-----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, EZQOMuegIbEGB+OvcJ/qAyWimq5kRnQdOEpfhu94q+azt7m2kStQl5Q74PgtKMk0 xlyyrFmEIbTmLX2h9lsM9g== 0000711512-98-000002.txt : 19980402 0000711512-98-000002.hdr.sgml : 19980402 ACCESSION NUMBER: 0000711512-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980401 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: SEC FILE NUMBER: 002-90654 FILM NUMBER: 98584835 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, 1997 [ ]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, 1997, the Partnership consisted of an individual general partner, Mr. Robert J. Werra (the "General Partner") and 1,968 limited partners owning 14,544 limited partnership interests at $1,000 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, 2014 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 and determined 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 Properties' leases are of six to twelve month terms. Accordingly, operating income is highly susceptible to varying market conditions. Occupancy and local market 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. On the property owned at December 31, 1997, the Partnership has been able to maintain a generally high occupancy level and increasing rents primarily due to the positive relationship between apartment unit supply and demand in the market. However, the property is 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. In 1996, the Partnership sold its 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 its apartment complex located in Charlotte, North Carolina, for net proceeds of $4,149,635 and recognizing a gain of $1,287,391. Item 2. Properties At December 31, 1997 the Partnership owned one property, Chimney Square Apartments. Prior to the disposal during January 1997 and August 1996 the Partnership also owned two other properties, as indicated below: Name and Location General Description of the Property Chimney Square A fee simple interest in seventeen Apartments 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 (sold January 1997) 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 (sold A fee simple interest in a August 1996) neighborhood shopping center 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 1993 1994 1995 1996 1997 Lancaster Shopping 80.00% 90.00% 89.00% NA NA Center Chimney Square 98.90% 96.50% 90.90% 95.60% 90.6% Shorewood Apartments 95.10% 96.50% 94.90% 94.00% NA The property is encumbered by a non-recourse mortgage payable. For information regarding the encumbrances to which the property is subject and the status of the related mortgage loan, 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 the 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, 1997 there were approximately 1,968 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 1997 the Partnership distributed $100 per $1000 unit due to the sale of Shorewood Apartments. In 1996 the Partnership distributed $50 per $1000 unit due to the sale of Lancaster Place. An analysis of tax income or loss allocated and cash distributed to Investors per $1,000 unit is as follows: YEARS TAXABLE INCOME OR TAXABLE LOSS CASH GAIN DISTRIBUTED 1984 - 1993 $0 $910 $30 1994 0 $27 0 1995 0 $28 0 1996 $62 0 $50 1997 $143 0 $100 Item 6. Selected Financial Data The following table sets forth selected financial data regarding the Partnership's results 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 the Financial Statements and notes thereto contained in Item 8. Year Ended December 31 (in thousands except unit and per unit amounts) 1997 1996 1995 1994 1993 Limited Partner Units 14,544 14,544 14,544 14,544 14,544 Outstanding Statement of Operations Total Revenues $2,122 $1,658 $1,629 $1,569 $1,533 Net Income (Loss) before 1,266 (135) (672) (252) (526) extraordinary items Extraordinary Item -Gain 0 1,377 0 0 0 on debt forgiveness (a) Extraordinary Item-loss on 0 0 0 (53) 0 extinguishment of debt Net Income (Loss) 1,266 1,241 (672) (305) (526) Limited Partner Net Income 86.17 84.51 (45.74) (20.78) (35.82) (Loss) per Unit - Basic Cash Distributions to Limited 100 50 0 0 0 Limited Partners per Unit - Basic Balance Sheet: Real Estate, net (b) $2,602 $2,777 $6,971 $7,633 $7,967 Real Estate assets held 0 2,862 0 0 0 for sale, Net Total Assets 3,408 6,271 7,499 7,753 8,111 Mortgages and Notes 2,397 5,054 6,571 6,204 6,223 Payable Partner's Equity 843 1,032 517 1,189 1,494 (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, and $222,178 of revenues for the years ended December 31, 1996, 1995, 1994, and 1993. Additionally in January 1997 the Partnership disposed of its apartment complex in North Carolina. This apartment complex had accounted for $61,408, $708,624, $671,691, $656,990, and $630,123 of revenues for the years ended December 31, 1997, 1996, 1995, 1994, and 1993 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: 1997 VERSUS 1996 - Revenue from Property Operations increased $464,318 or 28.01% as compared to 1996, due to the sale of Shorewood Apartments. Rental revenue at the Partnerships apartment communities decreased by $805,303 