposition of all its Properties; (b) the written determination by the General Partner, that the Partnership’s assets may constitute “plan assets” for purposes of ERISA; (c) the agreement of limited partners owning a majority of the outstanding limited partner interests to dissolve the Partnership; or (d) the dissolution, bankruptcy, death, withdrawal, or incapacity of the last remaining General Partner, unless an additional General Partner is elected by a majority of the limited partners. During the second and third quarters of the nine odd numbered years from 2001 through 2017, consent solicitations were circulated to the Partnership’s limited partners which, if approved by the limited partners, would have authorized the General Partner to initiate the potential sale of all of the Properties and the dissolution of the Partnership (each a “Consent”). Limited partners owning a majority of the outstanding limited partnership interests did not vote in favor of any of the Consents. Therefore, the Partnership continues to operate as a going concern.
During
the 2020 consent solicitation process, the Limited Partners approved two separate amendments to the Partnership Agreement.
2. RECENTLY ISSUED ACCOUNTING PRINCIPLES:
Management has reviewed recently issued, but not yet effective, accounting pronouncements and does not expect the implementation of the pronouncements to have a significant effect on the Partnership’s financial statements.
| 8 |
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
3. INVESTMENT PROPERTIES AND PROPERTIES HELD FOR SALE:
The total cost of the Properties includes the original purchase price plus acquisition fees and other capitalized costs paid to an affiliate of the former general partners of the Partnership.
As
of September 30, 2023, the Partnership owned
Sale of Walton Way Property
On
April 22, 2022, the Partnership sold the property located at 1730 Walton Way, Augusta, GA for $1,600,000. The gain on the sale is approximately
$
Sale of Martintown Road Property
On
March 31, 2023, the Martintown Road Property was sold for $
Sale of Mt. Pleasant, SC Property
On
June 6, 2023, the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property
with an asking price of $
On
July 20, 2023, the Partnership accepted an offer to sell the Property at asking price. The buyer negotiated a 1-day inspection
period and on August 31, 2023 the Partnership sold the Property for $
Sale of Applebee’s Property
On
April 11, 2023, the Partnership signed a listing agreement to offer its Applebee’s Property for a sale price of $
On
July 13, 2023, the Partnership accepted an offer to sell the Property for $
On
September 7, 2023 the Partnership sold the Property for $
Wendy’s – Peach Orchard Road, Augusta, GA Property
On October 30, 2022, the tenant Wendgusta, LLC closed on an asset purchase agreement with JAI Augusta, LLC to sell substantially all the assets of the tenant and pursuant thereto, the lease was also assigned to JAI Augusta under the same terms and conditions of the lease amendment effected January 1, 2021.
On
June 6, 2023 the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property
with an asking price of $
On
August 7, 2023 the Partnership accepted an offer to sell the Property for $
| 9 |
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Wendy’s – Whiskey Road, Aiken, SC
On
June 6, 2023, the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property
with an asking price of $
On
October 6, 2023 the Partnership accepted an offer to sell the Property for $
Wendy’s – Folly Road, Charleston, SC
On December 19, 2022, the tenant Wendcharles I, LLC closed on an asset purchase agreement with JAI Augusta, LLC to sell substantially all the assets of the tenant and pursuant thereto, the lease was also assigned to JAI Augusta under the same terms and conditions of the lease amendment effected January 1, 2021.
On
June 6, 2023, the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property
with an asking price of $
Wendy’s – Richland Ave, Aiken, SC
On
June 6, 2023, the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property
with an asking price of $
Wendy’s – Sam Rittenberg, Charleston, SC
On
June 6, 2023, the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property
with an asking price of $
Property Held for Sale
The Walton Way property in Augusta, GA, was listed for sale on July 5, 2021 and was sold on April 22, 2022. The Martintown Rd property in North Augusta, SC was listed for sale on December 22, 2021 and was sold on March 31, 2023. The Applebee’s Property was listed for sale on April 11, 2023 and sold on September 7, 2023. The Mt. Pleasant, SC Wendy’s was listed for sale on July 12, 2023 and sold on August 31, 2023. The remaining five Wendy’s properties were listed for sale on July 12, 2023.
The components of the five properties held for sale in the condensed balance sheets as of September 30, 2023 and December 31, 2022 are outlined below:
| September 30, 2023 | December 31, 2022 | |||||||
| Balance Sheet: | ||||||||
| Land | $ | $ | ||||||
| Building | ||||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| Properties held for sale | $ | $ | ||||||
| 10 |
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
4. PARTNERSHIP AGREEMENT:
The
Partnership Agreement was amended, effective as of October 20, 2020, to extend the term of the Partnership to
Under
the terms of the Partnership Agreement, as amended, net profits or losses from operations are allocated
The
provisions regarding distribution of Net Proceeds, as defined, provide that Net Proceeds are to be distributed as follows: (a) to the
limited partners, an amount equal to
5. TRANSACTIONS WITH GENERAL PARTNER AND ITS AFFILIATES:
Pursuant
to the terms of the Permanent Manager Agreement (“PMA”) executed in 1993 and renewed for an additional two-year term as of
January 1, 2021, the General Partner receives a base fee (the “Base Fee”) for managing the Partnership equal to four percent
of gross receipts, subject initially to a minimum annual Base Fee. The PMA also provides that the Partnership is responsible for reimbursement
of the General Partner for office rent and related office overhead (“Expenses”) up to an initial annual maximum of $
For purposes of computing the four percent overall fee paid to the General Partner, gross receipts include amounts recovered in connection with the misappropriation of assets by the former general partners and their affiliates. The fee received by the General Partner from the Partnership on any amounts recovered reduce the four percent minimum fee by that same amount.
Amounts paid and/or accrued to the General Partner and its affiliates for the three- and nine-month periods ended September 30, 2023 and 2022 are as follows:
| Incurred for the | Incurred for the | Incurred for the | Incurred for the | |||||||||||||
| Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| General Partner | ||||||||||||||||
| Management fees | $ | $ | $ | $ | ||||||||||||
| Overhead allowance | ||||||||||||||||
| Sales commissions | ||||||||||||||||
| Reimbursement for out-of-pocket expenses | ||||||||||||||||
| Cash distribution | ||||||||||||||||
| Amounts paid and/or accrued to the General Partner | $ | $ | $ | $ | ||||||||||||
At
September 30, 2023 and December 31, 2022, $
| 11 |
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
As of September 30, 2023, Jesse Small, an Advisory Board Member, beneficially owned greater than ten percent of the Partnership’s outstanding limited partnership interests. Amounts paid to Mr. Small for his services as a member of the Advisory Board for the three- and nine-month periods ended September 30, 2023 and 2022 are as follows:
| Three Month Period ended September 30, 2023 | Three Month Period ended September 30, 2022 | Nine Month Period ended September 30, 2023 | Nine Month Period ended September 30, 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Advisory Board Fees paid | $ | $ | $ | $ | ||||||||||||
At September 30, 2023 and December 31, 2022 there were no outstanding Advisory Board fees accrued and payable to Jesse Small.
