-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NyrOiz0ddPUkjN4B2RCdpRHEUXslDLTsKvk9Q7voOQGVGNCb8IbHl8hnM/IWaezc KiLZO0zea0cDpKlqRCdkaQ== 0000711512-97-000003.txt : 19970425 0000711512-97-000003.hdr.sgml : 19970425 ACCESSION NUMBER: 0000711512-97-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970424 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMRECORP REALTY FUND II CENTRAL INDEX KEY: 0000745061 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 751956009 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-90654 FILM NUMBER: 97586760 BUSINESS ADDRESS: STREET 1: 6210 CAMPBELL ROAD STREET 2: SUITE 140 CITY: DALLAS STATE: TX ZIP: 75248-1380 BUSINESS PHONE: 2143808000 MAIL ADDRESS: STREET 1: 6210 CAMBELL ROAD STREET 2: SUITE 140 CITY: DALLAS STATE: TX ZIP: 75248-1380 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 2O549 FORM 1O-K ANNUAL REPORT [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the Fiscal year ended December 31, 1996 [ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the Transaction Period from ________ to ________ Commission File Number 2-90654 AMRECORP REALTY FUND II (Exact name of registrant as specified in its charter) Texas 75-1956009 (State or Other Jurisdiction of (I.R.S. Employer (Incorporation or Organization) (Identification Number) 6210 Campbell Road, Suite 140, Dallas, Texas 75248 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including area code(972) 38O-8OOO Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on which Registered - ------------------- --------------------- None None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests (Title of Class) 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 Amendment to the Form 10-k. _______ 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 9O days. Yes X No . Documents Incorporated by Reference The Prospectus dated July 6, 1985 filed pursuant to Rule 424(b) as supplemented pursuant to Rule 424(b) on December 11, 1985 Part I Item 1. Business The Registrant, Amrecorp Realty Fund II, (the "Partnership"), is a limited partnership organized under the Texas Uniform Limited Partnership Act pursuant to a Certificate of Limited Partnership dated April 16, 1984 and amended on July 5, 1984. As of December 31, 1996, the Partnership consisted of an individual general partner, Mr. Robert J. Werra (the "General Partner") and 1,978 limited partners owning 14,544 limited partnership interests at $1,OOO per interest. The distribution of limited partnership interests commenced pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration #2-9O654) as amended. The Partnership was organized to acquire a diversified portfolio of income-producing real properties, primarily apartments, as well as office buildings, industrial buildings, and other similar properties. The Partnership intends to continue until December 31, 2O14 unless terminated by an earlier sale of its Properties. The General Partner manages the affairs of the Partnership and acts as the Managing Agent with respect to the Partnership's properties. The General Partner may also engage other on-site property managers and other agents, to the extent the General Partner considers appropriate. The General Partner makes all decisions regarding investments in and disposition of properties and has ultimate authority regarding all property management decisions. The Partnership competes in the residential and commercial rental markets. The General Partner prepared market analyses for the property areas. These areas contain other like properties which may be considered competitive on the basis of location, amenities and rental rates. No material expenditure has been made or is anticipated for either Partnership-sponsored or consumer research and development activities relating to the development or improvement of facilities or services provided by the Partnership. There neither has been, nor are any anticipated, material expenditures required to comply with any Federal, State or local environmental provisions which would materially affect the earnings or competitive position of the Partnership. The Partnership is engaged solely in the business of real estate investments. Its business is believed by management to fall entirely within a single industry segment. Management does not anticipate that there will be any material seasonal effects upon the operation of the Partnership. Competition and Other Factors The majority of the Apartment Community Properties leases are of six to twelve month terms. Accordingly, operating income is highly susceptible to varying market conditions. Occupancy and street rents are driven by general market conditions which include job creation, new construction of single and multi-family projects, and demolition and other reduction in net supply of apartment units. Due to increased market pressures, the Partnership's shopping center located in Lancaster, Texas has continued to experience poor economic performance and decreasing cash flows. Accordingly, in 1996 the Partnership sold its investment in the shopping center, recognizing a loss of $10,177 On those properties owned at December 31, 1996, rents have generally been increasing in recent years due to the generally positive relationship between apartment unit supply and demand in the Partnership's markets. However, the properties are subject to substantial competition from similar and often newer properties in the vicinity in which they are located. In addition, operating expenses and capitalized expenditures have increased as units are updated and made more competitive in the market place. Item 2. Properties At December 31, 1996 the Partnership owned two properties. The two apartment communities aggregate approximately 250,748 net rentable square feet. The Shopping Center, Lancaster Place which was disposed of during 1996 consisted of approximately 53,860 net rentable square feet. Name and Location General Description of the Property - ----------------- ----------------------------------- Chimney Square Apartments A fee simple interest in seventeen two-story residential buildings located in Abilene, Texas purchased in 1984, containing approximately 126,554 net rentable square feet on approximately 7.18 acres of land. The community consists of 128 apartment units and twenty four townhouse units. Shorewood Apartments A fee simple interest in a 96 unit apartment community located in Mecklenburg County, North Carolina, purchased in 1985 and containing approximately 124,194 net rentable square feet on 10.058 acres of land. In January 1997, the Partnership sold this apartment community. Lancaster Place A fee simple interest in a neighborhood shopping center sold located in Lancaster Texas purchased in 1984 containing 53,860 square feet on approximately 7.89 acres of land with paved surface parking for 372 cars. The shopping center was sold in August of 1996. Occupancy Rates --------------- Per cent -------- 1992 1993 1994 1995 1996 Lancaster Shopping Center 80.00% 80.00% 90.00% 89.00% NA Chimney Square 98.50% 98.90% 96.50% 90.90% 95.60% Shorewood Apartments 90.00% 95.10% 96.50% 94.90% 94.00% The properties are encumbered by non-recourse mortgages payable. For information regarding the encumbrances to which the properties are subject and the status of the related mortgage loans, see " Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" contained in Item 7 hereof and Note 4 to Consolidated Financial Statements and Schedule Index contained in Item 8. Item 3. Legal Proceedings - ------------------------- The Partnership is not engaged in any material legal proceedings. Item 4. Submission of Matters to a Vote of Unit Holders - ------------------------------------------------------- There were no matters submitted to a vote of unit holders during the fourth quarter of the fiscal year. By virtue of its organization as a limited partnership, the Partnership has outstanding no securities possessing traditional voting rights. However, as provided and qualified in the Limited Partnership Agreement, limited partners have voting rights for, among other things, the removal of the General Partner and dissolution of the Partnership. PART II Item 5. Market for Registrant's Units and Related Unit-holders Matters - ---------------------------------------------------------------------- The Partnerships outstanding securities are in the form of Limited Partnership Interests ("Interests"). As of December 31, 1996 there were approximately 1,978 limited partners owning 14,544 limited partnership interests at $1,000 per interest. A public market for trading Interests has not developed and none is expected to develop. In addition, transfer of an Interest is restricted pursuant to Article X, Section 2, of the Limited Partnership Agreement. The General Partner continues to review the Partnership's ability to make distributions on a quarter by quarter basis. In 1996 the Partnership distributed $50 per $1000 unit due to the sale of Lancaster Place . The Partnership anticipates a distribution of $100 per $1000 unit in early 1997 due to the sale of Shorewood in 1997. An analysis of tax income or (loss) allocated, and cash distributed to Investors per $1,000 unit is as follows: YEARS TAXABLE INCOME OR GAIN TAXABLE LOSS CASH DISTRIBUTED 1984 - 1993 $0 $910 $30 1994 0 $27 0 1995 0 $28 0 1996 $62 0 $50 Item 6. Selected Financial Data - -------------------------------- The following table sets forth selected financial data regarding the Partnership's result of operations and financial position as of the dates indicated. This information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Item 7 hereof and Consolidated Financial Statements and notes thereto contained in Item 8. Year Ended December 31 (in thousands except unit amounts) 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Limited Partner Units Outstanding 14,544 14,544 14,544 14,544 14,544 ------ ------ ------ ------ ------ Statement of Operations Total Revenues $1,658 $1,629 $1,569 $1,533 $1,347 Net Income (Loss) before extraordinary items (135) (672) (252) (526) (422) Extraordinary Item- Gain on debt forgiveness (a) 1,377 0 0 0 0 Extraordinary Item-loss on extinguishment of debt 0 0 (53) 0 0 Net Income (Loss) 1,241 (672) (305) (526) (422) Limited Partner Net Income(Loss) per Unit 85 (46) (21) (27) (34) Cash Distributions to Limited Partners per Unit 50 0 0 0 0 Balance Sheet: Real Estate, net (b) 2,777 6,971 7,633 7,967 8,533 Real Estate assets held for sale 2,862 0 0 0 0 Total Assets 6,271 7,499 7,753 8,111 8,594 Mortgages Payable 5,054 6,571 6,204 6223 6,297 Partner's Equity(Deficit)1,032 517 1,189 1,494 2,020 (a) In connection with the sale of the commercial property located in Lancaster, Texas, the general partner relieved the Partnership of its obligation to repay the mortgage note, resulting in gain on forgiveness of debt. (b) On August 23, 1996 the Partnership disposed of its shopping center located in Lancaster, Texas. The shopping center had accounted for $158,001, $230,651, $221,713, $222,178 and $203,928 of revenues for the years ended December 31, 1996, 1995, 1994, 1993, and 1992 Item 7 Management's Discussion and Analysis of Financial Conditions and - ------------------------------------------------------------------------ Results of Operations --------------------- This discussion should be read in conjunction with Item 6- Selected Financial Data and Item 8 - Financial Statements and Supplemental Information . Results of Operations: 1996 VERSUS 1995 - Revenue from Property Operations increased $29,295 or 1.8% as compared to 1995, due to an increase in rental revenues of $12,075, which was primarily the result of increases in rents resulting from improvements in the apartment rental markets. (Rental revenue at the Partnership's apartment communities increased by $85,755.) These increases were partially offset by a reduction in rental revenue on Lancaster of $73,680. The Partnership disposed of its investment in Lancaster in August of 1996, thus only eight months of rental revenues were recognized. Additionally interest income increased $9,884 due to additional funds available for investment and other income for 1996 increased $7,336 primarily due to the aforementioned increase in occupancy. The following table illustrates the increases or (decreases): Increase (Decrease) ---------- Rental income $12,075 Interest 9,884 Other 7,336 Net Increase -------- (Decrease) $29,295 ======== Property operating expenses for 1996 decreased $507,276 from 1995 or 22.05%. Property operating expenses at the Partnership's apartment communities decreased by $71,569 due to a one time painting and parking lot repairs to facilitate the sale of Shorewood Apartments in 1997. The remaining decrease of $94,545 in property operating expenses is due to the sale of Lancaster Shopping Center. The following table illustrates the increases or (decreases): Gain of debt forgiveness for 1996 was $1,376,916 due to the general partner relieving the Partnership of its obligations to repay the mortgage note related to the commercial property located in Lancaster Texas and disposed of in August of 1996. Increase (Decrease) ---------- Repairs and Maintenance $(78,322) Real estate taxes (480) General & Administrative (18,146) Administrative Service Fee (1,000) Utilities (18,329) Payroll (440) Interest (51,500) Loss on Sale of Property 10,177 Depreciation and amortization (6,362) Property management fees (1,712) ---------- Net Increase (Decrease) $(106,114) ========== Results of Operations: 1995 VERSUS 1994 - Revenue from Property Operations increased $59,521 or 3.8% as compared to 1994, due to an increase in rental revenues of $43,268 which was primarily the result of increases in rents resulting from improvements in the apartment rental markets. Additional interest income increased $12,577 due to additional funds available for investment and other income for 1995 increased $3,676 primarily due to the aforementioned increase in occupancy. The following table illustrates the increases or (decreases): Increase (Decrease) ---------- Rental income $43,268 Interest 3,676 Other 12,577 ------- Net Increase (Decrease) $59,521 ======= Property operating expenses for 1995 increased $479,284 from 1994 or 26.32%. Real estates taxes decreased as a result of successful tax appeals. Depreciation and amortization expense increased primarily due to additions to buildings, improvements and fixtures. Payroll increases were due primarily to cost of living increases. Interest expense decreased by $17,765 due primarily to the refinancing of an 11.75% mortgage with a 7.75% mortgage in 1994 and the refinancing of an 9.625% mortgage payable with a 9.325% note payable in February of 1995. Repair and maintenance expenses increased primarily due to mandated repairs and in bringing additional units on line. Property management fees are paid to an affiliated entity and represent approximately 5% to 6% of gross revenues. The following table illustrates the increases or (decreses): Increase (Decrease) ---------- Repairs and Maintenance $107,367 Real estate taxes (3,880) General & Administrative 7,508 Administrative Service Fee 0 Utilities 5,628 Payroll 17,811 Interest (17,765) Loss on Sale of Property 0 Depreciation and amortization 18,453 Property management fees 3,000 -------- Net Increase (Decrease) $138,122 ======== Due to the poor economic performance brought about by increased pressures, the Partnership's investment in its shopping center located in Lancaster, Texas, has experienced decreased cash flows. Accordingly, during 1995, the Partnership recorded an impairment loss of approximately $341,000 to lower the carrying value of the assets to their estimated fair value, determined based on estimated cash flows and sales proceeds. The impairment has been reflected in the balance sheet as a reduction in the basis of the fixed assets. Lancaster Place was sold in August of 1996. Liquidity and Capital Resources - ------------------------------- While it is the General Partners primary intention to operate and manage the existing real estate investments, the General Partner also continually evaluates this investment in light of current economic conditions and trends to determine if these assets should be considered for disposal. Accordingly, in 1996 the Partnership sold its investment in the shopping center located in Lancaster Texas , recognizing a loss of $10,177. Shorewood Apartments, an apartment complex located in Charlotte, North Carolina was sold in January 1997. Net gain from the sale will be approximately 1.3 million dollars. The partnership anticipates marketing Chimney Square during 1997. As of December 31, 1996, the Partnership had $362,135 in cash and cash equivalents as compared to $254,189 as of December 31, 1995. The net increase in cash of $107,946 is principally due to funds provided from sale proceeds from the sale of the shopping center at Lancaster Texas. The properties are encumbered by nonrecourse mortgages as of December 31, 1996, with interest rates ranging from 7.75% to 9.325%. Required principal payments on these mortgage notes for the five years ended December 31, 2001, are $75,828, $82,422, $86,639, $97,471 and $2,464,463 respectively. For the foreseeable future, the Partnership anticipates that mortgage principal payments (excluding balloon mortgage payments), improvements and capital expenditures will be funded by net cash from operations. The primary source of capital to fund future Partnership acquisitions and balloon mortgage payments will be proceeds from the sale, financing or refinancing of the properties. Risk Associated with Forward-Looking Statements Included in this Form 10-k This Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Actof 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created thereby. These statements include the plans and objectives of management for future operations, including plans and objectives relating to capital expenditures and rehabilitation costs on the Properties. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward- looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. AMRECORP REALTY FUND II (A TEXAS LIMITED PARTNERSHIP) ITEM 8 - FINANCIAL STATEMENTS AND SCHEDULE INDEX - -------------------------------------------------------------------- Page INDEPENDENT AUDITORS' REPORT 11 BALANCE SHEETS 12 STATEMENTS OF OPERATIONS 13-14 STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 15 STATEMENTS OF CASH FLOWS 16 NOTES TO FINANCIAL STATEMENTS 17-21 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 22-23 INDEPENDENT AUDITORS' REPORT To the General Partner and Limited Partners Amrecorp Realty Fund II Dallas, Texas We have audited the accompanying balance sheets of Amrecorp Realty Fund II (a Texas limited partnership) (the Partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in the index at Item 14(a)(2). These financial statements and financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the financial statements and financial statement 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 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, such financial statements present fairly, in all material respects, the financial position of Amrecorp Realty 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. Also, in our opinion, such 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. Deloitte & Touche LLP Dallas, Texas February 17, 1997 AMRECORP REALTY FUND II (A Texas Limited Partnership) BALANCE SHEETS DECEMBER 31, 1996 AND 1995 ASSETS 1996 1995 INVESTMENTS IN REAL ESTATE, AT COST (Note 4): Land $ 580,045 $ 1,858,048 Buildings, improvements and furniture and fixtures 4,547,323 10,347,641 ----------- ---------- 5,127,368 12,205,689 Less accumulated depreciation (2,350,376) (5,234,192) ----------- ---------- 2,776,992 6,971,497 INVESTMENTS IN REAL ESTATE ASSETS HELD FOR SALE, NET (Note 2) 2,862,244 - CASH AND CASH EQUIVALENTS 362,135 254,189 DEFERRED COSTS (Note 3) 86,057 99,863 ESCROW DEPOSITS 166,070 143,417 OTHER ASSETS 17,866 30,015 ---------- ---------- TOTAL $6,271,364 $7,498,981 ========== ========== LIABILITIES AND PARTNERS' EQUITY MORTGAGES AND NOTES PAYABLE (Notes 4 and 5) $5,054,073 $6,571,120 ACCOUNTS PAYABLE AND ACCRUED EXPENSES 103,019 128,753 DUE TO AFFILIATES 6,854 4,379 ACCRUED INTEREST PAYABLE 35,827 233,648 SECURITY DEPOSITS 40,002 43,778 ---------- --------- 5,239,775 6,981,678 COMMITMENTS AND CONTINGENCIES PARTNERS' EQUITY (Note 2) 1,031,589 517,303 ---------- --------- TOTAL $6,271,364 $7,498,981 ========== ========= See notes to financial statements. AMRECORP REALTY FUND II (A Texas Limited Partnership) STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - ---------------------------------------------------------------------------- 1996 1995 1994 INCOME: Rentals $1,597,441 $1,585,366 $1,542,098 Other 39,256 29,372 25,696 Interest 21,208 13,872 1,295 ---------- ---------- ---------- Total income 1,657,905 1,628,610 1,569,089 OPERATING EXPENSES: Repairs and maintenance 224,898 303,220 195,853 Real estate taxes 135,622 136,102 139,982 General and administrative 109,314 127,460 119,952 Administrative services fees to affiliate (Note 5) 9,176 10,176 10,176 Utilities 71,989 90,318 84,690 Payroll 166,707 167,147 149,336 Interest 536,118 587,618 605,383 Loss on sale of property (Note 2) 10,177 - - Depreciation and amortization 447,314 453,676 435,223 Loss on impairment (Note 8) - 341,162 - Property management fee to affiliate (Note 5) 82,020 83,732 80,732 ---------- ---------- ---------- Total operating expenses 1,793,335 2,300,611 1,821,327 ---------- ---------- ---------- NET LOSS BEFORE EXTRAORDINARY ITEM (135,430) (672,001) (252,238) EXTRAORDINARY ITEM: Gain on debt forgiveness 1,376,916 - - Loss on extinguishment of debt (Note 4) - - (53,030) ---------- ---------- ---------- NET INCOME (LOSS) (Note 6) $1,241,486 $(672,001) $(305,268) ========== ========== ========== NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT: Net loss before extraordinary item $(9.22) $(45.74) $(17.17) Gain on debt forgiveness 93.73 - - Loss on extinguishment of debt - - (3.61) ---------- ---------- ---------- NET INCOME (LOSS) PER UNIT $84.51 $(45.74) $(20.78) ========== ========== ========== LIMITED PARTNERSHIP UNITS OUTSTANDING 14,544 14,544 14,544 ========== ========== ========== See notes to financial statements. AMRECORP REALTY FUND II (A Texas Limited Partnership) STATEMENTS OF PARTNERS' EQUITY (DEFICIT) YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - ---------------------------------------------------------------------------- General Limited Partner Partners Total BALANCE, JANUARY 1, 1994 $(105,207) $1,599,779 $1,494,572 Net loss (3,053) (302,215) (305,268) --------- -------- --------- BALANCE, DECEMBER 31, 1994 (108,260) 1,297,564 1,189,304 Net loss (6,720) (665,281) (672,001) --------- -------- --------- BALANCE, DECEMBER 31, 1995 (114,980) 632,283 517,303 Distributions - (727,200) (727,200) Net income 12,415 1,229,071 1,241,486 --------- --------- ---------- BALANCE, DECEMBER 31, 1996 $(102,565) $1,134,154 $1,031,589 ========= ========== ========== See notes to financial statements. AMRECORP REALTY FUND II (A Texas Limited Partnership) STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - ----------------------------------------------------------------------------- 1996 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $1,241,486 $(672,001) $(305,268) Adjustments to reconcile net income (loss) to cash provided by operations: Loss on extinguishment of debt - - 53,030 Loss on sale of assets 10,177 - - Gain on debt forgiveness (Note 5) (1,376,916) - - Depreciation and amortization 447,314 453,676 435,223 Loss on impairment (Note 8) - 341,162 - Changes in assets and liabilities: - - - Escrow deposits 5,716 (70,900) (7,479) Deferred costs - (43,421) (41,501) Other assets 12,149 6,733 (16,205) Accrued interest payable 3,446 (1,513) (16,717) Security deposits (3,776) 2,535 (3,067) Accounts payable and accrued expenses (25,734) 48,971 (17,791) Due to/from affiliates 2,475 1,096 6,400 ---------- ---------- ---------- (925,149) 738,339 391,893 ---------- ---------- ---------- Net cash provided by operating activities 316,337 66,338 86,625 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in real estate (61,073) (120,695) (66,924) Proceeds from sale of assets 949,649 - - Deposits to reserve for replacements (34,997) (76,839) - Disbursements from reserve for replacements 6,628 17,525 - ---------- ---------- ---------- Net cash provided by (used in) investing activities 860,207 (180,009) (66,924) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on mortgages and notes payable (341,398) (2,107,620) (2,797,087) Additions to mortgages and notes payable - 2,475,000 2,725,000 Distributions (727,200) - - ---------- ---------- ---------- Net cash provided by (used in) financing activities (1,068,598) 367,380 (72,087) ---------- ---------- ---------- NET INCREASE (DECREASE) IN CASH 107,946 253,709 (52,386) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 254,189 480 52,866 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS, END OF YEAR $362,135 $254,189 $480 ========== ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $532,672 $589,131 $622,100 ========== ========== ========== See notes to financial statements. AMRECORP REALTY FUND II (A TEXAS LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - ---------------------------------------------------------------------------- 1. SUMMARY OF ACCOUNTING POLICIES Basis of Accounting - Amrecorp Realty Fund II (the "Partnership"), a Texas limited partnership, maintains its books and prepares its income tax returns using the accrual income tax basis of accounting. Memo adjustments have been made in preparing the accompanying financial statements in accordance with generally accepted accounting principles (see Note 6). The financial statements include only those assets, liabilities and results of operations which relate to the business of the Partnership. The financial statements do not include any assets, liabilities, revenues or expenses attributable to the partners' individual activities. Property and Equipment- Buildings, improvements, and furniture and fixtures are depreciated using the straight-line method over the estimated useful lives of the assets which are five years for improvements, furniture and fixtures and 25 years for buildings. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," Partnership management routinely reviews its investments for impairments whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable (Note 7). Deferred Costs - Loan commitment fees are amortized by the straight-line method over the term of the loan, which approximates the interest method. Syndication Costs - Costs or fees incurred to raise capital for the Partnership are netted against the respective partners' equity accounts. Revenue Recognition - The Partnership has leased its investment in residential property under operating leases for periods generally less than one year. For its investments in commercial property, there are operating leases ranging from 2 to 25 years. Income Taxes - No provision has been made for income taxes since these taxes are the responsibility of the individual partners. For tax purposes, the basis of the Partnership assets is $5,797,453 at December 31, 1996. Cash and Cash Equivalents - For purposes of the statement of cash flows, the Partnership considers all highly liquid investments with a remaining maturity of three months or less at the date of acquisition to be cash equivalents. Univesco Inc. ("Univesco"), an affiliate of general partner, Robert J. Werra, and the management agent, maintains a single controlled disbursement account for all properties managed by Univesco. Funds are transferred at the time of cash disbursements from the project's operating account to the controlled disbursement account to reimburse checks issued. Environmental Remediation Costs - The Partnership accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. Partnership management is not aware of any environmental remediation obligations which would materially affect the operations, financial position or cash flows of the Partnership. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of certain assets, liabilities, revenues and expenses as of and for the reporting periods. Actual results may differ from such estimates. Reclassifications - Certain reclassifications have been made in the previous years' financial statements to conform to the classifications used in the current year. 2. PARTNERSHIP General - The Partnership was formed on April 16, 1984, under the Texas Uniform Limited Partnership Act, for the purpose of acquiring, maintaining, developing, operating, and selling buildings and improvements. During the two years ended December 31, 1996, the Partnership owned and operated two apartment complexes located in Abilene, Texas, and Charlotte, North Carolina, and a commercial shopping center located in Lancaster, Texas. In 1996, the Partnership sold the commercial shopping center located in Lancaster, Texas, receiving net proceeds of $949,649 and recognizing a loss of $10,177. In addition, in January 1997, the Partnership sold the apartment complex located in Charlotte, North Carolina, for net proceeds of approximately $4.2 million. This property was considered held for sale at December 31, 1996. The Partnership will terminate by December 31, 2014, although this date can be extended if certain events occur. The general partner is Mr. Robert J. Werra. An aggregate of 25,000 units at $1,000 per unit are authorized of which 14,544 were issued and outstanding during the three years ended December 31, 1996. Under the terms of the offering, no additional units will be