Item 1 - Business.
The Registrant is a North Carolina limited partnership organized on November 14, 1985. The General Partners of the Registrant are Marion Bass Real Estate Group, Inc. (the Managing General Partner), a North Carolina corporation, and Marion F. Bass (the Individual General Partner), president and chief executive officer of the Managing General Partner (collectively, the General Partners). The Managing General Partner is wholly owned by Marion Bass Investment Group, Inc., which in turn is wholly owned by Marion F. Bass.
By means of a public offering registered under the Securities Act of 1933, as amended (the Offering), the Registrant offered and sold 9,938 units of limited partnership interests (the Units) at $500 per Unit. On July 9, 1986, the proceeds of the Offering of 3,029 Units were removed from escrow (the Initial Closing) aggregating $1,332,760 after deduction of selling commissions and organization and offering expenses. Subsequent to the Initial Closing, additional limited partners were admitted monthly.
On January 30, 1987 the Offering terminated with aggregate proceeds from the Offering totaling $4,969,000. After deduction for selling commissions and organization and offering expenses of $596,280, net proceeds of $4,372,720 were available for partnership operations. In addition to these proceeds the General Partners contributed amounts totaling $50,192.
The Registrant's principal investment objectives are to (1) obtain capital appreciation, (2) provide cash distributions from operations, (3) preserve and protect the capital of the Partners, (4) build equity through the reduction of mortgage indebtedness encumbering the Registrant's properties, and (5) provide tax losses equal to or in excess of cash distributions during the initial years of the Registrant's operations.
On November 7, 1986, the Registrant purchased 23.75 acres of unimproved land in Pineville, North Carolina for a total purchase price of $930,002. On March 18, 1987 the Registrant contracted with Marion Bass Construction Company (MBCC), an affiliate of the General Partners, for the construction of an apartment complex on the property containing 24 three-bedroom, 106 two-bedroom, and 72 one-bedroom apartment units for the fixed sum of $7,513,850. On July 15, 1987, the contract was amended to provide for certain enhanced amenities at a revised construction cost of $8,113,850. The construction of the project formerly known as Sabal Point, now known as Sabal Point I, was completed in August, 1988. The Registrant entered into an agreement with Marion Bass Equity Group, Inc., an affiliate of the General Partners, (MBEG) wherein MBEG acted as development manager in connection with the development and
construction of properties, including coordinating and supervising site selection, property acquisition and performance by the general contractor under the construction contract. MBEG received a fee of $600,000 in connection with the development of Sabal Point I, of which $149,169 was paid in 1988. The total cost of the acquisition, development and construction of the project, including development fees, financing costs and construction period interest was $10,087,691.
On November 17, 1987, the Registrant consummated construction financing for Sabal Point I with First Union National Bank of North Carolina (FUNB). The construction loan in the principal amount of $6,210,850 had a maturity date of July 1, 1990 and required monthly payments of interest at an annual rate of FUNB's prime rate plus 5/8 of 1% on the outstanding amount of the loan. Through March 7, 1989, the Registrant had drawn $5,835,850, under the FUNB construction loan.
On March 7, 1989, The Variable Annuity Life Insurance Company of Houston, Texas made a permanent loan to the Registrant in the amount of $6,250,000. The permanent loan has a ten-year term with interest accruing at 10 1/8% per annum. Principal and accrued interest are payable monthly, but installments of principal are based upon a thirty-year amortization schedule. The remaining principal and all unpaid and accrued interest will be due and payable on April 1, 1999. After the pay-off of the indebtedness to FUNB and payment of expenses relating to the permanent loan, approximately $323,464 was paid to the Registrant.
