EX-99 2 dex99.txt LIMITED PARTNERS CORRESPONDANCE DATED 5/15/2001 DiVall Insured Income Properties 2, L.P. QUARTERLY NEWS ================================================================================ A publication of The Provo Group, Inc. FIRST QUARTER 2001 IMPORTANT: Consent For Sale Enclosed with this mailing you will find a consent form. Please read and review it carefully. As you may recall, we had originally planned to liquidate DiVall 2 by year-end. However, our offices have received numerous phone calls from investors who have indicated they no longer wish to sell. Additionally, the Advisory Board would discourage a sale based on available re-investment alternatives as well as the recent extension of 10 Wendy's leases through 2016. The Board feels that the Partnership is stable and an annual return of approximately 9% is good performance in todays market environment. We agree with the Board's position. However, we felt a consent would give us the best indication of how the investors wish to proceed. As General Partner we should always act in the best interest of the investors. In this circumstance, even if ------ we disagree with the majority vote, we will proceed according to the majority position. In short, IF 51% of investors vote to sell, we will immediately move forward with a sealed bid sale process. However, IF we do not receive a majority vote for a sale, we will instead continue to operate the Partnership ... business as usual. We anticipate that the number one question for those investors who no longer wish to sell is this, "If I vote for a NO sale now - am I stuck in this Partnership forever?". The answer is absolutely not. Assuming we do not -------------- receive a majority vote for sale this quarter, we will send out consent forms every two years, beginning May 2003. The cost of sending consents is not significant and we feel it is important to continue to measure the pulse of our investors preferences. As always, if you have questions please feel free to contact our investor relations department at 800-547-7686. -------------------------------------------------------------------------------- Distribution Highlights . The First Quarter distribution represents an approximate 9% annualized return from operations based on $23,800,000 (estimated net asset value as of 12/31/00) or approximately 10% return on the independent 2001 appraised value of $21,626,500. . $540,000 total amount distributed for the First Quarter 2001 which is higher than originally projected. . $11.67 per unit (approx.) for the First Quarter 2001. . $1,067.00 to $869.00 range of distributions per unit from the first unit ----- sold to the last unit sold before the offering closed (February 1990), ---- respectively. (NOTE: Distributions are from both cash flow from operations ---- and "net" cash activity from financing and investing activities.) Page 2 DiVall 2 1 Q 01 Statements of Income and Cash Flow Highlights . 9.8% increase in "total" operating revenues from projections for the 1/st/ Quarter. . 2000 percentage rent billing was higher than planned and Blockbuster did not vacate their property as originally anticipated. . There was a 2% decrease in expenses for the 1/st/ Quarter. . The decrease in expenses is primarily because legal fees were lower than anticipated. Property Highlights Receivables: . Mulberry Street Grill (Formerly Mr. Munchies, Phoenix, AZ) was delinquent at March 31, 2001, in the amount of $12,755. This tenant has since vacated the property and we are activating our legal remedies. . Village Inn (Grand Forks, ND) was delinquent at March 31, 2001, in the amount of $5,360. We fully expect to collect the balance in full. If we do not receive timely payment, we will move forward with appropriate legal remedies. . Denny's (Phoenix, AZ) has a past due balance in the amount of $14,561 for the percentage rent which was billed in March 2001. The tenant has already expressed concern over paying the full amount due. We plan to work with this tenant to collect the balance. . Popeye's - (Park Forest, IL) had a past due balance in the amount of $82,464 for the percentage rent which was billed in March 2001. However, the balance was paid in full during the month of April. HARDEE'S Terminates ... . Hardee's (Milwaukee, Wisconsin) has vacated the property. We have agreed to allow them to terminate their lease effective May 1, 2001 with the condition that the tenant would pay a termination fee equal to 2 years rent or $152,000. The fee would be paid in four installments over a one-year period. We have already hired a broker in the market who has found several promising prospects. We could be motivated to accept a purchase offer on this property at the right price. . Hardee's (South Milwaukee, Wisconsin) has also vacated the property. The tenant has agreed to continue paying rent and abide by all the terms of the Lease. The Lease expires in November 2001. We are already looking for new prospective tenants. -------------------------------------------------------------------------------- Page 3 DiVall 2 1 Q 01 Questions & Answers . When can I expect my next distribution mailing? Your distribution correspondence for the Second Quarter of 2001 is scheduled to be mailed on August 15, 2001. . What is the new net unit value as of December 31, 2001. We have estimated the Net Asset Value of each interest of the Partnership to approximate $505.00 at December 31, 2000. . If I have questions or comments, how can I reach your office? Please feel free to contact us at our toll-free number (800) 547-7686 or (816) 421-7444 or you may contact us by mail at: The Provo Group, Inc. 101 W. 11/th/ Street, Suite 1110, Kansas City, MO 64105. Finally, we can also be reached via e-mail at mmcmillin@theprovogroup.com.