offered. Allocation of Net Income (Loss) and Cash - Net income and net operating cash flow, as defined in the partnership agreement, are allocated first to the limited partners in an amount equal to a distribution preference (as defined) on capital contributions from the first day of the month following their capital contribution and thereafter generally 10% to the general partner and 90% to the limited partners. Net loss is allocated 1% to the general partner and 99% to the limited partners. Net income from the sale of property is allocated first, to the extent there are cumulative net losses, 1% to the general partner and 99% to the limited partners; second, to the limited partners in an amount equal to their distribution preference as determined on the date of the partners' entry into the Partnership; and thereafter 15% to the general partner and 85% to the limited partners. Cash proceeds from the sale of property or refinancing are allocated first to the limited partners to the extent of their capital contributions and distribution preference as determined on the date of the partners' entry into the Partnership and thereafter 15% to the general partner and 85% to the limited partners. 3. DEFERRED COSTS Deferred costs at December 31, 1996 and 1995, consist of the following: 1996 1995 Loan fees $117,172 $117,172 Less accumulated amortization (31,115) (17,309) ---------- ---------- $86,057 $99,863 ========== ========== During 1995 and 1994, the Partnership incurred $68,421 in fees related to its successful effort to refinance its 9.625% mortgage (see Note 4). During 1996, 1995 and 1994, amortization expense of $13,806, $12,666 and $4,643, respectively, was incurred on fees paid to an unrelated party. 4. MORTGAGES AND NOTES PAYABLE Mortgages and notes payable at December 31, 1996 and 1995, consist of the following: 1996 1995 7.75% mortgage note, payable in monthly principal and interest installments of $20,583 through May 2001, at which time a lump-sum payment of approximately $2,400,000 is due. This mortgage note is secured by real estate assets with a net book value of approximately $2,862,244 $2,626,567 $2,664,884 9.325% mortgage note, payable in monthly principal and interest installments of $21,324 through March 2005, at which time a lump-sum payment of approximately $2,089,000 is due. This mortgage note is secured by real estate assets with a net book value of approximately $2,777,000 2,427,506 2,455,587 11% mortgage note due to the general partner. In August 1996, the general partner forgave principal and accrued but unpaid interest totaling $1,376,916, and the Partnership recognized a gain on forgiveness of debt for such amount (see Note 5) - 1,450,649 ---------- ---------- $5,054,073 $6,571,120 ========== ========== In February 1995, the Partnership refinanced its 9.625% mortgage payable with a 9.325% note payable. Direct costs incurred to obtain the mortgage financing of $68,421 were capitalized and are being amortized over the life of the mortgage. In July 1994, the Partnership refinanced a mortgage payable. A prepayment penalty of 2% of the outstanding mortgage balances relieved was incurred and recorded as an extraordinary item during 1994. The following sets forth the required principal payments due under the Partnership's mortgages and notes payable for the next five years. Annual principal payments as of December 31, 1996, are as follows: 1997 $ 75,828 1998 82,442 1999 89,639 2000 97,471 2001 2,464,463 Thereafter 2,244,230 5. RELATED PARTY TRANSACTIONS The partnership agreement specifies certain fees to be paid to the general partner or his designee. The following fees were paid to the general partner or his designee during 1996, 1995 and 1994: 1996 1995 1994 Property management fees $82,020 $83,732 80,732 Administrative services 9,176 10,176 10,176 Univesco receives an ongoing property management fee generally payable at 5% and 6% of the Partnership's gross receipts for residential properties and the nonresidential property, respectively. The Partnership will pay a real estate commission to the general partner or his affiliates in an amount not exceeding the lesser of 50% of the amounts customarily charged by others rendering similar services or 3% of the gross sales price of a property sold by the Partnership. In connection with the sale of the commercial property located in Lancaster, Texas, the general partner relieved the Partnership of its obligation to repay the mortgage note, resulting in a gain on forgiveness of debt of $1,376,916, which included $201,267 in accrued interest. 6. RECONCILIATION OF BOOK TO TAX LOSS (UNAUDITED) If the accompanying financial statements had been prepared in accordance with the accrual income tax basis of accounting rather than generally accepted accounting principles, excess revenues over expenses for 1996 would have been as follows: Net income per accompanying financial statements $1,241,486 Add back book basis depreciation expense using straight-line method 433,502 Add back gain on disposition of property - tax (282,636) Deduct income tax basis depreciation expense using ACRS method (495,318) Deduct loss on disposition of property - GAAP 10,177 ----------- Excess revenues over expenses, accrual income tax basis $907,211 =========== 7. IMPAIRMENT OF FIXED ASSETS Due to the poor economic performance brought about by increased market pressures, the Partnership's investment in its shopping center located in Lancaster, Texas, experienced decreased cash flows. Accordingly, during 1995, the Partnership recorded an impairment loss of approximately $341,000 to lower the carrying value of the assets to their estimated fair value, determined based on estimated cash flows and sales proceeds. The impairment was reflected in the balance sheet as a reduction in the basis of the fixed assets. During 1996, the Partnership disposed of its investment in the Lancaster shopping center, recognizing a loss of $10,177. 