10-K 1 d50067form10-k.txt ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended Commission File Number December 31, 2001 0-14188 ----------------- ------- I.R.E. PENSION INVESTORS, LTD. - II (Exact Name of Registrant as Specified in its Certificate of Limited Partnership) Florida 59-2582239 (State of Organization) (I.R.S. Employer Identification Number) 1750 E. Sunrise Boulevard Fort Lauderdale, Florida 33304 (Address of Principal Executive Office) (Zip Code) Registrant's telephone number, including area code: (954) 760-5200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units, $250 Per Unit Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [X] Documents Incorporated by Reference Portions of the Prospectus of the Registrant, dated October 4, 1985, are incorporated by reference into Part IV. Page 1 of 22 Except for historical information contained herein, the matters discussed in this report are forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These forward-looking statements are based largely on the Partnership's expectations and are subject to a number of risks and uncertainties, including but not limited to, economic matters (both as a general matter and in particular in the area where the Partnership owns real estate), competitive and other factors affecting the Partnership's operations, markets, property values and other factors including factors associated with the continued ownership and operation of real estate and the factors identified in documents filed by the Partnership with the Securities and Exchange Commission. Many of these factors are beyond the Partnership's control. Actual results could differ materially from these forward-looking statements. In light of these risks and uncertainties, there is no assurance that the results discussed in such forward-looking statements contained in this report will, in fact, occur. The Partnership does not undertake any obligation to publicly release the results of any revisions to these forward-looking statements to reflect future events or circumstances. PART I ITEM 1. BUSINESS I.R.E. PENSION INVESTORS, LTD.-II, a limited partnership organized under the laws of the State of Florida in 1985, is primarily engaged in the business of operating and holding for investment, income producing real properties. The Partnership did not utilize borrowings in connection with the purchase of its properties. The Partnership commenced a public offering of its units of limited partnership interest in October 1985. The required escrow relative to the Partnership was reached and subscription funds were transferred to the Partnership on December 26, 1985 ("Inception"). The Partnership closed the offering in October 1987, having raised $12,373,750 in capital and issued 49,491 units of limited partnership interests at $250 per unit. Galleria Professional Building and a minority interest in One West Nine Mile Joint Venture were acquired during 1986 and the Federal Express Distribution Center was acquired during 1987. In December 1991, the One West Nine Mile Joint Venture was sold and in June 1999, the Federal Express Distribution Center was sold. Uninvested cash of the Partnership is deposited in demand accounts with commercial banks and may be invested temporarily in U.S. Treasury Bills, certificates of deposit or other interest bearing accounts or investments. Alan B. Levan and I.R.E. Pension Advisors II, Corp. are the general partners of the Partnership. I.R.E. Pension Advisors II, Corp., as Managing General Partner, manages and controls the Partnership's affairs and has general responsibility and the ultimate authority in all matters affecting the Partnership's business. Affiliates of the general partners of the Partnership also own and operate their own improved real estate and may have investment objectives and policies similar to those of the Partnership. The Partnership may be in competition with other limited partnerships served by affiliates of the Managing General Partner or other companies affiliated with the general partner. On December 31, 2001, the Partnership had no employees. The balance of information required in Item 1 is either inapplicable or not material to an understanding of the Partnership's business. ITEM 2. PROPERTIES The property listed below is not utilized by the Partnership but is held for investment. It is zoned for its current use. Galleria Professional Office Building 60,965 square owned Fort Lauderdale, FL feet leasable ITEM 3. LEGAL PROCEEDINGS None. Page 2 of 22 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP INTEREST AND RELATED SECURITY HOLDER MATTERS a) There is no established public trading market for the Partnership's units of limited partnership interest. b) There are approximately 1,600 holders of units of limited partnership interest as of March 15, 2002. c) See Item 6. -Selected Financial Data regarding the Partnership's distributions, incorporated herein by reference as if set forth herein. Page 3 of 22 I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) ITEM 6. SELECTED FINANCIAL DATA For the five years ended December 31, 2001.