----------------------------------------------------------------------------------------------------------------------- DIVALL INSURED INCOME PROPERTIES 2 L.P. STATEMENTS OF INCOME AND CASH FLOW CHANGES FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2001 ----------------------------------------------------------------------------------------------------------------------- PROJECTED ACTUAL VARIANCE ----------------------------------------- 1ST 1ST QUARTER QUARTER BETTER OPERATING REVENUES 03/31/01 03/31/01 (WORSE) ----------- ----------- ----------- Rental income $ 537,876 $ 589,482 $ 51,606 Interest income 14,600 14,173 (427) Other income 0 2,966 2,966 ----------- ----------- ----------- TOTAL OPERATING REVENUES $ 552,476 $ 606,621 $ 54,145 ----------- ----------- ----------- OPERATING EXPENSES Insurance $ 4,908 $ 4,827 $ 81 Management fees 47,280 47,386 (106) Overhead allowance 3,816 3,832 (16) Advisory Board 3,989 4,275 (286) Administrative 15,442 15,503 (61) Professional services 69,610 67,459 2,151 Auditing 18,675 19,926 (1,251) Legal 6,000 4,225 1,775 Defaulted tenants 300 0 300 ----------- ----------- ----------- TOTAL OPERATING EXPENSES $ 170,020 $ 167,433 $ 2,587 ----------- ----------- ----------- GROUND RENT $ 16,650 $ 16,852 ($202) ----------- ----------- ----------- INVESTIGATION AND RESTORATION EXPENSES $ 0 $ 111 ($111) ----------- ----------- ----------- NON-OPERATING EXPENSES Uncollectible Receivable $ 0 $ 8,000 ($8,000) Depreciation 86,100 86,100 (0) Amortization 2,787 3,135 (348) ----------- ----------- ----------- TOTAL NON-OPERATING EXPENSES $ 88,887 $ 97,235 ($8,348) ----------- ----------- ----------- TOTAL EXPENSES $ 275,557 $ 281,631 ($6,074) ----------- ----------- ----------- NET INCOME (LOSS) $ 276,919 $ 324,990 $ 48,071 OPERATING CASH RECONCILIATION: VARIANCE ----------- Depreciation and amortization 88,887 89,235 348 Recovery of amounts previously written off 0 (2,781) (2,781) (Increase) Decrease in current assets 452,585 415,198 (37,387) Increase (Decrease) in current liabilities (31,700) 29,074 60,774 (Increase) Decrease in cash reserved for payables 30,592 (30,374) (60,966) Advance from/(to) current cash flows for future distributions (273,750) (273,750) 0 ----------- ----------- ----------- Net Cash Provided From Operating Activities $ 543,533 $ 551,592 $ 8,059 ----------- ----------- ----------- CASH FLOWS FROM (USED IN) INVESTING AND FINANCING ACTIVITIES Recoveries from former general partners 0 2,781 2781 Investment in Deferred Leasing Commissions (17,858) (10,440) 7,418 ----------- ----------- ----------- Net Cash Provided From Investing And Financing Activities ($17,858) ($7,659) $ 10,199 ----------- ----------- ----------- Total Cash Flow For Quarter $ 525,675 $ 543,933 $ 18,258 Cash Balance Beginning of Period 789,317 752,060 (37,257) Less 4th quarter distributions paid 2/01 (520,000) (575,000) (55,000) Change in cash reserved for payables or future distributions 243,158 304,124 60,966 ----------- ----------- ----------- Cash Balance End of Period $ 1,038,150 $ 1,025,117 ($13,033) Cash reserved for 1st quarter L.P. distributions (525,000) (540,000) (15,000) Cash reserved for payment of accrued expenses (122,888) (157,611) (34,723) Cash advanced from (reserved for) future distributions (273,750) (273,750) 0 ----------- ----------- ----------- Unrestricted Cash Balance End of Period $ 116,512 $ 53,756 ($62,756) =========== =========== =========== ----------------------------------------------------------------------------------------------------------------------- PROJECTED ACTUAL VARIANCE ----------------------------------------- * Quarterly Distribution $ 525,000 $ 540,000 $ 15,000 Mailing Date 5/15/01 (enclosed) - -----------------------------------------------------------------------------------------------------------------------
* Refer to distribution letter for detail of quarterly distribution. PROJECTIONS FOR DISCUSSION PURPOSES DIVALL INSURED INCOME PROPERTIES 2 LP 2001 PROPERTY SUMMARY AND RELATED ESTIMATED RECEIPTS PORTFOLIO (Note 1)
