EX-99.0 4 dex990.htm CORRESPONDENCE TO THE LIMITED PARTNERS Correspondence to the Limited Partners

Exhibit 99.0

DiVall Insured Income Properties 2, L.P.

QUARTERLY NEWS

 

A publication of The Provo Group, Inc.    SECOND QUARTER 2009

2009 CONSENT VOTING UNDERWAY…We need your response!

Within the last two weeks, investors of record as of the close of business on June 30, 2009, should have received a Consent Statement and Consent Card in the mail which addresses the term extension of the Partnership from November 30, 2010 to November 30, 2020. The current market conditions (as we understand them) are detailed in the Consent Statement. We hope you have read these documents carefully and have already returned your Consent Card in the postage free and pre-addressed envelope mailed to you along with the Consent materials.

For those same investors of record, we have enclosed with this distribution mailing an additional investor Consent Card (pre-printed with your individual investor(s) information), as well as a new postage free and pre-addressed envelope. Please disregard these if you have already returned your signed Consent Card. Although these investors previously received a full set of Consent materials by mail, a PDF copy of the Definitive Consent Statement can also be viewed on and printed from the Internet via the new Partnership website at www.divallproperties.com (see the Investor Relations page). If using the Consent Card from the Internet, please call DiVall Investor Relations at 1-800-547-7686 for appropriate individual investor label information prior to signing and mailing.

You must return your signed Consent Card prior to October 31, 2009. If you do not sign and return your Consent Card, it is deemed a vote AGAINST the term extension of the Partnership for ten years to November 30, 2020. Please note that extending the term of the Partnership to 2020 does not mean that the properties will not be sold and the Partnership liquidated until 2020. If we do receive more than 50% of limited partner votes to extend the term of the Partnership, we will continue to circulate the biennial Consent for Sale vote every two years as we have done the past several years. Therefore, if the Partnership is extended to 2020, limited partners will continue to have the opportunity to vote for a “bulk” sale and the liquidation of the Partnership as early as May of 2011. In addition, we would continue to selectively sell individual properties when special and advantageous circumstances arise.

We believe that the amendment to the Partnership Agreement extending its term is in the best interest of the Partnership and the limited partners because, among other reasons and as more specifically described in the Consent Statement, the quality of the Partnership’s portfolio has improved due to the selective “pruning” (through individual sales) of properties with higher risk profiles with respect to future earnings. Your Advisory Board has been supportive of our selective pruning of the Partnership’s portfolio; however, the Advisory Board believes that it is prudent to hold the majority of the Partnership’s portfolio because of the fundamental strength of its core assets . . . namely the Wendy’s leases. In addition, “cap rates,” which are being applied in the triple-net lease marketplace, have risen markedly in the past eight months. As such cap rates rise, the property sales prices drop. We do not know if this rise in cap rates is a short term phenomenon or a long term adjustment in the market. However, we believe it is prudent not to try to sell into the current depressed real estate market if it is not necessary. Finally, the General Partner estimates a stable annual return of approximately 6% going forward, which would be difficult to replace in the current interest rate environment.

As your General Partner we recommend that you vote “FOR” the amendment to the Partnership Agreement to extend the term of the Partnership a period of 10 years to November 30, 2020.

 

SEE INSIDE

  

Distribution Highlights

   2

Property Highlights

   2

Questions & Answers

   2

Contact Information

   2


PAGE 2

  DIVALL 2 QUARTERLY NEWS   2 Q 09

DISTRIBUTION HIGHLIGHTS

 

   

$275,000 ($5.94 per unit) distributed for the Second Quarter of 2009, which is $55,000 ($1.19 per unit) higher than originally projected. The variance is primarily due to unanticipated rental collections from both Daytona’s and Denny’s (see PROPERTY HIGHLIGHTS below) and the collection of a sales escrow deposit related to the Denny’s sales contract which was terminated in May of 2008.

 

   

The annualized “operating return” for the Second Quarter of 2009 was approximately 7%, based on the Net Unit Value (“NUV”) of $330 per unit as of December 31, 2008.

 

   

$1,557.23 to $1,408.06 range of cumulative distributions per unit from the first unit sold to the last unit sold before the offering closed (3/90). (Distributions are from both cash flow from operations and “net” cash activity from financing and investing activities).