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF I.R.E. PENSION INVESTORS, LTD. - II A description of the Partnership's investment properties during 1999, 2000 and 2001 follows: * Galleria Professional Building ("Galleria") - A 61,000 square foot office building located in Fort Lauderdale, Florida. * Federal Express Distribution Center ("Federal Express") - A 38,000 square foot warehouse building located in Jacksonville, Florida. In June 1999, the Partnership sold the property for approximately $918,500. The Partnership was organized in September 1985 and is engaged in the business of operating and holding for investment, income producing real properties. In December 1986, the Partnership acquired Galleria and in December 1987, the Partnership acquired Federal Express. The Galleria Professional Building is net leased to a tenant. When the Partnership acquired the Galleria Professional Building, they executed a net lease leasing the Property on a totally net basis. Rental income is recognized under the operating method whereby aggregate rentals are reported as income over the life of the lease and the costs and expenses are charged against such revenue. The lessee has exercised an option that has extended the expiration date from 2016 until 2046. With the exercise of the option, the buy/sell option for this property will not occur until 2032. The Federal Express Distribution Center was occupied solely by Federal Express Corporation pursuant to a lease that expired May 31, 1998. Federal Express Corporation vacated the property on that date. In June 1999, the property was sold for approximately $918,500. Proceeds received, net of selling costs were approximately $811,000 and a net gain on the sale of real estate of approximately $8,000 was recognized in 1999. Page 4 of 22 The decrease in interest income for the year ended December 31, 2001 as compared to the 2000 and 1999 periods is due to decreases in average yields and investable funds. Depreciation expense decreased approximately $42,000 for the year ended December 31, 2000 as compared to the same period in 1999 due to the sale of Federal Express in June 1999. In 1999, the carrying value of Federal Express was reduced by approximately $280,000 based upon the anticipated contract to sell the property. In June 1999, the property was sold to an unaffiliated third party for approximately $918,500 and a net gain on the sale of real estate of approximately $8,000 was recognized in 1999. Other property operations decreased for the year ended December 31, 2001 as compared to the same period in 2000 due to a decrease in insurance expense. Other property operations decreased for the year ended December 31, 2000 as compared to the same period in 1999 primarily due to decreases in insurance, property taxes and maintenance as a result of the sale of Federal Express in June 1999. When the Partnership acquired the Galleria Professional Building in 1986, it executed a net lease with the seller, leasing the property back to the seller on a totally net basis. The lessee has exercised an option that has extended the expiration date from 2016 until 2046. The exercise of this option effectively reduces the current value of the Galleria Professional Building to the Partnership because it extends by thirty years the date on which the Partnership can sell the property free of the lease. A December 2001 appraisal indicated a market value of $2.5 million for the Galleria Professional Building. An impairment loss adjustment was not necessary because the current net book value of the Galleria Professional Building is less that the current value calculated after the exercise of the option. The Partnership and the tenant have a buy/sell option for this property, which may be exercised by either the Partnership or the tenant commencing in 2032. Pursuant to this option, the Partnership can offer to sell the property after 2032 to the tenant for $6,000,000 plus the excess between approximately $100,000 per month and actual rent paid during the lease term (less certain defined offsets). If the Partnership makes such an offer and if the tenant fails to purchase the property at such price, the lease would be terminated. The lease currently requires a minimum annual rental of $217,000 per annum plus 10% of the property income, as defined, between $217,000 and $467,000 and 50% of the property income in excess of $467,000. Based on operations of the property reflected in information provided by the tenant, no percentage rent was paid in 2001. At December 31, 2001, the Galleria Professional Building was 100% occupied, with an average lease rate of approximately $17.37 per square foot. As indicated above, the lessee is responsible for any and all costs associated with the property. Galleria Professional Building is located in Fort Lauderdale Florida on the Middle River Waterway. There are several mid-rise office buildings in the area. Galleria Mall, a large regional shopping center, is located east of this property. Based upon an appraisal, rental rates of the mid-rise office buildings in close proximity to the Galleria Professional Building were similar to those being charged by the Galleria Professional Building. Based upon an appraisal performed in November 2001, the ERISA value of the Partnership is $55.00 per unit. Management evaluates the Galleria Professional Building annually for impairment by obtaining appraisals. At December 31, 2001, the