The Registrant has entered into a property management agreement with Marion Bass Properties, Inc. (MBP), an affiliate of the General Partners. The agreement provides that MBP will be responsible for managing, operating and leasing the Registrant's properties and that MBP will receive a fee for its services in an amount equal to the lesser of (a) fees that are competitive and comparative with fees of unaffiliated parties providing comparable services in the locality of the Registrant's property, or (b) 5% of the monthly gross revenue from the Registrant's property. MBP will also be entitled to reimbursement of on-site management and maintenance services. The agreement will expire three years from the date that occupancy of the Sabal Point I project begins, and will be automatically renewed unless either party gives notice of its intention not to renew. In addition, either party may terminate the agreement without penalty upon 60 days' written notice. In any event, the agreement will automatically terminate upon dissolution of the Registrant.
Cash at December 31, 1996, totalled $384,539. As of March 27, 1997, a distribution has not been declared for the operational year of 1996. If the remaining cash and other available cash flow are insufficient to cover expenses, then the Registrant will have to obtain additional funds through borrowings or refinancings.
Available operating cash fluctuates with partnership operations. See discussion in Item 7 under Liquidity and Capital Resources.
The Registrant does not anticipate the acquisition or development of any additional properties.
Upon the sale of any property by the Registrant, the proceeds of the sale will be distributed to the partners. Therefore, it is intended that the Registrant will be self-liquidating. The General Partners currently intend to dispose of all properties purchased within nine to twelve years of the purchase.
Competition among owners of apartment complexes of the type and in the areas that the Registrant owns apartment complexes generally is high. Competition is based generally on price and features offered. Many of the Registrant's competitors have greater assets and more experience than the Registrant and the General Partners.
One or both of the General Partners serve as a general partner in eight private partnerships which own various income-producing, multi-family residential property. None of the private partnerships sponsored by the General Partners currently contemplates the acquisition of additional properties. The General Partners sponsored three public real estate partnerships, Bass Real Estate Fund-84, Bass Income Plus Fund and Bass Real Estate Fund III with similar objectives as the Registrant. Bass Income Plus Fund acquired a nine-acre tract of land adjacent to Sabal Point I, on which MBCC constructed an apartment complex of 88 units. Bass Real Estate Fund III acquired another adjacent parcel of twelve acres with an apartment complex of 84 units. Conflicts could develop between the Registrant and other existing or future partnerships which the General Partners may manage. The General Partners intend to devote only such time to the business of the Registrant as in their judgment is reasonably required. The General Partners are engaged in other similar activities which also require their time and attention.
The Registrant's property adjoins apartment complexes owned by Bass Real Estate Fund-III and Bass Income Plus Fund. In order to achieve greater economies of scale, Marion Bass Properties, Inc., the property manager for the Registrant and the other owners, has combined the management and leasing operations for all of the adjoining complexes. Under this arrangement, the expenses are allocated on a per unit basis except for those costs that can be directly attributed to a single complex. When leasing units, the property manager shows available units in different complexes and the tenant chooses the unit that he desires. The occupancy on December 31, 1996 for Sabal Point I was 95% and the adjoining complexes were 98% and 91%.
As of December 31, 1996, the Registrant did not directly employ any persons in a full-time position. Certain employees of the
Managing General Partner and affiliates performed services for the Registrant during the year.
Item 2
Item 2 - Properties.
The Registrant completed construction in August, 1988 of a 202 unit apartment community consisting of 2 two-story apartment buildings, 7 three-story apartment buildings and 1 clubhouse building located on a 23.75 acre tract of land in suburban Mecklenburg County, North Carolina formerly known as Sabal Point, now known as Sabal Point I. MBCC, an affiliate of the General Partner, constructed the property for a fixed sum of $8,113,850. Amenities include clubhouse, swimming pool, tennis court, racquetball court, fitness room and laundry facilities. At December 31, 1996, 95% of the apartment units were occupied. The types of units and monthly rentals are described below:
The apartment community is managed by Marion Bass Properties, Inc., an affiliate of the General Partner.
Item 3
Item 3 - Legal Proceedings.
No material legal proceedings were initiated or terminated during the fiscal year covered by this report.
Item 4
Item 4 - Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the holders of Units during the fourth quarter of the fiscal year ended December 31, 1996.
Item 5
Item 5 - Market for Registrant's Units and Related Matters.