6. CONTINGENT LIABILITIES:
According
to the Partnership Agreement, TPG, as General Partner may receive a disposition fee not to exceed
7. PMA INDEMNIFICATION TRUST:
The
PMA provides that TPG will be indemnified from any claims or expenses arising out of, or relating to, TPG serving in the capacity of
General Partner or as substitute general partner, so long as such claims do not arise from fraudulent or criminal misconduct by TPG.
The PMA provides that the Partnership will fund this indemnification obligation by establishing a reserve of up to $
| 12 |
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
8. FAIR VALUE DISCLOSURES:
The Partnership has determined the fair value based on hierarchy that gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy under the accounting principle are described below:
| Level 1. | Quoted prices in active markets for identical assets or liabilities. | |
| Level 2. | Quoted prices for similar investments in active markets, quoted prices for identical or similar investments in markets that are not active, and inputs other than quoted prices that are observable for the investment. | |
| Level 3. | Unobservable inputs for which there is little, if any, market activity for the investment. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation and the use of discounted cash flow models to value the investment. |
The fair value hierarchy is based on the lowest level of input that is significant to the fair value measurements. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The assets held in indemnification trust account are invested in one year treasury bills which are measured using level 1 fair value inputs.
The
Partnership assesses the levels of the investments at each measurement date, and transfers between levels are recognized on the actual
date of the event or change in circumstances that caused the transfer in accordance with the Partnership’s accounting policy regarding
the recognition of transfers between levels of the fair value hierarchy. For the nine-month period ended September 30, 2023 and for the
year ended December 31, 2022, there were
9. SUBSEQUENT EVENTS:
Wendy’s – Peach Orchard, Augusta, GA
On
November 1, 2023, the Partnership closed on the sale of the Property. The proceeds from the sale were $
Wendy’s – Whiskey Road, Aiken, SC
On
October 6, 2023 the Partnership accepted an offer to sell the Property for $
On
November 6, 2023, the Partnership closed on the sale of the Property. The proceeds from the sale were $
We have reviewed all material events through the issuance of this report in accordance with ASC 855-10.
| 13 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but are the intent, belief or current expectations of management of DiVall Insured Income Properties 2 Limited Partnership (the “Partnership”) based on its knowledge and understanding of the business and industry. Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.
Examples of forward-looking statements include, but are not limited to, statements we make regarding:
| ● | our expectations regarding financial condition or results of operations in future periods; | |
| ● | our future sources of, and needs for, liquidity and capital resources; | |
| ● | our expectations regarding economic and business conditions; | |
| ● | our business strategies; | |
| ● | our decisions and policies with respect to the potential retention or disposition of one or more Properties; | |
| ● | our ability to find a suitable purchaser for any marketed Properties; | |
| ● | our ability to agree on an acceptable purchase price or contract terms; | |
| ● | our ability to collect rents on our leases; | |
| ● | our ability to maintain relationships with our tenants, and when necessary identify new tenants; | |
| ● | future capital expenditures; and | |
| ● | other risks and uncertainties described from time to time in our filings with the Securities and Exchange Commission (the “SEC”). |
| 14 |
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates, including investment impairment. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates, and the difference could be material.
The Partnership believes that its most critical accounting policies deal with:
Depreciation methods and lives- Depreciation of the Properties is provided on a straight-line basis over the estimated useful life of the buildings and improvements. While the Partnership believes these are the appropriate lives and methods, use of different lives and methods could result in different impacts on net income. Additionally, the value of real estate is typically based on market conditions and property performance, so depreciated book value of real estate may not reflect the market value of real estate assets.
Revenue recognition- Rental revenue from investment properties is recognized on a straight-line basis over the life of the respective lease when collectability is assured. Percentage rents are accrued only when the tenant has reached the sales breakpoint stipulated in the lease.
Impairment- The Partnership periodically reviews its long-lived assets, primarily real estate, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Partnership’s review involves comparing current and future operating performance of the assets, the most significant of which is undiscounted operating cash flows, to the carrying value of the assets. Based on this analysis, if deemed necessary, a provision for possible loss is recognized.
Investment Properties
As of September 30, 2023, the Partnership owned five Properties, all of which contained fully constructed fast-food/casual dining restaurant facilities. The Properties are operated by tenants as Wendy’s franchise restaurants. The Properties are located in two states, Georgia and South Carolina. The five properties are included in properties held for sale as of September, 30, 2023.
Property taxes, general maintenance, insurance and ground rent on the Properties are the responsibility of the tenant. However, when a tenant fails to make the required tax payments or when a Property becomes vacant, the Partnership makes the appropriate property tax payments to avoid possible foreclosure of the property.
There were no building improvements capitalized during the three-month period ending September 30, 2023.
Net Income
Net income for the three-month periods ended September 30, 2023 and 2022 was $4,344,198 and $188,535, respectively. Net income per limited partnership interest for the three-month periods ended September 30, 2023 and 2022 was $92.93 and $4.03, respectively.
Net income for the nine-month periods ended September 30, 2023 and 2022 was $5,648,248 and $1,606,074, respectively. Net income per limited partnership interest for the nine-month periods ended September 30, 2023 and 2022 was $120.82 and $34.36, respectively.
See paragraphs below for further information as to the primary factors that contributed to the variances in operating income and expense items from the 2022 periods to the 2023 periods.
| 15 |
Results of Operations
Three-month period ended September 30, 2023 as compared to the three-month period ended September 30, 2022:
Net income from continuing operations for the three month periods ended September 30, 2023 and 2022 was $4,344,198 and $188,535, respectively. Net income per limited partnership interest for the three month periods ended September 30, 2023 and 2022 was $92.93 and $4.03, respectively.
See paragraphs below for further information as to the primary factors that contributed to the variances in operating income and expense items from the 2022 periods to the 2023 periods.
Operating Rental Income: Rental income for the three-month periods ended September 30, 2023 and 2022 was $309,010 and $351,179, respectively. The rental income was comprised primarily of monthly lease obligations and includes recognition of annual percentage rents earned year-to-date. The decrease is primarily the result of lower monthly base rents and accrued percentage rents as a result of multiple property sales within the last 12 months.
General and Administrative Expense: General and administrative expenses for the three-month periods ended September 30, 2023 and 2022 were $149,503 and $41,300, respectively. General and administrative expenses were comprised of management expense, state/city registration and annual report filing fees, XBRL outsourced fees, office supplies, printing costs, outside storage expenses, copy/fax costs, postage and shipping expenses, long-distance telephone expenses, website fees, bank fees and state income tax expenses. The increase is primarily the result of higher state income tax accruals for 2023 related to the Property sales in March, August and September.