8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments," requires disclosure of the estimated fair values of certain financial instruments. The estimated fair value amounts have been determined using available market information or other appropriate valuation methodologies that require considerable judgment in interpreting market data and developing estimates. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Partnership could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The fair value of financial instruments that are short-term or reprice frequently and have a history of negligible credit losses is considered to approximate their carrying value. These include cash and cash equivalents, short-term receivables, accounts payable and other liabilities. Real estate and other assets consist of nonfinancial instruments, which are excluded from the scope of SFAS No. 107. Management has reviewed the carrying values of its mortgages and notes payable in connection with interest rates currently available to the Partnership for borrowings with similar characteristics and maturities and has determined that their carrying value approximates their estimated fair values as of December 31, 1996. As of December 31, 1996, the fair value information presented herein is based on pertinent information available to management. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented herein. ****** AMRECORP REALTY FUND II (A Texas Limited Partnership) SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 - ----------------------------------------------------------------------------- Initial Cost to Partnership ----------------------------- Buildings, Encum- and Furniture Subsequent to Description brances Land and Fixtures Acquisition A 128-unit two-story apartment community of wooden frame construction and a combination brick veneer and wood siding exterior located in Abilene, Texas (b) $580,045 $4,341,569 $205,754 A 96-unit one- and two-story apartment community of wood frame and stucco construction located adjacent to the Raintree Country Club in Charlotte, North Carolina (b) 676,364 3,857,693 314,490 ---------- ---------- -------- $1,256,409 $8,199,262 $520,244 ========== ========== ======== DEPRECIATION (CONTINUED) Gross Amounts at Which Carried at Close of Period --------------------------------- Buildings and Accumulated Description Land Improvements Total Depreciation A 128-unit two-story apartment community of wooden frame construction and a combination brick vaneer and wood siding exterior located in Abilene, Texas $580,045 $4,547,323 $5,127,368 $2,350,376 A 96-unit one-and two-story apartment community of wood frame and stucco construction located adjacent to the Raintree Country Club in Charlotte, North Carolina 676,364 4,172,183 4,848,547 1,986,303 --------- --------- --------- --------- $1,256,409 $8,719,506 $9,975,915 $4,336,679 =========== ========== ========== ========== Date of Construction: Complete at date acquired Date Acquired: 11/1/84 Life on Which Depreciation Is Computed: (a) Date of Construction: Complete at date acquired Date Acquired 8/12/85 Life on Which Depreciation Is Computed: (a) See notes to Schedule III. AMRECORP REALTY FUND II (A TEXAS LIMITED PARTNERSHIP) SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) DECEMBER 31, 1996 - --------------------------------------------------------------------------- NOTES TO SCHEDULE III: (a)See Note 1 to financial statements outlining depreciation methods and lives. (b)See description of mortgages and notes payable in Note 4 to the financial statements. (c)Reconciliation of investments in real estate and accumulated depreciation for the years ended December 31, 1996, 1995 and 1994. Investments Accumulated in Real Estate Depreciation BALANCE, JANUARY 1, 1994 $12,359,232 $4,362,602 Additions during the year: Additions 66,924 - Depreciation expense - 430,580 ----------- ---------- BALANCE, DECEMBER 31, 1994 12,426,156 4,793,182 Additions during the year: Additions 120,695 - Depreciation expense - 441,010 Loss on impairment (341,162) - ----------- ---------- BALANCE, DECEMBER 31, 1995 12,205,689 5,234,192 Additions during the year: Additions 61,073 - Depreciation expense - 433,508 Sale of real estate (2,290,847) (1,331,021) ----------- ---------- BALANCE, DECEMBER 31, 1996 $9,975,915 $4,336,679 =========== ========== (d)Aggregate cost for federal income tax purposes is $9,993,508. Item 9. Changes in and Disagreements With Accountants on Accounting - ------------------------------------------------------------------- and Financial Disclosure ------------------------ The Registrant has not been involved in any disagreements on accounting and financial disclosure. PART III Item 10. Directors and Executive Officer of the Partnership - ------------------------------------------------------------ The Partnership itself has no officers or directors. Robert J. Werra is the General Partner of the Partnership. Robert J. Werra, 57, the General Partner. Mr. Werra joined Loewi & Co., Incorporated ("Loewi") in 1967 as a Registered Representative. In 1971, he formed the Loewi real estate department, and was responsible for its first sales of privately placed real estate programs. Loewi Realty was incorporated in 1974, as a wholly owned subsidiary of Loewi & Co., with Mr. Werra as President. In 198O, Mr. Werra, along with three other individuals, formed Amrecorp Inc. to purchase the stock of Loewi Real Estate Inc., and Loewi Realty. In 1991 Univesco, Inc. was formed to serve as the management agent for the Partnership and other partnerships which Mr. Werra serves as General Partner. Limited Partners have no right to participate in management of the Partnership. Item 11. Management Remuneration and Transactions - -------------------------------------------------- As stated above, the Partnership has no officers or directors. Pursuant to the terms of the Limited Partnership Agreement, the General Partner receives 1% of Partnership income