PROPERTY HIGHLIGHTS

 

   

Des Moines, IA (operates as Daytona’s All Sports Café): The lease on the property was extended in 2008 for one year and expired as of February 28, 2009. The terms of a new twenty-seven (27) month lease (retroactive to March 1, 2009), was agreed to in July of 2009, and includes first year base rent of $72,000. Daytona’s will be continued to be charged month-to-month rent of $6,000 until the new lease is executed. Due to the vagaries of a sports bar, a lease renewal for Daytona’s was not included in the 2009 budget.

 

   

Phoenix, AZ (operates as a Denny’s restaurant): A lease on the property expired on April 30, 2009 and month-to-month rent of $6,000 was charged to the tenant for May of 2009. A new twenty-three (23) month lease was executed in June of 2009 and commenced on June 1, 2009. The first year base rent amounts to $72,000. Due to the uncertainty of a lease renewal, the Denny’s new lease was not included in the 2009 budget.

QUESTIONS AND ANSWERS

 

   

When can I expect my next distribution mailing?

Your distribution correspondence for the Third Quarter of 2009 is scheduled to be mailed on November 13, 2009.

 

   

What was the December 31, 2008 Net Unit Value (“NUV”)?

The Net Unit Value was $330 per unit. The Net Unit Value letter from the General Partner was included with the February 13, 2009 distribution mailing. Please note that the year-end NUV should be adjusted (reduced) for any subsequent property sales during the following year.

 

   

Where can I find the new Partnership website?

Please visit the website at www.divallproperties.com.

 

   

How do I have a question answered in the next Newsletter?

Please e-mail your specific question to Diane Conley (DiVall Controller) at dconley@theprovogroup.com by Monday, October 5, 2009 or visit the Investor Relations page at www.divallproperties.com.

 

   

I’ve moved. How do I update my account registration?

Please mail or fax to DiVall Investor Relations a signed letter stating your new address and telephone number. Updates cannot be accepted over the telephone or via voicemail messages.

 

   

If I have questions or comments, how can I reach DiVall Investor Relations?

You can reach DiVall Investor Relations at the address and/or number(s) listed below.

CONTACT INFORMATION

 

MAIL:

    

DiVall Investor Relations

  

PHONE: 1-800-547-7686

    

c/o Phoenix American Financial Services, Inc.

   FAX:       1-415-485-4553
    

2401 Kerner Blvd.

  
     San Rafael, CA 94901   

 


DIVALL INSURED INCOME PROPERTIES 2 L.P.

STATEMENTS OF INCOME AND CASH FLOW CHANGES

FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2009

 

     PROJECTED     ACTUAL     VARIANCE  
      2nd
QUARTER
06/30/2009
    2nd
QUARTER
06/30/2009
    BETTER
(WORSE)
 

OPERATING REVENUES

      

Rental income

   $ 285,487      $ 311,272      $ 25,785   

Interest income

     1,655        631        (1,024

Other income

     0        15,010        15,010   
                        

TOTAL OPERATING REVENUES

   $ 287,142      $ 326,913      $ 39,771   
                        

OPERATING EXPENSES

      

Insurance

   $ 8,682      $ 8,682      $ 0   

Management fees

     60,210        60,613        (403

Overhead allowance

     4,857        4,896        (39

Advisory Board

     2,625        2,625        0   

Administrative

     35,045        34,589        456   

Professional services

     25,800        24,721        1,079   

Auditing

     51,273        31,715        19,558   

Legal

     9,000        18,840        (9,840

Property Expenses

     25,996        14,626        11,370   
                        

TOTAL OPERATING EXPENSES

   $ 223,488      $ 201,307      $ 22,181   
                        

INVESTIGATION AND RESTORATION EXPENSES

   $ 0      $ 86      $ (86
                        

NON-OPERATING EXPENSES

      

Depreciation

   $ 47,526      $ 47,527      $ (1

Amortization

     5,187        6,574        (1,387
                        

TOTAL NON-OPERATING EXPENSES

   $ 52,713      $ 54,102      $ (1,389
                        

TOTAL EXPENSES

   $ 276,200      $ 255,495      $ 20,705   
                        

NET INCOME

   $ 10,942      $ 71,418      $ 60,476   
                 VARIANCE  

OPERATING CASH RECONCILIATION:

      