Transfer of the Units is subject to certain restrictions contained in the Limited Partnership Agreement. There is no established market for the Units and it is not anticipated that any will occur in the future. The Registrant is aware of no subsequent sales of Units during the past two years. As of December 31, 1996, 577 persons were holders of 9,938 units.
The Registrant intends to make distributions of net cash flow from operations semi-annually, provided cash reserves are at appropriate levels. A summary of cash distributions follows:
Total Amount Average Date Period Distributed(1) Per Unit
2-10-89 7-1-88 through 12-31-88 $ 50,000 $ 4.98 8-4-89 1-1-89 through 6-30-89 50,000 4.98 2-7-90 7-1-89 through 12-31-89 75,000 7.47 7-23-90 1-1-90 through 6-30-90 50,000 4.98 2-6-91 7-1-90 through 12-31-90 50,000 4.98 2-24-94 1-1-93 through 12-31-93 50,000 4.98 1-15-95 1-1-94 through 12-31-94 100,000 9.96 4-1-96 1-1-95 through 12-31-95 100,000 9.96 - -----------------
(1) Includes amounts distributed to General Partners under Registrant's partnership agreement.
Item 6
Item 6 - Selected Financial Data.
Item 7
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations.
General.
The Registrant was organized on November 14, 1985, to engage in the acquisition, development, operation, holding and disposition of income-producing residential and commercial properties. Net proceeds of the offering and General Partners' contributions aggregating $4,422,912 were available for partnership operations. On November 7, 1986 the Partnership purchased 23.75 acres of undeveloped land for $930,002. In 1987 the Registrant contracted with an affiliate for the construction of a 202 unit apartment community to be known as Sabal Point I. Construction of the project began in July 1987 and was completed in August, 1988 with a total cost of $10,087,691. Units were available for lease beginning June 1988.
Liquidity and Capital Resources.
At December 31, 1996, partners' equity was $1,499,189 or 20% of total assets and liquid assets amounted to $384,539. The increase in cash of $161,329 was due to a net cash flow from operations of $347,754 less capital replacements of $31,774, mortgage debt reduction of $54,651 and a distribution to partners of $100,000. The Registrant had accrued liabilities of $17,208 which consisted of management fees due to an affiliate of $6,255, trade account payables of $7,576 and tenant prepaid rent of $3,377.
Net cash flow (deficit) from operations before property additions, payments on mortgage principal, and distributions to partners totaled $347,754 in 1996, $250,095 in 1995, and $80,521 in 1994. The Registrant had a 10.125% amortizing mortgage note in the amount of $5,999,300 outstanding at December 31, 1996. Principal payments of $54,651, $49,410 and $48,195 were made in 1996, 1995 and 1994, respectively.
During 1996 the Charlotte market continued to witness increased activity in the construction of multi-family residential apartment complexes. With the addition of these new units, some properties have begun offering rental concessions or other discounts to obtain tenants. Should this trend affect the Registrant's operations during 1997, then certain marketing strategies will be implemented in order to minimize any potential reduction in occupancy.
The 1997 operating plan and budget projects cash flow from Registrant activities (which includes operating, investing, financing) of $290,000. The projected occupancy rate for 1997 is 95%. As of March 15, 1997, the occupancy rate was 94%. Capital replacements of $49,000 are budgeted and an additional $16,000 in
Registrant expenses is expected. Rents have been increased 3% over rates charged in 1996 to offset any normal increase in operating expenses. Based upon these estimates, it is anticipated that cash flow from operations will be sufficient to meet cash needs and build cash reserves.
Results of Operations.
The results from operations for the year 1996 reflect an increase in total revenues of $102,950 due to maintaining an average occupancy of 96% and increasing rents an average of 3%. Rental income was $1,456,491 in 1996 compared to $1,364,926 in 1995, a difference of $91,565. Other operating income was $54,839 in 1996 compared to $52,088 in 1995, reflecting a increase of $2,751. Operating expenses (excluding depreciation and amortization) increased $13,708. Utilities increased $5,384 due mainly to higher utility rates and resident usage. Repairs and maintenance decreased $14,411 due to incurring fewer noncapitalized replacement costs.