Professional services: Professional services expenses for the three-month periods ended September 30, 2023 and 2022 were $30,506 and $39,495, respectively. Professional services expenses were primarily comprised of investor relations data processing, investor mailings processing, website design, legal, auditing and tax preparation fees, and SEC report conversion and processing fees. The decrease is primarily related to the decrease in investor relations costs as a result of our new transfer agent contract effective in January 2023.
Nine-month period ended September 30, 2023 as compared to the nine-month period ended September 30, 2022:
Net income from continuing operations for the nine month periods ended September 30, 2023 and 2022 was $5,648,248 and $1,606,074, respectively. The increase is primarily the result of the sale of three Properties in 2023 versus the sale of one Property in 2022.
See paragraphs below for further information as to the primary factors that contributed to the variances in operating income and expense items from the 2022 periods to the 2023 periods.
Operating Rental Income: Rental income for the nine-month periods ended September 30, 2023 and 2022 was $907,706 and $999,354, respectively. The rental income was comprised primarily of monthly lease obligations and includes accruals for annual percentage rents earned year-to-date. The decrease is primarily the result of lower monthly base rents and accrued percentage rents as a result of three property sales within the last 12 months.
General and Administrative Expense: General and administrative expenses for the nine-month periods ended September 30, 2023 and 2022 were $224,991 and $103,206, respectively. General and administrative expenses were comprised of management expense, state/city registration and annual report filing fees, office supplies, printing costs, outside storage expenses, copy/fax costs, postage and shipping expenses, website fees, bank fees, and state income tax expenses. The increase is primarily the result of higher state income tax accrued for 2023 income related to the sale of the three Properties so far this year.
Professional services: Professional services expenses for the nine-month periods ended September 30, 2023 and 2022 were $123,239 and $191,389, respectively. Professional services expenses were primarily comprised of investor relations data processing, investor mailings processing, website design, legal, auditing and tax preparation fees, and SEC report conversion and processing fees. The decrease is primarily related to the decrease in the cost of our new transfer agent contract effective in January 2023.
| 16 |
Cash Flow Analysis
Net cash flows provided by operating activities for the nine-month periods ended September 30, 2023 and 2022 were $810,379 and $924,568, respectively. The decrease is attributed to lower net income period over period (exclusive of the property sales) in addition to lower accrued percentage rents than in 2022.
Cash flows provided by investing activities for the nine-month periods ended September 30, 2023 and 2022 were $6,221,659 and $1,448,425, respectively. The 2023 amount represents the proceeds from the sales of three Properties offset partially by interest applied to the indemnification trust account. The 2022 amount represents the proceeds from the sale of the Walton Way property offset partially by interest applied to the indemnification trust account.
For the nine-month period ended September 30, 2023, cash flows used in financing activities was $1,880,849 and consisted of aggregate limited partner distributions of $1,875,001, and general partner distributions of $5,848.
For the nine-month period ended September 30, 2022, cash flows used in financing activities was $3,057,470 and consisted of aggregate limited partner distributions of $3,050,000, and general partner distributions of $7,470.
Liquidity and Capital Resources
The Partnership’s cash balance was $5,322,425 at September 30, 2023. Cash of $5,000,000 was used to fund the aggregate distribution to limited partners on October 6, 2023 of $5,000,000.
The Partnership’s principal demands for liquidity historically have been, and are expected to continue to be, for the payment of operating expenses and distributions. Management anticipates that cash generated through the operations of the Properties and potential sales of Properties will primarily provide the sources for future Partnership liquidity and limited partner distributions of cash flows from operations. The Partnership is in competition with sellers of similar properties to locate suitable purchasers for its Properties. The two primary liquidity risks in the absence of mortgage debt with respect to the on-going operations of the Properties are the Partnership’s inability to collect rent receivables and near-term or chronic property vacancies. The amount of cash to be distributed to our limited partners is determined by the General Partner and is dependent on a number of factors, including funds available for payment of distributions, capital expenditures, and taxable income recognition matching, which is primarily attributable to percentage rents and property sales.
As of September 30, 2023, the current five Properties were 100% leased. In addition, the Partnership collected 100% of its base rent from current operating tenants for the period ended September 30, 2023 and the year ended December 31, 2022, which we believe is a good indication of overall tenant quality and stability.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
As a smaller reporting company, the Partnership is not required to provide the information required by Item 305 of Regulation S-K.
Item 4. Controls and Procedures
Controls and Procedures
Controls and Procedures:
As of September 30, 2023 the Partnership’s management, including the persons performing the functions of the Partnership’s principal executive officer and principal financial officer, have concluded that the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report were effective based on the evaluation of these controls and procedures as required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Exchange Act.
Changes in Internal Control over Financial Reporting:
There has been no change in the Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ending September 30, 2023 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
| 17 |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As of the date of this report, there are no material pending legal proceedings to which the Partnership is a party.