Partnership had approximately $327,000 of cash and cash equivalents. The Partnership has annually been paying distributions of $5.00 per limited partnership unit ($1.25 quarterly) since the fourth quarter of 1990. In addition, during 1999, the Partnership also paid a special distribution of $52.00 per limited partnership unit. Based upon current cash in the Partnership and anticipated rental proceeds from the net lease on the Partnership's property, the Partnership anticipates continuing distributions at the current level for at least the next year. The Partnership's long term prospects will be primarily affected by future net income at the Galleria Professional Building. Due to the uncertainties involving the real estate market, management cannot reasonably determine the Partnership's long term liquidity position. However, management believes the Partnership currently has sufficient liquidity for operations and to meet its obligations and commitments for the foreseeable future. Page 5 of 22 I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) ITEM 8. INDEX TO FINANCIAL STATEMENTS Independent Auditors' Report Financial Statements: Balance Sheets - December 31, 2000 and 2001 Statements of Operations - For each of the Years in the Three Year Period ended December 31, 2001 Statements of Partners' Capital - For each of the Years in the Three Year Period ended December 31, 2001 Statements of Cash Flows - For each of the Years in the Three Year Period ended December 31, 2001 Notes to Financial Statements ITEM 14. FINANCIAL STATEMENT SCHEDULES III. Properties and Accumulated Depreciation - December 31, 2001. All other schedules are omitted as the required information is either not applicable or is presented in the financial statements and related notes. Page 6 of 22 INDEPENDENT AUDITORS' REPORT The Partners I.R.E. Pension Investors, Ltd. - II: We have audited the financial statements of I.R.E. Pension Investors, Ltd. - II (a Florida Limited Partnership), as listed in the accompanying index. In connection with our audits of the financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These financial statements and financial statement schedule are the responsibility of I.R.E. Pension Investors, Ltd. - II's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of I.R.E. Pension Investors, Ltd. - II, at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP Fort Lauderdale, Florida March 12, 2002 Page 7 of 22 I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) Balance Sheets December 31, 2000 and 2001 Assets 2000 2001 ----------- ---------- Cash and cash equivalents $ 405,252 327,133 Investments in real estate: Office building 5,782,761 5,782,761 Less accumulated depreciation (4,525,759) (4,849,591) ----------- ---------- 1,257,002 933,170 Other assets, net 100 100 ----------- ---------- $ 1,662,354 1,260,403 =========== ========== Liabilities and Partners' Capital Accounts payable $ 25,546 36,296 Other liabilities 33,791 -- Due to affiliates 4,712 5,181 ----------- ---------- Total liabilities 64,049 41,477 Partners' capital: 49,041 limited partnership units issued and outstanding 1,598,305 1,218,926 ----------- ---------- $ 1,662,354 1,260,403 =========== ========== See accompanying notes to financial statements. Page 8 of 22 I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) Statements of Operations For each of the Years in the Three Year Period ended December 31, 2001

See accompanying notes to financial statements. Page 9 of 22 I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) Statements of Partners' Capital For each of the Years in the Three Year Period ended December 31, 2001 Limited General Partners Partners Total -------- -------- --------- Balance at December 31, 1998 $ 5,173,476 (2,208) 5,171,268 Limited partner distributions (2,795,337) -- (2,795,337) Net loss (404,360) (4,084) (408,444) ----------- ------ ---------- Balance at December 31, 1999 1,973,779 (6,292) 1,967,487 Limited partner distributions (245,165) -- (245,165) Net loss (122,777) (1,240) (124,017) ----------- ------ ---------- Balance at December 31, 2000 1,605,837 (7,532) 1,598,305 Limited partner distributions (245,165) -- (245,165) Net loss (132,872) (1,342) (134,214) ----------- ------ ---------- Balance at December 31, 2001 $ 1,227,800 (8,874) 1,218,926 =========== ====== ========== See accompanying notes to financial statements. Page 10 of 22 I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) Statements of Cash Flows For each of the Years in the Three Year Period Ended December 31, 2001