After interest expense of $610,473 and other nonoperating expenses of $29,212 the Registrant realized net income of $34,995. This is compared to net losses of $103,659 and $228,393 in 1995 and 1994, respectively. Before recognizing the expense of depreciation and amortization, the 1996 operating plan and budget had forecasted a net income of $351,000. This is compared to an actual net income before depreciation and amortization of $373,538.
Item 8
Item 8 - Financial Statements and Supplementary Data.
See Appendix A to this Form 10-K.
Item 9
Item 9 - Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 10
Item 10 - Directors and Executive Officers of the Registrant.
The Registrant has no directors or executive officers. Information as to the directors and executive officers of the Managing General Partner is as follows:
Information about Directors Name and Executive Officers
Marion F. Bass Director, President, Chief Executive Officer, and Treasurer of the Managing General Partner since 1977. He is 57 years old.
Robert J. Brietz Executive Vice President of the Managing General Partner since October, 1988. Director and Secretary of the Managing General Partner since March, 1989. Executive Vice President of Marion Bass Securities Corporation since November, 1986. Senior Vice President with Interstate Securities Corporation for the period from 1978 to October, 1986. He is 53 years old.
The directors and executive officers of the Managing General Partner were elected to their current positions on March 27, 1989. Each officer and director holds office until his death, resignation, retirement, removal, disqualification, or his successor is elected and qualified.
All of the executive officers and directors of the Managing General Partner serve in the same capacities with Marion Bass Securities Corporation, Marion Bass Construction Company, Marion Bass Properties, Inc., Marion Bass Equity Group, Inc. (collectively, the Marion Bass Group). Marion F. Bass is the sole shareholder of the Managing General Partner and the other corporations in the Marion Bass Group.
Item 11
Item 11 - Executive Compensation.
During the fiscal year ended December 31, 1996, the Registrant paid no compensation to the executive officers or directors of the Managing General Partner or to either of the General Partners. See Item 13 "Certain Relationships and Related Transactions" for a discussion of amounts paid or which may be paid to the General Partners and certain affiliates of the General Partners after December 31, 1996.
Item 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management.
As of March 15, 1997 no persons known to the Registrant have beneficial ownership of more than 5% of the Units.
None of the directors and officers of the Managing General Partner owned any Units of the Registrant at March 15, 1997.
Item 13
Item 13 - Certain Relationships and Related Transactions.
The Registrant has and will engage in transactions with various corporations within the Marion Bass Group. Under the terms of the partnership agreement, the General Partners and their affiliates received fees and reimbursement of expenses from operations as follows:
PART IV
Item 14
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial statements and schedules. See Index to Financial Statements included in Appendix A to this Form 10-K. All other schedules are omitted because they are not applicable, not required or because the requested information is included in the Financial Statements or notes thereto.
(b) Exhibits.
3(a) Copy of Certificate of Limited Partnership dated as of November 13, 1985, filed as Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
3(b) Copy of Amended and Restated Limited Partnership Agreement dated as of July 10, 1986, filed as Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
3(c) Copy of Amended and Restated Certificate of Limited Partnership, dated as of July 10, 1986, filed as Exhibit 3(c) to the Regis- trant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
3(d) Copy of Second Amended and Restated Cert- ificate of Limited Partnership, dated as of July 31, 1986, filed as Exhibit 3(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
3(e) Copy of Third Amended and Restated Certifi- cate of Limited Partnership, dated as of August 29, 1986, filed as Exhibit 3(e) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
3(f) Copy of Fourth Amended and Restated Certifi- cate Certificate of Limited Partnership, dated as of September 30, 1986, filed as Exhibit 3(f) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
3(g) Copy of Certificate of Domestic Limited Partnership, dated as of October 31, 1986, filed as Exhibit 3(g) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
10(a) Copy of Construction Agreement dated as of April 8, 1987, filed as Exhibit 10(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
10(b) Copy of Amended Construction Agreement dated as of July 15, 1987, filed as Exhibit 10(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
10(c) Copy of Loan Documents for Construction Loan by First Union National Bank of North Carolina, dated as of November 17, 1987, filed as Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
10(d) Copy of Loan Documents for Permanent Loan by The Variable Annuity Life Insurance Company, dated as of March 3, 1989, filed as Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
(c) Reports on Form 8-K. No reports on Form 8-K were filed during the last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized on March 27, 1997.