Item 1a. Risk Factors
Not Applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| (a) | Listing of Exhibits |
| 3.1 | Certificate of Limited Partnership dated November 20, 1987, filed as Exhibit 3.7 to the Partnership’s Annual Report on Form 10-K filed March 22, 2013, Commission File 0-17686, and incorporated herein by reference. | |
| 4.1 | Agreement of Limited Partnership dated as of November 20, 1987, amended as of November 25, 1987, and February 20, 1988, filed as Exhibit 3A to Amendment No. 1 to the Partnership’s Registration Statement on Form S-11 as filed on February 22, 1988, and incorporated herein by reference. | |
| 4.2 | Amendments to Amended Agreement of Limited Partnership dated as of June 21, 1988, included as part of Supplement dated August 15, 1988, filed under Rule 424(b)(3), Commission File 0-17686, and incorporated herein by reference. | |
| 4.3. | Amendment to Amended Agreement of Limited Partnership dated as of February 8, 1993, filed as Exhibit 3.3 to the Partnership’s Annual Report on Form 10-K for the year ended December 31, 1992, Commission File 0-17686, and incorporated herein by reference. | |
| 4.4 | Amendment to Amended Agreement of Limited Partnership dated as of May 26, 1993, filed as Exhibit 3.4 to the Partnership’s Annual Report on Form 10-K for the year ended December 31, 1993, Commission File 0-17686, and incorporated herein by reference. | |
| 4.5 | Amendment to Amended Agreement of Limited Partnership dated as of June 30, 1994, filed as Exhibit 3.5 to the Partnership’s Annual Report on Form 10-K for the year ended December 31, 1994, Commission File 0-17686, and incorporated herein by reference. | |
| 4.6 | Amendment to Amended Agreement of Limited Partnership dated as of November 9, 2009, filed as Exhibit 4.1 to the Partnership’s Quarterly Report on Form 10-Q filed November 12, 2009, Commission File 0-17686, and incorporated herein by reference. | |
4.7 |
| |
| 31.1 | Sarbanes-Oxley Section 302 Certification | |
| 31.2 | Sarbanes-Oxley Section 302 Certification | |
| 32.1 | Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350. | |
| 101 | The following materials from the Partnership’s Quarterly Report on Form 10-Q for the quarter ended, formatted in XBRL (Extensible Business Reporting Language): (i) Unaudited Condensed Balance Sheets at September 30, 2023 and December 31, 2022, (ii) Unaudited Condensed Statements of Income for the three and nine month periods ended September 30, 2023 and 2022, (iii) Unaudited Condensed Statement of Cash Flows for the nine month periods ended September 30, 2023 and 2022, (iv) Unaudited Condensed Statements of Partners’ Capital for the nine month periods ended September 30, 2023 and 2022, and (v) Notes to the Unaudited Condensed Financial Statements. |
| 18 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
| By: | /s/ Lynette L. DeRose | |
| Lynette L. DeRose | ||
| (Chief Financial Officer and | ||
| Duly Authorized Officer of the Partnership) | ||
| Date: | November 13, 2023 |
| 19 |
Exhibit 31.1
DIVALL INSURED INCOME PROPERTIES 2
LIMITED PARTNERSHIP
CERTIFICATIONS
I, Lynette L. DeRose, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of DiVall Insured Income Properties 2 Limited Partnership; | |
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: November 13, 2023 | By: | /s/ Lynette L. DeRose | |
| Chief Financial Officer of the Partnership | |||
| (principal financial officer of the registrant) |
Exhibit 31.2
DIVALL INSURED INCOME PROPERTIES 2
LIMITED PARTNERSHIP
CERTIFICATIONS
I, Bruce A. Provo, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of DiVall Insured Income Properties 2 Limited Partnership; | |
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: November 13, 2023 | By: | /s/ Bruce A. Provo | |
| President, and Chief Executive Officer of The Provo Group, Inc., the General Partner of the Partnership | |||
| (principal executive officer of the registrant) |
Exhibit 32.1
DIVALL INSURED INCOME PROPERTIES 2
LIMITED PARTNERSHIP
Certification of Periodic Financial Report
Pursuant to 18 U.S.C. Section 1350
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned principal executive officer and principal financial officer of DiVall Insured Income Properties 2 Limited Partnership (the “Company”) certify that this Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: November 13, 2023 | By: | /s/ Lynette L. DeRose | |
| Chief Financial Officer of the Partnership | |||
| (principal financial officer of the registrant) |
| By: | /s/ Bruce A. Provo | |
| President, and Chief Executive Officer of The Provo Group, Inc., the General Partner of the Partnership | ||
| (principal executive officer of the registrant) |
This certification is made solely for the purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.
Condensed Balance Sheets (Parenthetical) - shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
|---|---|---|---|
| Statement of Financial Position [Abstract] | |||
| Limited partners, interests outstanding | 46,280.3 | 46,280.3 | 46,280.3 |
Condensed Statements of Income (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| OPERATING REVENUES: | ||||
| Rental income (Note 3) | $ 309,010 | $ 351,179 | $ 907,706 | $ 999,354 |
| TOTAL OPERATING REVENUES | 309,010 | 351,179 | 907,706 | 999,354 |
| EXPENSES: | ||||
| Partnership management fees (Note 5) | 68,079 | 68,079 | 204,237 | 204,237 |
| Insurance | 712 | 1,550 | 2,179 | 4,651 |
| General and administrative | 6,331 | 7,700 | 27,723 | 33,778 |
| State income tax expense | 143,172 | 33,600 | 197,268 | 69,428 |
| Advisory Board fees and expenses | 1,750 | 1,750 | 5,250 | 5,250 |
| Professional services | 30,506 | 39,495 | 123,239 | 191,389 |
| Depreciation | ||||
| Amortization | 53,781 | 10,588 | 83,785 | 32,666 |
| TOTAL OPERATING EXPENSES | 304,331 | 162,762 | 643,681 | 541,399 |
| OTHER INCOME | ||||
| Other income | 20 | 44,495 | ||
| Other interest income | 1,011 | 98 | 9,010 | 416 |
| Gain on sale of property | 4,338,508 | 5,375,213 | 1,103,208 | |
| TOTAL OTHER INCOME | 4,339,519 | 118 | 5,384,223 | 1,148,119 |
| NET INCOME | 4,344,198 | 188,535 | 5,648,248 | 1,606,074 |
| NET INCOME ALLOCATED- GENERAL PARTNER | 43,442 | 1,885 | 56,482 | 16,060 |
| NET INCOME ALLOCATED- LIMITED PARTNERS | $ 4,300,756 | $ 186,650 | $ 5,591,767 | $ 1,590,014 |
| Based on 46,280.3 interests outstanding: (Basic and diluted) | ||||
| NET INCOME PER LIMITED PARTNERSHIP INTEREST | $ 92.93 | $ 4.03 | $ 120.82 | $ 34.36 |
Condensed Statements of Income (Unaudited) (Parenthetical) - shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
|---|---|---|---|
| Income Statement [Abstract] | |||
| Limited partners capital account, interests outstanding | 46,280.3 | 46,280.3 | 46,280.3 |
Condensed Statements of Partners' Capital (Unaudited) - USD ($) |
General Partner [Member]
Cumulativen Net Income [Member]
|
General Partner [Member]
Cumulative Cash Distributions [Member]
|
General Partner [Member] |