Depreciation and amortization

     52,713        54,102        1,389   

Recovery of amounts previously written off

     0        (2,155     (2,155

(Increase) Decrease in current assets

     (11,857     6,598        18,455   

Increase (Decrease) in current liabilities

     20,006        13,299        (6,707

(Increase) Decrease in cash reserved for payables

     (20,050     (13,585     6,465   

Current cash flows advanced from (reserved for) future distributions

     168,357        144,357        (24,000
                        

Net Cash Provided From Operating Activities

   $ 220,110      $ 274,034      $ 53,924   
                        

CASH FLOWS (USED IN) FROM INVESTING AND FINANCING ACTIVITIES

      

Indemnification Trust (Interest earnings reinvested)

   $ (155   $ (156   $ (1

Recovery of amounts previously written off

     0        2,155        2,155   

Payment of Leasing Commissions

     0        (4,140     (4,140
                        

Net Cash (Used In) From Investing And Financing Activities

   $ (155   $ (2,141   $ (1,986
                        

Total Cash Flow For Quarter

   $ 219,955      $ 271,893      $ 51,938   

Cash Balance Beginning of Period

     726,803        751,323        24,520   

Less 1st quarter 2009 L.P. distributions paid 5/09

     (220,000     (230,000     (10,000

Change in cash reserved for payables or future distributions

     (148,307     (130,772     17,535   
                        

Cash Balance End of Period

   $ 578,451      $ 662,444      $ 83,993   
      

Cash reserved for 2nd quarter 2009 L.P. distributions

     (220,000     (275,000     (55,000

Cash reserved for payment of accrued expenses

     (76,885     (96,162     (19,277

Cash advanced from (reserved for) future distributions

     (177,326     (186,326     (9,000
                        

Unrestricted Cash Balance End of Period

   $ 104,241      $ 104,956      $ 715   
                        
     PROJECTED     ACTUAL     VARIANCE  

* Quarterly Distribution

   $ 220,000      $ 275,000      $ 55,000   

Mailing Date

     08/14/2009        (enclosed     —     

 

* Refer to distribution letter for detail of quarterly distribution.


PROJECTIONS FOR

DISCUSSION PURPOSES

DIVALL INSURED INCOME PROPERTIES 2 LP

2009 PROJECTED PROPERTY SUMMARY

AND RELATED RECEIPTS

FOR CURRENT INVESTMENT PROPERTIES

AS OF JUNE 30, 2009

 

PORTFOLIO   (Note 1)   REAL ESTATE     EQUIPMENT     TOTALS  

CONCEPT

 

LOCATION

  COST   ANNUAL
BASE
RENT
  %
YIELD
    LEASE
EXPIRATION
DATE
  COST   PRINCIPAL
RETURNED
AS OF 1/1/94
  ANNUAL
LEASE
RECEIPTS
  %
RETURN
    COST   ANNUAL
RECEIPTS
  RETURN  

APPLEBEE’S (2)

  COLUMBUS, OH   1,059,465   135,780   12.82     84,500   29,849   0   0.00   1,143,965   135,780   11.87

DENNY’S (3)

  PHOENIX, AZ   972,726   72,000   7.40     183,239   0   0   0.00   1,155,965   72,000   6.23

CHINESE SUPER BUFFET

  PHOENIX, AZ   865,900   72,000   8.32     221,237   0   0   0.00   1,087,137   72,000   6.62

DAYTONA’S All SPORTS CAFÉ (4)

  DES MOINES, IA   845,000   72,000   8.52     52,813   0   0   0.00   897,813   72,000   8.02

KFC

  SANTA FE, NM   451,230   60,000   13.30             451,230   60,000   13.30

 

Note:

 

  1: This property summary includes only property held by the Partnership as of June 30, 2009.
  2: The Applebee’s lease is set to expire on October 31, 2009. Management anticipates a lease renewal, so therefore twelve months of rent are included in annual base rent.
  3: The former Denny’s lease expired on April 30, 2009. A new twenty-three month lease was executed in June of 2009 and was retroactive to June 1, 2009 (set to expire on April 30, 2011).
  4: The Daytona’s lease expired on February 28, 2009. The terms of a new twenty-seventh month lease was agreed to in July of 2009 (retroactive to March 1, 2009), and includes first year base rent of $72,000. Daytona’s will continue to be charged month-to-month rent of $6,000 until the new lease is executed.
  5: Popeye’s ceased operations in June of 2008 and the lease was terminated in July of 2008. Management anticipates the property will be vacant throughout 2009.