See accompanying notes to financial statements. Page 11 of 22 I.R.E. Pension Investors, Ltd.-II (A Florida Limited Partnership) Notes to Financial Statements (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General I.R.E. Pension Investors, Ltd. - II (the "Partnership") was organized in 1985 in accordance with the provisions of the Florida Uniform Limited Partnership Act to invest in, hold and manage income producing real estate. The Managing General Partner has complete authority in the management and control of the Partnership. I.R.E. Pension Advisors II, Corp. is the Managing General Partner and Alan B. Levan is the individual General Partner of the Partnership. The General Partners may serve in the same capacity for other entities having similar investment objectives. Should any conflicts of interest arise among these entities, the management of the managing general partners will, at their sole discretion, resolve such conflicts. Basis of Financial Statement Presentation - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and statements of operations for the periods presented. Actual results could differ significantly from those estimates. A material estimate that is susceptible to significant change in the next year relates to the determination of the impairment loss on real estate. Compensation or Reimbursements to General Partners and Affiliates The General Partners and/or their affiliates are entitled to receive compensation or reimbursements only as specified by the Partnership Agreement. The determination of amount and timing of payment is subject to certain limitations and to cash distribution preferences of limited partners. Following is a brief description of such compensation and the services to be rendered: Property Management Fee: Due for services in connection with the continuing professional property management of the Partnership properties. Partnership Management Fee: Due for services rendered in evaluating and selecting properties for the Partnership, reviewing cash requirements including the determination of the amount and timing of distributions, if any, making decisions as to the nature and terms of the acquisition and disposition of such properties, selecting, retaining and supervising consultants, contractors, architects, engineers, lenders, borrowers, agents and others and otherwise generally managing the day-to-day operations of the Partnership. Subordinated Real Estate Commissions: Related to sales of Partnership properties. Interest in Cash from Sales or Financing: Due also for services as listed under "Partnership Management Fee". Interest in Net Income and Net Loss as Determined for Federal Income Tax Purposes: Page 12 of 22 1% of net losses and the greater of (a) 1% of net income or (b) an amount of such net income which is in proportion to the percentage of cash distributed to the General Partners as a Partnership Management Fee or for their Interest in Cash From Sales or Financing. Cash and cash equivalents Cash equivalents include liquid investments with a maturity of three months or less. Property The property is an asset to be held and used and is stated at cost in the accompanying balance sheets. The office building is depreciated using the straight-line method over an estimated useful life of 20 years. Long-lived assets to be held and used by the Partnership are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In performing the review for recoverability, the Partnership estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized and the property's cost basis is reduced. Measurement of an impairment loss for long-lived assets that the Partnership expects to hold and use is based on the fair value of the asset. Income Taxes The payment of income taxes is the obligation of the individual partners; therefore, there is no provision for income taxes in the accompanying financial statements. The Partnership's tax returns have not been examined by Federal or state taxing authorities. Net income or loss reported for income tax purposes involves, among other things, various determinations relating to properties purchased. Although management of the Partnership believes that such determinations are appropriate, there can be no assurance that the Internal Revenue Service will not contest the Partnership's tax treatment of various items or, if contested, such treatment will be sustained by the Courts. Further, there is a possibility that the Treasury will amend existing regulations or promulgate new regulations, and such action may be retroactive. Accordingly, the tax status of the Partnership and the availability of prior and future income tax benefits to limited partners may be adversely affected. Rental Income Rental income is recognized under the operating method whereby aggregate rentals are reported as income over the life of the lease and the costs and expenses are charged against such revenue. Rental income, from leases with non-level payments, is recognized ratably over the term of the lease. (2) PROPERTIES Following is a brief description of the property investments made by the Partnership. Galleria Professional Building On December 31, 1986, the Partnership purchased a six story office building containing 60,965 square feet of net leasable area in Fort Lauderdale, Florida. The Partnership owns a leasehold interest in a long-term ground lease for two parcels of land which encompass the building site and parking areas. The lease commenced in 1955 and expires in 2054. Ground rent is approximately $37,368 annually. Every 20 years the ground rent is adjusted to be equal to five percent of the then current appraised value of the land. The Partnership also purchased the rights to the parking agreement with the Galleria Mall. The agreement requires rental payments and common area maintenance charges which currently aggregate approximately $25,000 annually. The parking agreement and ground lease have concurrent terms. Page 13 of 22 Simultaneous with the acquisition of the property, the