Limited Partner [Member]
Cumulativen Net Income [Member]
|
Limited Partner [Member]
Cumulative Cash Distributions [Member]
|
Limited Partner [Member]
Capital Contributions Net of Offering Costs [Member]
|
Limited Partner [Member]
Reallocation [Member]
|
Limited Partner [Member] |
Total |
|---|---|---|---|---|---|---|---|---|---|
| Beginning balance at Dec. 31, 2021 | $ 399,805 | $ (166,024) | $ 233,781 | $ 45,946,561 | $ (80,127,268) | $ 39,358,468 | $ (840,229) | $ 4,337,532 | $ 4,571,313 |
| Net Income | 1,568 | 1,568 | 155,249 | 155,249 | 156,817 | ||||
| Distributions declared | (949) | (949) | (1,200,000) | (1,200,000) | (1,200,949) | ||||
| Ending balance at Mar. 31, 2022 | 401,373 | (166,973) | 234,400 | 46,101,810 | (81,327,268) | 39,358,468 | (840,229) | 3,292,781 | 3,527,181 |
| Beginning balance at Dec. 31, 2021 | 399,805 | (166,024) | 233,781 | 45,946,561 | (80,127,268) | 39,358,468 | (840,229) | 4,337,532 | 4,571,313 |
| Net Income | 1,606,074 | ||||||||
| Ending balance at Sep. 30, 2022 | 415,865 | (173,494) | 242,371 | 47,536,574 | (83,177,268) | 39,358,468 | (840,229) | 2,877,545 | 3,119,916 |
| Beginning balance at Mar. 31, 2022 | 401,373 | (166,973) | 234,400 | 46,101,810 | (81,327,268) | 39,358,468 | (840,229) | 3,292,781 | 3,527,181 |
| Net Income | 12,607 | 12,607 | 1,248,114 | 1,248,114 | 1,260,721 | ||||
| Distributions declared | (5,673) | (5,673) | (200,000) | (200,000) | (205,673) | ||||
| Ending balance at Jun. 30, 2022 | 413,980 | (172,646) | 241,334 | 47,349,924 | (81,527,268) | 39,358,468 | (840,229) | 4,340,895 | 4,582,229 |
| Net Income | 1,885 | 1,885 | 186,650 | 186,650 | 188,535 | ||||
| Distributions declared | (848) | (848) | (1,650,000) | (1,650,000) | (1,650,848) | ||||
| Ending balance at Sep. 30, 2022 | 415,865 | (173,494) | 242,371 | 47,536,574 | (83,177,268) | 39,358,468 | (840,229) | 2,877,545 | 3,119,916 |
| Beginning balance at Dec. 31, 2022 | 420,502 | (175,584) | 244,918 | 47,995,656 | (83,352,268) | 39,358,468 | (840,229) | 3,161,627 | 3,406,545 |
| Net Income | 11,404 | 11,404 | 1,128,857 | 1,128,857 | 1,140,261 | ||||
| Distributions declared | (5,111) | (5,111) | (475,001) | (475,001) | (480,112) | ||||
| Ending balance at Mar. 31, 2023 | 431,906 | (180,695) | 251,211 | 49,124,513 | (83,827,269) | 39,358,468 | (840,229) | 3,815,483 | 4,066,694 |
| Beginning balance at Dec. 31, 2022 | 420,502 | (175,584) | 244,918 | 47,995,656 | (83,352,268) | 39,358,468 | (840,229) | 3,161,627 | 3,406,545 |
| Net Income | 5,648,248 | ||||||||
| Ending balance at Sep. 30, 2023 | 476,985 | (201,033) | 275,952 | 53,587,422 | (85,227,269) | 39,358,468 | (840,229) | 6,878,392 | 7,154,344 |
| Beginning balance at Mar. 31, 2023 | 431,906 | (180,695) | 251,211 | 49,124,513 | (83,827,269) | 39,358,468 | (840,229) | 3,815,483 | 4,066,694 |
| Net Income | 1,637 | 1,637 | 162,153 | 162,153 | 163,790 | ||||
| Distributions declared | (737) | (737) | (1,250,000) | (1,250,000) | (1,250,737) | ||||
| Ending balance at Jun. 30, 2023 | 433,543 | (181,432) | 252,111 | 49,286,666 | (85,077,269) | 39,358,468 | (840,229) | 2,727,636 | 2,979,747 |
| Net Income | 43,442 | 43,442 | 4,300,756 | 4,300,756 | 4,344,198 | ||||
| Distributions declared | (19,601) | (19,601) | (150,000) | (150,000) | (169,601) | ||||
| Ending balance at Sep. 30, 2023 | $ 476,985 | $ (201,033) | $ 275,952 | $ 53,587,422 | $ (85,227,269) | $ 39,358,468 | $ (840,229) | $ 6,878,392 | $ 7,154,344 |
ORGANIZATION: |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| ORGANIZATION: | 1. ORGANIZATION:
DiVall Insured Income Properties 2 LP (the “Partnership”) was formed on November 20, 1987, pursuant to the Uniform Limited Partnership Act of the State of Wisconsin. The initial capital, contributed during 1987, consisted of $300, representing aggregate capital contributions of $200 by the former general partners and $100 by the initial limited partner. A subsequent offering of limited partnership interests closed on February 22, 1990, with 46,280.3 limited partnership interests having been sold in that offering, resulting in total proceeds to the Partnership, net of underwriting compensation and other offering costs, of $39,358,468.
The Partnership is currently engaged in the business of owning and operating its investment portfolio of commercial real estate properties (each a “Property”, and collectively, the “Properties”). The Properties are leased on a triple net basis primarily to, and operated by, franchisors or franchisees of national, regional, and local retail chains under primarily long-term leases. The lessees are operators of fast food, family style, and casual/theme restaurants. As of September 30, 2023, the Partnership owned 5 Properties, which are located in a total of two states.
The Limited Partnership Agreement, as amended from time to time (collectively, the “Partnership Agreement”), stipulates that the Partnership is scheduled to be dissolved on November 30, 2023, or earlier upon the prior occurrence of any of the following events: (a) the disposition of all its Properties; (b) the written determination by the General Partner, that the Partnership’s assets may constitute “plan assets” for purposes of ERISA; (c) the agreement of limited partners owning a majority of the outstanding limited partner interests to dissolve the Partnership; or (d) the dissolution, bankruptcy, death, withdrawal, or incapacity of the last remaining General Partner, unless an additional General Partner is elected by a majority of the limited partners. During the second and third quarters of the nine odd numbered years from 2001 through 2017, consent solicitations were circulated to the Partnership’s limited partners which, if approved by the limited partners, would have authorized the General Partner to initiate the potential sale of all of the Properties and the dissolution of the Partnership (each a “Consent”). Limited partners owning a majority of the outstanding limited partnership interests did not vote in favor of any of the Consents. Therefore, the Partnership continues to operate as a going concern.
During the 2020 consent solicitation process, the Limited Partners approved two separate amendments to the Partnership Agreement. The amendments served to: (i) extend the term of the Partnership by three (3) years to November 30, 2023, and (ii) permit the General Partner to effect distributions at times that it deems appropriate, but no less often than semi-annually.
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RECENTLY ISSUED ACCOUNTING PRINCIPLES: |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Accounting Changes and Error Corrections [Abstract] | |
| RECENTLY ISSUED ACCOUNTING PRINCIPLES: | 2. RECENTLY ISSUED ACCOUNTING PRINCIPLES:
Management has reviewed recently issued, but not yet effective, accounting pronouncements and does not expect the implementation of the pronouncements to have a significant effect on the Partnership’s financial statements.