Page 1 of 2


PROJECTIONS FOR

DISCUSSION PURPOSES

DIVALL INSURED INCOME PROPERTIES 2 LP

2008 PROJECTED PROPERTY SUMMARY

AND RELATED RECEIPTS

FOR CURRENT INVESTMENT PROPERTIES

AS OF JUNE 30, 2009

 

PORTFOLIO   (Note 1)   REAL ESTATE     EQUIPMENT     TOTALS  

CONCEPT

  LOCATION   COST   ANNUAL
BASE
RENT
  %
YIELD
    LEASE
EXPIRATION
DATE
  COST   PRINCIPAL
RETURNED
AS OF 1/1/94
  ANNUAL
LEASE
RECEIPTS
  %
RETURN
    COST   TOTAL
RECEIPTS
  RETURN  

VACANT (FORMER POPEYE’S) (5)

  PARK FOREST, IL   580,938   0   0.00             580,938   0   0.00

PANDA BUFFET

  GRAND FORKS, ND   739,375   38,000   5.14             739,375   38,000   5.14

WENDY’S

  AIKEN, SC   633,750   90,480   14.28             633,750   90,480   14.28

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

    11,302,885   1,216,280   10.76     541,789   29,849   0   0.00   11,844,674   1,216,280   10.27

 

Note:

 

  1: This property summary includes only property held by the Partnership as of June 30, 2009.
  2: The Applebee’s lease is set to expire on October 31, 2009. Management anticipates a lease renewal, so therefore twelve months of rent are included in annual base rent.
  3: The former Denny’s lease expired on April 30, 2009. A new twenty-three month lease was executed in June of 2009 and was retroactive to June 1, 2009 (set to expire on April 30, 2011).
  4: The Daytona’s lease expired on February 28, 2009. The terms of a new twenty-seventh month lease was agreed to in July of 2009 (retroactive to March 1, 2009), and includes first year base rent of $72,000. Daytona’s will continue to be charged month-to-month rent of $6,000 until the new lease is executed.
  5: Popeye’s ceased operations in June of 2008 and the lease was terminated in July of 2008. Management anticipates the property will be vacant throughout 2009.

Page 2 of 2

 


DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP,

a Wisconsin Limited Partnership

CONSENT OF LIMITED PARTNER TO AMEND THE

PARTNERSHIP AGREEMENT TO EXTEND THE LIFE OF THE

PARTNERSHIP TEN (10) YEARS TO NOVEMBER 30, 2020

The undersigned Limited Partner acknowledges receipt of the Consent Statement dated July 31, 2009 respecting the proposed amendment of the Partnership Agreement to extend the term of the Partnership by ten (10) years from November 30, 2010 to November 30, 2020. The undersigned Limited Partner understands that the General Partner is seeking approval from the Limited Partner’s to so amend the Partnership Agreement.

The General Partner recommends a vote “FOR” the amendment to the Partnership Agreement to extend the term of the Partnership by ten (10) years to November 30, 2020 as set forth below:

Section 2.2 of the Partnership Agreement is deleted in its entirety and the following substituted in lieu thereof:

“2.2 The term of the Partnership shall continue in full force and effect until November 30, 2020 or until dissolution prior thereto pursuant to the provisions of Article VIII.”

THIS PROPOSED AMENDMENT TO THE PARTNERSHIP AGREEMENT REQUIRES THE APPROVAL BY THE HOLDERS OF MORE THAN 50% OF THE OUTSTANDING UNITS OF THE PARTNERSHIP.

PLEASE CHECK THE APPROPRIATE BLANK BOX BELOW IN BLUE OR BLACK INK TO INDICATE YOUR VOTE ON THIS MATTER.

Consent to amend the Partnership Agreement to extend the term of the Partnership ten (10) years to November 30, 2020 as set forth above:

FOR  ¨    AGAINST  ¨    ABSTAIN  ¨

 

       Date:  

 

 

Signature of Unit Holder

      
      

 

Print Name

      

[LABEL]

 

 

    

Date:

 

 

Signature of Unit Holder, if held jointly

      
      

 

Print Name

      

PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE ABOVE LABEL REPRESENTING YOUR LIMITED PARTNERSHIP INTEREST. WHEN SUCH INTEREST(S) ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE OF SUCH. IF A CORPORATION, PLEASE HAVE SIGNED IN FULL CORPORATE NAME BY THE PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE HAVE SIGNED IN THE PARTNERSHIP’S NAME BY AN AUTHORIZED PERSON.