BASS REAL ESTATE FUND-II
By: MARION BASS REAL ESTATE GROUP, INC., as Managing General Partner
By: Marion F. Bass, President
By: MARION F. BASS, as Individual General Partner
By: Marion F. Bass
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:
Signature Title Date
Director, President and March 27, 1997 Marion F. Bass Treasurer of Marion Bass Real Estate Group, Inc. (Principal Executive Officer)
Director, Executive Vice March 27, 1997 Robert J. Brietz President and Secretary of Marion Bass Real Estate Group, Inc. (Principal Financial and Accounting Officer)
APPENDIX A
BASS REAL ESTATE FUND-II
FINANCIAL STATEMENTS AND SCHEDULES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
C O N T E N T S
Page
FINANCIAL STATEMENTS: Report of Independent Public Accountants 1
Balance Sheets - December 31, 1996 and 1995 2
Statements of Operations - For the Years ended December 31, 1996, 1995 and 1994 3
Statements of Changes in Partners' Equity For the Years ended December 31, 1996, 1995 and 1994 4
Statements of Cash Flows - For the Years ended December 31, 1996, 1995 and 1994 5
Notes to Financial Statements 6-9
FINANCIAL STATEMENT SCHEDULES:
Schedule III-Real Estate and Accumulated Depreciation - December 31, 1996 10
BASS REAL ESTATE FUND-II (A LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996, 1995 AND 1994 TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bass Real Estate Fund-II:
We have audited the accompanying balance sheets of Bass Real Estate Fund-II (a North Carolina limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements and the schedule referred to below are the responsibility of the managing general partner (see Note 4). Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the managing general partner, 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 Bass Real Estate Fund-II as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Appendix A is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
Arthur Andersen & Co. SC
Charlotte, North Carolina, February 21, 1997.
BASS REAL ESTATE FUND-II (A LIMITED PARTNERSHIP)
BALANCE SHEETS -- DECEMBER 31, 1996 AND 1995
The accompanying notes to financial statements are an integral part of these balance sheets.
BASS REAL ESTATE FUND-II (A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The accompanying notes to financial statements are an integral part of these statements.
BASS REAL ESTATE FUND-II (A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The accompanying notes to financial statements are an integral part of these statements.
BASS REAL ESTATE FUND-II (A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The accompanying notes to financial statements are an integral part of these statements.
BASS REAL ESTATE FUND-II (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Bass Real Estate Fund-II (the Partnership) was organized to engage in the acquisition, development, operation, holding and disposition of income-producing residential and commercial properties. Limited partnership interests were sold at $500 per unit (9,938 units) for a total of $4,969,000.
Under the terms of the partnership agreement, net income (loss) and cash distributions from operations are to be allocated 99% to the limited partners and 1% to the general partners. Upon the sale or refinance of the partnership property, the partnership agreement specifies certain allocations of net proceeds and taxable gain or loss from the transaction.
CASH INVESTMENTS
For purposes of the statements of cash flows, the Partnership considers all unrestricted, highly liquid investments purchased with an original maturity of three months or less to be cash investments.
RENTAL PROPERTIES
Rental properties are carried at cost, which includes the initial land price as well as capitalized interest, property taxes and development costs (see Note 2).
DEPRECIATION
The cost of rental properties is depreciated using the straight-line method over the following estimated useful lives:
Buildings 30 years Furnishings and fixtures 8 years
DEFERRED COSTS
Expenses incurred in connection with obtaining financing have been capitalized as deferred costs and are being amortized over the term of the mortgage loan. Amortization of these costs is included in depreciation and amortization expense on the accompanying statements of operations.