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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INVESTMENT PROPERTIES AND PROPERTIES HELD FOR SALE |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVESTMENT PROPERTIES AND PROPERTIES HELD FOR SALE | 3. INVESTMENT PROPERTIES AND PROPERTIES HELD FOR SALE:
The total cost of the Properties includes the original purchase price plus acquisition fees and other capitalized costs paid to an affiliate of the former general partners of the Partnership.
As of September 30, 2023, the Partnership owned five Properties, all of which contained fully constructed fast-food/casual dining restaurant facilities. The Properties are operated by tenants as Wendy’s franchise restaurants. The Properties are located in two states, Georgia and South Carolina.
Sale of Walton Way Property
On April 22, 2022, the Partnership sold the property located at 1730 Walton Way, Augusta, GA for $1,600,000. The gain on the sale is approximately $1,103,000.
Sale of Martintown Road Property
On March 31, 2023, the Martintown Road Property was sold for $1,350,000. The Partnership received proceeds from the sale of approximately $1.28 million and the gain on the sale was about $1 million.
Sale of Mt. Pleasant, SC Property
On June 6, 2023, the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property with an asking price of $3.2 million. The Property listing went active on July 12, 2023.
On July 20, 2023, the Partnership accepted an offer to sell the Property at asking price. The buyer negotiated a 1-day inspection period and on August 31, 2023 the Partnership sold the Property for $3,212,124. The gain on the sale was approximately $2.7M.
Sale of Applebee’s Property
On April 11, 2023, the Partnership signed a listing agreement to offer its Applebee’s Property for a sale price of $2.3 million. As of June 27, 2023, the tenant waived its right of first offer contained in the lease.
On July 13, 2023, the Partnership accepted an offer to sell the Property for $2,125,000. The buyer negotiated a 25-day inspection period and closing should take place about 30 days after that date.
On September 7, 2023 the Partnership sold the Property for $2,125,000. The gain on the sale was approximately $1.6 million.
Wendy’s – Peach Orchard Road, Augusta, GA Property
On October 30, 2022, the tenant Wendgusta, LLC closed on an asset purchase agreement with JAI Augusta, LLC to sell substantially all the assets of the tenant and pursuant thereto, the lease was also assigned to JAI Augusta under the same terms and conditions of the lease amendment effected January 1, 2021.
On June 6, 2023 the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property with an asking price of $4.1 million. The Property listing went active on July 12, 2023.
On August 7, 2023 the Partnership accepted an offer to sell the Property for $3,822,000. The sale closed on November 1, 2023 and the gain was approximately $3.4 million.
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Wendy’s – Whiskey Road, Aiken, SC
On June 6, 2023, the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property with an asking price of $4.0 million. The Property listing went active on July 12, 2023.
On October 6, 2023 the Partnership accepted an offer to sell the Property for $3.8 million. The sale closed on November 6, 2023 and the gain was approximately $3.2 million.
Wendy’s – Folly Road, Charleston, SC
On December 19, 2022, the tenant Wendcharles I, LLC closed on an asset purchase agreement with JAI Augusta, LLC to sell substantially all the assets of the tenant and pursuant thereto, the lease was also assigned to JAI Augusta under the same terms and conditions of the lease amendment effected January 1, 2021.
On June 6, 2023, the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property with an asking price of $3.5 million. The Property listing went active on July 12, 2023.
Wendy’s – Richland Ave, Aiken, SC
On June 6, 2023, the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property with an asking price of $3.4 million. The Property listing went active on July 12, 2023.
Wendy’s – Sam Rittenberg, Charleston, SC
On June 6, 2023, the Partnership executed a listing agreement with Matthews Real Estate Investment Services, Inc. for the sale of the Property with an asking price of $3.9 million. The Property listing went active on July 12, 2023.
Property Held for Sale
The Walton Way property in Augusta, GA, was listed for sale on July 5, 2021 and was sold on April 22, 2022. The Martintown Rd property in North Augusta, SC was listed for sale on December 22, 2021 and was sold on March 31, 2023. The Applebee’s Property was listed for sale on April 11, 2023 and sold on September 7, 2023. The Mt. Pleasant, SC Wendy’s was listed for sale on July 12, 2023 and sold on August 31, 2023. The remaining five Wendy’s properties were listed for sale on July 12, 2023.
The components of the five properties held for sale in the condensed balance sheets as of September 30, 2023 and December 31, 2022 are outlined below:
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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PARTNERSHIP AGREEMENT: |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Equity [Abstract] | |
| PARTNERSHIP AGREEMENT: | 4. PARTNERSHIP AGREEMENT:
The Partnership Agreement was amended, effective as of October 20, 2020, to extend the term of the Partnership to November 30, 2023, or until dissolution prior thereto pursuant to the consent of limited partners owning a majority of the outstanding limited partnership interests.
Under the terms of the Partnership Agreement, as amended, net profits or losses from operations are allocated 99% to the limited partners and 1% to the current General Partner. The November 9, 2009 amendment also provided for distributions from Net Cash Receipts, as defined, to be made 99% to limited partners and 1% to The Provo Group, Inc. (“TPG”, or the “General Partner”), the current General Partner, provided that quarterly distributions are cumulative and are not to be made to the current General Partner unless and until each limited partner has received a distribution from Net Cash Receipts in an amount equal to 10% per annum, cumulative simple return on his, her or its Adjusted Original Capital, as defined, from the Return Calculation Date, as defined, except to the extent needed by the General Partner to pay its federal and state income taxes on the income allocated to it attributable to such year.
The provisions regarding distribution of Net Proceeds, as defined, provide that Net Proceeds are to be distributed as follows: (a) to the limited partners, an amount equal to 100% of their Adjusted Original Capital; (b) then, to the limited partners, an amount necessary to provide each limited partner a liquidation preference equal to a 13.5% per annum, cumulative simple return on Adjusted Original Capital from the Return Calculation Date including in the calculation of such return on all prior distributions of Net Cash Receipts and any prior distributions of Net Proceeds under this clause, except to the extent needed by the General Partner to pay its federal and state income tax on the income allocated to it attributable to such year; and (c) then, to limited partners, 99%, and to the General Partner, 1%, of remaining Net Proceeds available for distribution.
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TRANSACTIONS WITH GENERAL PARTNER AND ITS AFFILIATES: |
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| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TRANSACTIONS WITH GENERAL PARTNER AND ITS AFFILIATES: | 5. TRANSACTIONS WITH GENERAL PARTNER AND ITS AFFILIATES:
Pursuant to the terms of the Permanent Manager Agreement (“PMA”) executed in 1993 and renewed for an additional two-year term as of January 1, 2021, the General Partner receives a base fee (the “Base Fee”) for managing the Partnership equal to four percent of gross receipts, subject initially to a minimum annual Base Fee. The PMA also provides that the Partnership is responsible for reimbursement of the General Partner for office rent and related office overhead (“Expenses”) up to an initial annual maximum of $13,250. Both the Base Fee and Expenses reimbursement are subject to annual Consumer Price Index based adjustments. Effective March 1, 2021, Management has elected to roll back the last five years of CPI increases to their 2016 level and suspend any future CPI adjustments for the base fee. Therefore, the minimum annual Base Fee decreased by 5.54% from the prior year to $272,316. The maximum annual Expenses reimbursement remained the same at $23,256 and any potential future CPI adjustments have been suspended.