Partnership executed a net lease with the seller, leasing the Property back to the Seller on a totally net basis. The lessee has exercised an option that has extended the expiration date of the lease from 2016 until 2046. The exercise of this option effectively reduces the current value of the Galleria Professional Building to the Partnership because it extends by thirty years the date on which the Partnership can sell the property free of the lease. The Partnership and the tenant have a buy/sell option for this property, which may be exercised by either the Partnership or the tenant commencing in 2032. Pursuant to this option, the Partnership can offer to sell the property to the tenant for $6,000,000 plus the excess between approximately $100,000 per month and actual rent paid during the lease term (less certain defined offsets). If the Partnership makes such an offer and if the tenant fails to purchase the property at such price, the lease would be terminated. The terms of the lease currently require a minimum annual rental of $217,000 per annum plus 10% of the property income, as defined, between $217,000 and $467,000 and 50% of the property income in excess of $467,000. In accordance with accounting principles generally accepted in the United States of America, the rental income was recognized ratably through 2001 (the date of the buy/sell option not considering the option to extend the lease). The ratable minimum rent after the modification of the lease in September 1990 was $250,830 per year and such amount was recognized annually for financial statement purposes. The seller, as lessee, is responsible for any and all costs associated with the property, including but not limited to operating expenses, insurance, taxes, the ground lease and parking agreement payments. Following is summarized financial information with respect to operations at the Galleria office building. The following information is unaudited because the Partnership has no contractual right to require the lessee of the property to provide audited information. Years ended December 31, ---------------------------------------- 1999 2000 2001 ---------- ---------- ---------- (Unaudited) Rental income (a) $1,048,292 1,028,876 1,110,814 Other income 7,543 11,580 6,814 ---------- ---------- ---------- 1,055,835 1,040,456 1,117,628 ---------- ---------- ---------- Property operating expenses 700,068 715,880 725,929 Ground rent 37,368 37,367 37,368 ---------- ---------- ---------- 737,436 753,247 763,297 ---------- ---------- ---------- Operating income $ 318,399 287,209 354,331 ========== ========== ========== (a) At December 31, 2001, the Galleria Professional Building was 100% occupied, with an average lease rate of approximately $17.37 per square foot. As indicated above, the lessee is responsible for any and all costs associated with the property. Galleria Professional Building is located in Fort Lauderdale Florida on the Middle River Waterway. There are several mid-rise office buildings in the area. Galleria Mall, a large regional shopping center, is located east of this property. Rental rates of the mid-rise office buildings in close proximity to the Galleria Professional Building were similar to those being charged by the Galleria Professional Building. Federal Express Distribution Center On December 15, 1987, the Partnership purchased, from an unaffiliated seller, a one story 37,500 square foot office/warehouse building in Jacksonville, Florida. The building was designed for and was occupied solely by Federal Express Corporation pursuant to a lease which expired May 31, 1998. Federal Express Corporation vacated the property on that date. In 1999, based upon the proceeds anticipated to be received, the Partnership reduced the carrying value of the property by approximately $280,000. In June 1999, the Partnership sold the property to an unaffiliated third party for approximately $918,500. Page 14 of 22 Proceeds received on the sale, net of selling cost were approximately $811,000 and a net gain on the sale of real estate of approximately $8,000 was recognized in 1999. Leases The aggregate sum of the minimum lease rental payments to be received for the Galleria Professional Building over the five succeeding years is approximately as follows: Year ending December 31, ------------------------------------------------------------------- 2002 2003 2004 2005 2006 -------- ------- ------- ------- ------- $217,000 217,000 217,000 217,000 217,000 ======== ======= ======= ======= ======= (3) COMPENSATION OR REIMBURSEMENTS TO GENERAL PARTNERS AND AFFILIATES During the years ended December 31, 1999, 2000 and 2001 compensation to general partners and affiliates was as follows: 1999 2000 2001 ------- ------- ------- Reimbursement for administrative and accounting services $34,649 33,025 34,681 Property management fees (a) 2,509 2,509 2,508 ------- ------- ------- Total $37,158 35,534 37,189 ======= ======= ======= (a) Property management fees are computed as 1% of rental income. (4) RECONCILIATION OF NET INCOME (LOSS) AND PARTNERS' CAPITAL The following reconciliation provides details of the nature and amount of differences between net income (loss) and partners' capital per the accompanying financial statements and the Partnership tax return.