INCOME TAXES
Under current income tax laws, income or loss of partnerships is included in the income tax returns of the partners. Accordingly, no provision has been made for federal or state income taxes in the accompanying financial statements.
The tax returns of the Partnership are subject to examination by federal and state taxing authorities. If such examinations occur and result in changes with respect to the partnership qualification or in changes to partnership income or loss, the tax liability of the partners would be changed accordingly.
Adjustments are required to reflect the Partnership's accounts on the basis of accounting utilized for federal income tax reporting purposes. The significant items giving rise to the adjustments are differing lives and methods of depreciation and costs incurred in connection with raising of capital (syndication costs).
The reconciliation of net loss for the years ended December 31, 1996, 1995 and 1994, from a financial reporting basis to a tax basis, are as follows:
PER UNIT AMOUNTS
Net loss per limited partnership unit was determined based on the average number of units outstanding during each year. The weighted average number of units outstanding was 9,938 for 1996, 1995 and 1994.
NEW ACCOUNTING PRONOUNCEMENT
During 1996, the Partnership adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement establishes accounting standards for the impairment of long-lived assets. Under the provisions of SFAS No. 121, recoverability of long-lived assets is to be determined based on expected future net cash flows resulting from the use of the asset. The adoption of this new accounting pronouncement did not have an impact on the Partnership's financial position or the results of its operations.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect the reported amounts of revenues and expenses during the period reported. Actual results could differ from those estimates.
2. RENTAL PROPERTY:
Rental property consists of a residential apartment complex - Sabal Point I. The complex, which was constructed by an affiliate of the general partners, is comprised of 202 rental units. The units were available for lease beginning June 1988. The 23.75 acres of land in Mecklenburg County, North Carolina, where the apartment complex is located, were purchased in December 1986 for $930,002 (including closing costs).
Affiliates of the general partners own two adjacent residential apartment complexes, Sabal Point II and Sabal Point III. The three complexes merged their management and leasing operations in 1990 and are sharing expenses related to grounds, maintenance, leasing, management and other related costs. The managing general partner believes that the allocation of expenses to each partnership has been made on a reasonable basis.
3. MORTGAGE LOAN PAYABLE:
The mortgage loan payable is a 10-year note due April 1, 1999, with principal and interest at 10-1/8% payable monthly based upon a 30-year amortization period. The Sabal Point I complex is pledged as collateral for this mortgage. Under the mortgage agreement, the Partnership is required to fund certain reserves for insurance, property tax and capital improvement expenditures. These reserves are included in other assets on the accompanying balance sheets.
Future principal payments due on the mortgage loan are as follows:
1997 $ 55,175 1998 66,303 1999 5,877,822
Cash paid for interest was $610,473, $615,714 and $620,453 in 1996, 1995 and 1994, respectively.
4. GENERAL PARTNERS AND RELATED-PARTY TRANSACTIONS:
The general partners of the Partnership are Marion F. Bass and Marion Bass Real Estate Group, Inc. (the managing general partner). The Partnership's rental properties are managed by Marion Bass Properties, Inc. Both Marion Bass Real Estate Group, Inc. and Marion Bass Properties, Inc. are wholly owned by Marion F. Bass.
Under the terms of the partnership agreement, the general partners or their affiliates charged certain fees and expenses during 1996, 1995 and 1994 as follows:
The general partners and certain of their affiliates also perform, without cost to the Partnership, day-to-day investment, management and administration functions of the Partnership.
APPENDIX
BASS REAL ESTATE FUND-II (A LIMITED PARTNERSHIP)
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
Note 1:
Note 2:
Depreciation computed using the following estimated useful lives-
Buildings 30 years Furnishings and fixtures 8 years
Note 3:
Buildings and improvements include costs of furnishings and fixtures.
Note 4:
Aggregate cost for federal income tax purposes, net of accumulated tax depreciation, is $6,818,097 at December 31, 1996.