For purposes of computing the four percent overall fee paid to the General Partner, gross receipts include amounts recovered in connection with the misappropriation of assets by the former general partners and their affiliates. The fee received by the General Partner from the Partnership on any amounts recovered reduce the four percent minimum fee by that same amount.
Amounts paid and/or accrued to the General Partner and its affiliates for the three- and nine-month periods ended September 30, 2023 and 2022 are as follows:
At September 30, 2023 and December 31, 2022, $19,601 and $2,090, respectively, was payable to the General Partner.
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
As of September 30, 2023, Jesse Small, an Advisory Board Member, beneficially owned greater than ten percent of the Partnership’s outstanding limited partnership interests. Amounts paid to Mr. Small for his services as a member of the Advisory Board for the three- and nine-month periods ended September 30, 2023 and 2022 are as follows:
At September 30, 2023 and December 31, 2022 there were no outstanding Advisory Board fees accrued and payable to Jesse Small.
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CONTINGENT LIABILITIES: |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| CONTINGENT LIABILITIES: | 6. CONTINGENT LIABILITIES:
According to the Partnership Agreement, TPG, as General Partner may receive a disposition fee not to exceed three percent of the contract price on the sale of the properties of the Partnership and two affiliated publicly registered limited partnerships, DiVall Insured Income Fund Limited Partnership (“DiVall 1”), which was dissolved December of 1998, and DiVall Income Properties 3 Limited Partnership, which was dissolved in December 2003 (“DiVall 3”), and together with the Partnership and DiVall 1 (the “three original partnerships”). In addition, fifty percent of all such disposition fees earned by TPG were to be escrowed until the aggregate amount of recovery of the funds misappropriated from the three original partnerships by the former general partners was greater than $4,500,000. Upon reaching such recovery level, full disposition fees would thereafter be payable, and fifty percent of the previously escrowed amounts would be paid to TPG. At such time as the recovery exceeded $6,000,000 in the aggregate, the remaining escrowed disposition fees were to be paid to TPG. If such levels of recovery were not achieved, TPG would contribute the amounts escrowed toward the recovery until the three original partnerships were made whole. In lieu of a disposition fee escrow, fifty percent of all such disposition fees previously discussed were paid directly to a restoration account and then distributed among the three original partnerships; whereby the three original partnerships recorded the recoveries as income. After the recovery level of $4,500,000 was exceeded, fifty percent of the total disposition fee amount paid to the three original partnerships recovery through the restoration account (in lieu of the disposition fee escrow) was refunded to TPG during March 1996. The remaining fifty percent amount allocated to the Partnership through the restoration account, and which was previously reflected as Partnership recovery income, may be owed to TPG if the $6,000,000 recovery level is met. As of September 30, 2023, the Partnership may owe TPG $16,296 if the $6,000,000 recovery level is achieved. TPG does not expect any future refund, as it is uncertain that such a $6,000,000 recovery level will be achieved.
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PMA INDEMNIFICATION TRUST: |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| PMA INDEMNIFICATION TRUST: | 7. PMA INDEMNIFICATION TRUST:
The PMA provides that TPG will be indemnified from any claims or expenses arising out of, or relating to, TPG serving in the capacity of General Partner or as substitute general partner, so long as such claims do not arise from fraudulent or criminal misconduct by TPG. The PMA provides that the Partnership will fund this indemnification obligation by establishing a reserve of up to $250,000 of Partnership assets which would not be subject to the claims of the Partnership’s creditors. An Indemnification Trust (the “Trust”) serving such purposes has been established at United Missouri Bank, N.A. The corpus of the Trust has been fully funded with Partnership assets. Funds are invested in U.S. Treasury securities at fair value at level 1 (see Note 8). In addition, $237,947 of earnings has been credited to the Trust as of September 30, 2023. The rights of TPG to the Trust shall be terminated upon the earliest to occur of the following events: (i) the written release by TPG of any and all interest in the Trust; (ii) the expiration of the longest statute of limitations relating to a potential claim which might be brought against TPG and which is subject to indemnification; or (iii) a determination by a court of competent jurisdiction that TPG shall have no liability to any person with respect to a claim which is subject to indemnification under the PMA. At such time as the indemnity provisions expire or the full indemnity is paid, any funds remaining in the Trust will revert back to the general funds of the Partnership.
DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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FAIR VALUE DISCLOSURES: |
9 Months Ended | |||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||
| Fair Value Disclosures [Abstract] | ||||||||||||||||
| FAIR VALUE DISCLOSURES: | 8. FAIR VALUE DISCLOSURES:
The Partnership has determined the fair value based on hierarchy that gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy under the accounting principle are described below:
The fair value hierarchy is based on the lowest level of input that is significant to the fair value measurements. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The assets held in indemnification trust account are invested in one year treasury bills which are measured using level 1 fair value inputs.
The Partnership assesses the levels of the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Partnership’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. For the nine-month period ended September 30, 2023 and for the year ended December 31, 2022, there were no such transfers.
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SUBSEQUENT EVENTS: |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS: | 9. SUBSEQUENT EVENTS:
Wendy’s – Peach Orchard, Augusta, GA On November 1, 2023, the Partnership closed on the sale of the Property. The proceeds from the sale were $3.7 million and the gain on the sale is expected to approximate $3.4 million.
Wendy’s – Whiskey Road, Aiken, SC On October 6, 2023 the Partnership accepted an offer to sell the Property for $3.8 million.
On November 6, 2023, the Partnership closed on the sale of the Property. The proceeds from the sale were $3.7 million and the gain on the sale is expected to approximate $3.2 million.