Page 15 of 22

(5) OTHER LIABILITIES Other liabilities at December 31, 2000 consisted primarily of unearned rental income, which arose from leases with non-level payments being recognized ratably over the period from lease inception to the date of the buy/sell option before extension. (6) SELECTED QUARTERLY RESULTS (UNAUDITED) The following tables summarize the quarterly results of operations for the years ended December 31, 2001 and 2000:

Page 16 of 22 SCHEDULE III I.R.E. Pension Investors, Ltd. - II Property and Accumulated Depreciation December 31, 2001 Galleria Professional Office Bldg. Ft. Lauderdale Florida --------------------- Acquisition Date 12/86 Encumbrances $ -- =========== Initial Costs: Building and Improvements $ 6,285,472 ----------- 6,285,472 Improvements: Costs capitalized subsequent to acquisition: Building and Improvements $ 183,289 ----------- 183,289 Write-down to state real estate at fair value $ (686,000) ----------- (686,000) Gross Amount: Building and Improvements $ 5,782,761 ----------- Total $ 5,782,761 =========== Accumulated Depreciation $ 4,849,591 =========== Life on which depreciation is computed 20 years Page 17 of 22 SCHEDULE III Continued I.R.E. Pension Investors, Ltd. - II Reconciliation of Cost and Accumulated Depreciation For each of the Years in the Three Year Period ended December 31, 2001 1999 2000 2001 ----------- ----------- ----------- Cost: Balance at beginning of period $ 7,892,028 5,782,761 5,782,761 Deletions: Sale of real estate (1,829,267) -- -- Impairment loss on real estate (280,000) -- -- ----------- ----------- ----------- Balance at end of period $ 5,782,761 5,782,761 5,782,761 =========== =========== =========== Accumulated Depreciation: Balance at beginning of period $ 4,861,920 4,201,927 4,525,759 Additions: Depreciation 366,243 323,832 323,832 Deletions: Sale of real estate (1,026,236) -- -- ----------- ----------- ----------- Balance at end of period $ 4,201,927 4,525,759 4,849,591 =========== =========== =========== The aggregate basis for Federal income tax purposes (not reduced by accumulated depreciation) of the above properties was approximately $6,468,761 at December 31, 2001. Page 18 of 22 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP The Partnership has no directors or officers. a) Directors. Listed below are the directors of I.R.E. Pension Advisors II, Corp., Managing General Partner of the Partnership, all of whom are to serve until the election and qualification of their respective successors unless sooner removed from office: NAME AGE POSITIONS HELD ---- --- -------------- Alan B. Levan 57 Director since 1985 Earl Pertnoy 75 Director since 1985 b) Executive Officers. Listed below are the executive officers of I.R.E. Pension Advisors II, Corp., all of whom are to serve until they resign or are replaced by the Board of Directors: NAME AGE POSITIONS HELD ---- --- -------------- Alan B. Levan 57 President since 1985 Glen R. Gilbert 57 Executive Vice President since July 1997, Senior Vice President from 1985 to July 1997; Chief Financial Officer since 1987; Secretary since 1988 c) Certain Significant Employees. Not applicable. d) Family Relationships. Not applicable. e) Business Experience. ALAN B. LEVAN formed the I.R.E. Group in 1972. Since 1978, he has been the Chairman of the Board, President, and Chief Executive Officer of BFC Financial Corporation (or its predecessor companies), a financial services and unitary savings bank holding company. He is also Chairman of the Board and President of I.R.E. Realty Advisors, Inc., I.R.E. Properties, Inc., I.R.E. Realty Advisory Group, Inc., U.S. Capital Securities, Inc., and Florida Partners Corporation. Mr. Levan is also Chairman of the Board and Chief Executive Officer of BankAtlantic