------------------------ ----------------------------------- ------------------------------ REAL ESTATE EQUIPMENT TOTALS ------------------------ ----------------------------------- ------------------------------ ANNUAL LEASE ANNUAL ----------------------------------- BASE % EXPIRATION LEASE % * ANNUAL CONCEPT LOCATION COST RENT YIELD DATE COST RECEIPTS RETURN COST RECEIPTS RETURN ----------------------------------- ------------------------ ----------------------------------- ------------------------------ APPLEBEE'S COLUMBUS, OH 1,059,465 135,780 12.82% 84,500 0 0.00% 1,143,965 135,780 11.87% BLOCKBUSTER OGDEN, UT 646,425 100,670 15.57% 646,425 100,670 15.57% DENNY'S PHOENIX, AZ 972,726 65,000 6.68% 183,239 0 0.00% 1,155,965 65,000 5.62% DENNY'S PHOENIX, AZ 865,900 90,000 10.39% 221,237 0 0.00% 1,087,137 90,000 8.28% FIESTA TIME TWIN FALLS, ID 699,032 85,800 12.27% 190,000 0 0.00% 889,032 85,800 9.65% MULBERRY ST GRILL PHOENIX, AZ 500,000 61,200 12.24% 14,259 0 0.00% 514,259 61,200 11.90% HARDEE'S (5) S MILWAUKEE, WI 808,032 58,667 7.26% 808,032 58,667 7.26% HARDEE'S (5) HARTFORD, WI 686,563 64,000 9.32% 686,563 64,000 9.32% HARDEE'S (5) MILWAUKEE, WI 1,010,045 76,000 7.52% (4) 260,000 0 0.00% 1,421,983 76,000 5.34% " " 151,938 0 0.00% HARDEE'S (5) FOND DU LAC, WI 849,767 88,000 10.36% (4) 290,469 0 0.00% 1,140,236 88,000 7.72% HARDEE'S (5) MILWAUKEE, WI 0 0 0.00% 780,000 0 0.00% 780,000 0 0.00% HOOTER'S R. HILLS, TX 1,246,719 95,000 7.62% 1,246,719 95,000 7.62% HOSTETTLER'S DES MOINES, IA 845,000 60,000 7.10% 52,813 0 0.00% 897,813 60,000 6.68% KFC SANTA FE, NM 451,230 60,000 13.30% 451,230 60,000 13.30% MIAMI SUBS PALM BEACH, FL 743,625 54,000 7.26% 743,625 54,000 7.26% ----------------------------------- ------------------------ ----------------------------------- ------------------------------
Note 1: This property summary includes only current property and equipment held by the Partnership. Equipment lease receipts shown include a return of capital. 2: Rent is based on 12.5% of monthly sales. Rent projected for 2000 is based on 1999 sales levels. 3: The Partnership entered into a long-term ground lease in which the Partnership is responsible for payment of rent. 4: The lease was terminated and the equipment sold to Hardee's Food Systems in conjunction with their assumption of the Terratron leases in November 1996. 5: These leases were assumed by Hardee's Food Systems at a reduced rental rate from the stated in the original leases. Page 1 of 2 PROJECTIONS FOR DISCUSSION PURPOSES DIVALL INSURED INCOME PROPERTIES 2 LP 2001 PROPERTY SUMMARY AND RELATED ESTIMATED RECEIPTS PORTFOLIO (Note 1)
------------------------------ ------------------------------------ ----------------------------- REAL ESTATE EQUIPMENT TOTALS ------------------------------ ------------------------------------ ----------------------------- ANNUAL LEASE ANNUAL -------------------------------- BASE % EXPIRATION LEASE % TOTAL CONCEPT LOCATION COST RENT YIELD DATE COST RECEIPTS RETURN COST RECEIPTS RETURN -------------------------------- ------------------------------ ------------------------------------ ----------------------------- POPEYE'S PARK FOREST, IL 580,938 77,280 13.30% 580,938 77,280 13.30% SUNRISE PS PHOENIX, AZ 1,084,503 134,136 12.37% 79,219 0 0.00% 1,182,735 134,136 11.34% 19,013 0 0.00% VILLAGE INN GRAND FORKS, ND 739,375 60,000 8.11% 739,375 60,000 8.11% WENDY'S AIKEN, SC 633,750 90,480 14.28% 633,750 90,480 14.28% WENDY'S CHARLESTION, SC 580,938 77,280 13.30% 580,938 77,280 13.30% WENDY'S N. AUGUSTA, SC 660,156 87,780 13.30% 660,156 87,780 13.30% WENDY'S AUGUSTA, GA 728,813 96,780 13.28% 728,813 96,780 13.28% WENDY'S CHARLESTON, SC 596,781 76,920 12.89% 596,781 76,920 12.89% WENDY'S AIKEN, SC 776,344 96,780 12.47% 776,344 96,780 12.47% WENDY'S AUGUSTA, GA 649,594 86,160 13.26% 649,594 86,160 13.26% WENDY'S CHARLESTON, SC 528,125 70,200 13.29% 528,125 70,200 13.29% WENDY'S MT. PLEASANT, SC 580,938 77,280 13.30% 580,938 77,280 13.30% WENDY'S MARTINEZ, GA 633,750 84,120 13.27% 633,750 84,120 13.27% -------------------------------- ------------------------------ ------------------------------------ ----------------------------- -------------------------------- ------------------------------ ------------------------------------ ----------------------------- PORTFOLIO TOTALS (27 Properties) 20,158,534 2,209,313 10.96% 2,326,687 0 0.00% 22,485,221 2,209,314 9.83% -------------------------------- ------------------------------ ------------------------------------ -----------------------------
Note 1: This property summary includes only current property and equipment held by the Partnership. Equipment lease receipts shown include a return of capital. Page 2 of 2