We have reviewed all material events through the issuance of this report in accordance with ASC 855-10. |
INVESTMENT PROPERTIES AND PROPERTIES HELD FOR SALE (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF PROPERTY HELD FOR SALE | The components of the five properties held for sale in the condensed balance sheets as of September 30, 2023 and December 31, 2022 are outlined below:
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TRANSACTIONS WITH GENERAL PARTNER AND ITS AFFILIATES: (Tables) |
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| Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF AMOUNTS PAID AND/OR ACCRUED TO GENERAL PARTNER AND ITS AFFILIATES | Amounts paid and/or accrued to the General Partner and its affiliates for the three- and nine-month periods ended September 30, 2023 and 2022 are as follows:
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| SCHEDULE OF ADVISORY BOARD FEES PAID |
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ORGANIZATION: (Details Narrative) |
9 Months Ended | ||
|---|---|---|---|
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Feb. 22, 1990
USD ($)
shares
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Nov. 20, 1987
USD ($)
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Sep. 30, 2023
Number
|
|
| Aggregate capital contributions | $ 300 | ||
| Limited partnership interests outstanding | shares | 46,280.3 | ||
| Proceeds to partnership, net of underwriting compensation and other offering costs | $ 39,358,468 | ||
| Number of properties owned | Number | 5 | ||
| Partnership agreement description | The amendments served to: (i) extend the term of the Partnership by three (3) years to November 30, 2023, and (ii) permit the General Partner to effect distributions at times that it deems appropriate, but no less often than semi-annually | ||
| General Partner [Member] | |||
| Aggregate capital contributions | 200 | ||
| Limited Partner [Member] | |||
| Aggregate capital contributions | $ 100 |
SCHEDULE OF PROPERTY HELD FOR SALE (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Real Estate [Abstract] | ||
| Land | $ 1,341,540 | $ 250,859 |
| Building | 1,840,864 | 409,297 |
| Accumulated Depreciation | (1,840,864) | (409,297) |
| Properties held for sale | $ 1,341,540 | $ 250,859 |
PARTNERSHIP AGREEMENT: (Details Narrative) |
Oct. 20, 2020 |
Sep. 30, 2023 |
|---|---|---|
| Partnership agreement extended date | Nov. 30, 2023 | |
| Limited Partner [Member] | ||
| Net profits or losses from operations amended | 99.00% | |
| Amended rate of net proceeds were to be distributed | 99.00% | |
| Cumulative simple return on adjusted original capital | 10.00% | |
| Amended distributions as percentage of adjusted original capital | 100.00% | |
| Liquidation preference of limited partners amended | 13.50% | |
| Net proceeds available for distribution | 99.00% | |
| General Partner [Member] | ||
| Net profits or losses from operations amended | 1.00% | |
| Amended rate of net proceeds were to be distributed | 1.00% | |
| Net proceeds available for distribution | 1.00% |
SCHEDULE OF AMOUNTS PAID AND/OR ACCRUED TO GENERAL PARTNER AND ITS AFFILIATES (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
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| Related Party Transactions [Abstract] | ||||
| Management fees | $ 68,079 | $ 68,079 | $ 204,237 | $ 204,237 |
| Overhead allowance | 5,814 | 5,814 | 17,442 | 17,442 |
| Sales commissions | 93,636 | 124,649 | ||
| Reimbursement for out-of-pocket expenses | 2,500 | 2,500 | ||
| Cash distribution | 19,601 | 848 | 25,449 | 7,470 |
| Amounts paid and/or accrued to the General Partner | $ 187,130 | $ 74,741 | $ 374,277 | $ 231,649 |
SCHEDULE OF ADVISORY BOARD FEES PAID (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
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| Related Party Transactions [Abstract] | ||||
| Advisory Board Fees paid | $ 875 | $ 875 | $ 2,625 | $ 2,625 |
TRANSACTIONS WITH GENERAL PARTNER AND ITS AFFILIATES: (Details Narrative) - USD ($) |
Jan. 01, 2023 |
Mar. 01, 2021 |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|---|---|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Payable to general partner | $ 19,601 | $ 2,090 | ||
| Permanent Manager Agreement [Member] | ||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Maximum reimbursement on office rent and related expenses | $ 13,250 | $ 23,256 | ||
| Fees received from partnership, by general partner | $ 272,316 |
CONTINGENT LIABILITIES: (Details Narrative) |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
Number
| |
| Commitments and Contingencies Disclosure [Abstract] | |
| Maximum percentage of disposition fees on sale of partnership properties | three |
| Number of partnership properties for sale | Number | 3 |
| Recovery level description | In addition, fifty percent of all such disposition fees earned by TPG were to be escrowed until the aggregate amount of recovery of the funds misappropriated from the three original partnerships by the former general partners was greater than $4,500,000. Upon reaching such recovery level, full disposition fees would thereafter be payable, and fifty percent of the previously escrowed amounts would be paid to TPG. At such time as the recovery exceeded $6,000,000 in the aggregate, the remaining escrowed disposition fees were to be paid to TPG. If such levels of recovery were not achieved, TPG would contribute the amounts escrowed toward the recovery until the three original partnerships were made whole. In lieu of a disposition fee escrow, fifty percent of all such disposition fees previously discussed were paid directly to a restoration account and then distributed among the three original partnerships; whereby the three original partnerships recorded the recoveries as income. After the recovery level of $4,500,000 was exceeded, fifty percent of the total disposition fee amount paid to the three original partnerships recovery through the restoration account (in lieu of the disposition fee escrow) was refunded to TPG during March 1996. The remaining fifty percent amount allocated to the Partnership through the restoration account, and which was previously reflected as Partnership recovery income, may be owed to TPG if the $6,000,000 recovery level is met. As of September 30, 2023, the Partnership may owe TPG $16,296 if the $6,000,000 recovery level is achieved. |
| Amount of recovery of funds | $ 4,500,000 |
| Aggregate recovery of funds value | 6,000,000 |
| Payable fee on achieving recovery level | $ 16,296 |
PMA INDEMNIFICATION TRUST: (Details Narrative) |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
| |
| Reserve related to partnership assets | $ 250,000 |
| Earnings credited to the trust | $ 237,947 |
FAIR VALUE DISCLOSURES: (Details Narrative) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Fair Value Disclosures [Abstract] | ||
| Recognition of transfers between levels of the fair value hierarchy | $ 0 | $ 0 |
SUBSEQUENT EVENTS: (Details Narrative) - USD ($) |
9 Months Ended | ||||
|---|---|---|---|---|---|
Nov. 06, 2023 |
Nov. 01, 2023 |
Oct. 06, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Subsequent Event [Line Items] | |||||
| Proceeds from sale of property plant and equipment | $ 6,229,467 | $ 1,448,540 | |||
| Subsequent Event [Member] | Wendy's - Peach Orchard Road, Augusta, GA Property [Member] | |||||
| Subsequent Event [Line Items] | |||||
| Proceeds from sale of property plant and equipment | $ 3,700,000 | ||||
| Gain on sale of real estate property | $ 3,400,000 | ||||
| Subsequent Event [Member] | Whiskey Road Aiken SC [Member] | |||||
| Subsequent Event [Line Items] | |||||
| Proceeds from sale of property plant and equipment | $ 3,700,000 | ||||
| Gain on sale of real estate property | $ 3,200,000 | ||||
| Real estate property sold | $ 3,800,000 | ||||