Bancorp, Inc. Mr. Levan is also an individual general partner and an officer and a director of the corporate general partner of the Partnership. GLEN R. GILBERT has been Executive Vice President of the corporate general partner of the Partnership since 1987. Mr. Gilbert has been Executive Vice President of BFC Financial Corporation since July 1997, Chief Page 19 of 22 Financial and Accounting Officer since May 1987 and Secretary since October 1988. From 1985 through July 1997 he served in the position of Senior Vice President of BFC Financial Corporation. Mr. Gilbert has been a certified public accountant since 1970. Mr. Gilbert also serves as an officer of Florida Partners Corporation and has been Vice President of Levitt since 1997. EARL PERTNOY has been for more than the past five years a real estate investor and developer. He has been a director of BFC Financial Corporation and its predecessor companies since 1978. He is a director of the corporate general partner of the Partnership. f) Certain Legal Proceedings. None. ITEM 11. EXECUTIVE COMPENSATION a) Cash Compensation. The Partnership has no officers or directors. The Partnership did not pay salaries or expenses of the officers and directors of the general partner of the Partnership in 2001. b) Compensation Pursuant to Plans. The Partnership has no annuity, pension or retirement plan for any director, officer or employee. c) Other Compensation. Not applicable. d) Compensation of Directors. The Partnership has no directors. e) Termination of Employment and Change of Control Arrangement. Not applicable. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT a) No person owns 5% or more of the Partnership's voting securities. b) The Partnership has no officers or directors. The following information is provided with respect to units owned by directors and officers of the managing general partner. Page 20 of 22

(i) Alan B. Levan is a general partner of the Partnership and is President and Director of the Managing General Partner. c) The Partnership knows of no contract or other arrangement that could result in a change in control of the Partnership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS a)& b) During the year ending December 31, 2001, the following entities received the fees and payments indicated for services rendered with respect to the Partnership:

c) Indebtedness of Management. None. d) Transactions with Promoters. Not applicable. Page 21 of 22 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K A-1. See Item 8. Financial Statements and Supplementary Data. A-2. See Item 8. Financial Statements and Supplementary Data. A-3. Exhibits: Exhibit 3 Articles of incorporation and by-laws. Limited Partnership Agreement set forth as Exhibit A to the Prospectus of the Partnership dated October 4, 1985, as filed with the Commission pursuant to Rule 424(c), is hereby incorporated herein by reference. B. REPORTS ON FORM 8-K No reports on Form 8-K have been filed during the last quarter of the period covered by this report. No annual report or proxy material for the year 2001 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. I.R.E. PENSION INVESTORS, LTD. - II Registrant By: I.R.E. Pension Advisors-II, Corp., Managing General Partner By: /S/ Alan B. Levan ------------------------------------- Alan B. Levan, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Managing General Partner on behalf of the Partnership and in the capacities and on the dates indicated. /S/ Alan B. Levan March 26, 2002 ------------------------------------------------------- Alan B. Levan, Director and Principal Executive Officer /S/ Earl Pertnoy March 26 , 2002 ------------------------------------------------------- Earl Pertnoy, Director Page 22 of 22

IRE PENSION INVESTORS LTD-II 10-K