and loss and up to 15% of Net Proceeds received from sale or refinancing of Partnership properties (after return of Limited Partner capital contributions and payment of a 6% Current Distribution Preference thereon). The individual general partner receives one-half of the General Partners' income and losses, provided that income not exceed prior years' losses. Univesco, Inc., an affiliate of the General Partner, is entitled to receive a management fee with respect to properties actually managed of 5% of the actual gross receipts from a property or an amount competitive in price or terms for comparable services available from non-affiliated persons. The Partnership is also permitted to engage in various transactions involving affiliates of the General Partner as described under the caption "Compensation and Fees" at pages 6-8, "Management" at pages 18-2O and "Allocation of Net Income and Losses and Cash Distributions" at pages 44-46 of the Prospectus as supplemented, incorporated in the Form S-11 Registration Statement which was filed with the Securities and Exchange Commission and made effective on July 6, 1984. Item 12. Security Ownership of Certain Beneficial Owners and - ------------------------------------------------------------ Management ---------- (a) No one owns of record, and the General Partner knows of no one who owns beneficially, more than five percent of the Interests in the Partnership, the only class of securities outstanding. (b) By virtue of its organization as a limited partnership, the Partnership has no officers or directors. The General Partner is responsible for management of the Partnership, subject to certain limited democracy rights of the Limited Partners. The following persons performing functions similar to those of officers and directors of the partnership own units of limited partnership interest in the partnership. Title of Name and Address Amount and Nature Percent of Class of Beneficial Owner of Beneficial Ownership Class - ----------------------------------------------------------------------------- Limited Robert J. Werra 66 units .45% Partnership 6210 Campbell Rd. #140 Interest Dallas, Texas 75248 (c) There is no arrangement, known to the Partnership, which may, at a subsequent date, result in a change in control of the Partnership. Item 13. Certain Relations and Related Transactions - --------------------------------------------------- As stated in Item 11., the Partnership has no officers or directors. Pursuant to the terms of the Limited Partnership Agreement, the general partner receives 1% of partnership income and loss and up to 15% of Net Proceeds received from the sale or refinancing of Partnership properties (after return of Limited Partner capital contributions and payment of a Current Distribution Preference thereon). Univesco, Inc. (an affiliate of the general partner) is entitled to receive a management fee with respect to properties actually managed by the corporate general partner. For nonresidential properties (including all leasing and releasing fees and fees for leasing-related services) the management fee is the lesser of 6% of gross receipts of the Partnership from such properties or an amount which is competitive in price and terms with other non-affiliated persons rendering comparable services which would reasonably be made available to the Partnership. For residential Properties (including all leasing and releasing fees and fees for leasing-related services), the lesser of 5% of gross receipts of the Partnership from such properties or an amount which is competitive in price and terms with other non-affiliated persons rendering comparable services which could reasonably be made available to the Partnership. The Partnership is also permitted to engage in various transactions involving affiliates of the corporate general partner a described under the caption "Compensation and Fees" at pages 6-8, "Management" at pages 18-2O and "Allocation of Net Income and Losses and Cash Distributions" at pages 44-46 of the definitive Prospectus, incorporated in the Form S-11 Registration Statement which was filed with the Securities and Exchange Commission and made effective on July 6, 1984 and incorporated herein by reference. See Note 5 to the Financial Statements for detailed information concerning fees paid to Univesco, Inc. (an affiliate of the General Partner). PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K - ---------------------------------------------------------------------------- (A)1. See accompanying Financial Statements Index 2. Additional financial information required to be furnished: Schedule III - Real Estate and Accumulated Depreciation 3. Exhibits None. (B)Reports on Form 8-K for the quarter ended December 31, 1996 None. (C)Exhibits 3. Certificate of Limited Partnership, incorporated by reference to Registration Statement No. 2-9O654 effective July 6, 1984. 4. Limited Partnership Agreement, incorporated by reference to Registration Statement No. 2-9O654 effective July 6, 1984. 9. Not Applicable. 1O.None. 11.Not Applicable. 12.Not Applicable. 13.Not Applicable. 18.Not Applicable. 19.Not Applicable. 22.Not Applicable. 23.Not Applicable. 24.Not Applicable. 25.Power of Attorney, incorporated by reference to Registration Statement No. 2-9O654 effective July 5, 1984. 28.None. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMRECORP REALTY FUND II ROBERT J. WERRA, GENERAL PARTNER April 10, 1997 /s/ Robert J. Werra - -------------- ------------------- EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH THE DECEMBER 31, 1996 BALANCE SHEET AND STATEMENT OF INCOME AND EXPENSES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000745061 AMRECORP REALTY FUND II 12-MOS DEC-31-1996 DEC-31-1996 362,135 0 0 0 0 0 5,127,368 2,350,376 6,271,364 103,019 5,054,073 0 0 0 1,031,589 6,271,364 0 1,597,441 0 0 1,257,217 0 536,118 0 0 0 0 0 0 1,241,486 84.51 0
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