which was primarily the result of the sale of Shorewood Apartments. The Partnerships' sole asset at December 31, 1997 saw revenue decrease $30,609 or 4.02% due to lower occupancy. Additionally interest income increased $11,959 due to additional funds available for investment. Other income for 1997 decreased $29,729 primarily due to the aforementioned property sale. The following table illustrates the increases or (decreases): Increase/ (Decrease) Rental income $(805,303) Interest 11,959 Gain On sale 1,287,391 Other (29,729) Net Increase $464,318 Property operating expenses for 1997 decreased $937,056 from 1996 or 52.25%. Expenses decreased primarily due to the sale of Shorewood Apartments. Chimney Square Apartments, the sole asset as of December 31, 1997, saw its operating expenses increase $3,227 or 1.16%. The following table illustrates the increases or (decreases): Increase/ (Decrease) Repairs and Maintenance $(124,699) Real estate taxes (54,746) General & Administrative (36,217) Administrative (3,512) Utilities (34,468) Payroll (87,324) Interest (292,933) Loss on Sale ofProperty (10,177) Depreciation and (251,143) amortization Property management fees (41,837) Net Decrease $(937,056) Results of Operations: 1996 VERSUS 1995 - Revenue from Property Operations increased $29,295 or 1.80% as compared to 1995, due to an increase in rental revenues of $12,075. Rental revenue at the Partnerships apartment communities increased by $85,755 which was primarily the result of increases in rents resulting from improvements in the apartment rental markets. 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: Increase Rental income $12,075 Interest 9,884 Other 7,336 Net Increase $29,295 Property operating expenses for 1996 decreased $507,276 from 1995 or 22.05%. Property operating expenses mainly decreased due to the $341,162 impairment loss recorded in 1995 to lower the carrying value of the partnership's investment in its shopping center located in Lancaster, Texas to its estimated fair value. Property operating expenses at the Partnerships' apartment communities also decreased by $71,569 due to one time painting and parking lot repairs to facilitate the sale of Shorewood Apartments which occurred 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): Increase (Decrease) Repairs and $(78,322) Maintenance Real estate taxes (480) General & Administrative (18,146) Administrative Service fees (1,000) Utilities (18,329) Payroll (440) Interest (51,500) Loss on Sale ofProperty 10,177 Depreciation and (6,362) amortization Loss on Impairment (341,162) Property management fees (1,712) Net Decrease $(507,276) Gain on 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. Liquidity and Capital Resources While it is the General Partners primary intention to operate and manage the remaining real estate investment, the General Partner also continually evaluates this investment in light of current economic conditions and trends to determine if this asset should be considered for disposal. 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 was $1,287,391. As of December 31, 1997, the Partnership had $593,721 in cash and cash equivalents as compared to $362,135 as of December 31, 1996. The net increase in cash of $231,586 is principally due to funds provided from sale proceeds from the sale of the Shorewood Apartments. The remaining property is encumbered by this nonrecourse mortgage as of December 31, 1997, with an interest rate of 9.325%. Required principal payments on this mortgage note for the five years ended December 31, 2002, are $33,813, $37,105, $40,717, $40,826 and $48,654 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 the balloon mortgage payment will be proceeds from the sale, financing or refinancing of the properties. Year 2000 The partnership anticipates that it will not incur any costs associated with its computers and building operating systems as it relates to the conversion to the year 2000. 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 Act of 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 1 BALANCE SHEETS 2 STATEMENTS OF OPERATIONS 3 STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 4 STATEMENTS OF CASH FLOWS 5 NOTES TO FINANCIAL STATEMENTS 6-10 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 11-12 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, 1997 and 1996, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, 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 /S/ DELOITTE & TOUCHE LLP Dallas, Texas February 23, 1998 AMRECORP REALTY FUND II (A Texas Limited Partnership) BALANCE SHEETS DECEMBER 31, 1997 AND 1996 ASSETS 1997 1996 INVESTMENTS IN REAL ESTATE, AT COST: Land $580,045 $580,045 Buildings, improvements and 4,560,894 4,547,323 furniture and fixtures 5,140,939 5,127,368 Less accumulated depreciation (2,539,125) (2,350,376) 2,601,814 2,776,992 INVESTMENTS IN REAL ESTATE ASSETS HELD 2,862,244 FOR SALE, NET CASH AND CASH EQUIVALENTS 593,721 362,135 DEFERRED COSTS 49,036 86,057 ESCROW DEPOSITS 154,681 166,070 OTHER ASSETS 8,796 17,866 TOTAL $3,408,048 $6,271,364 LIABILITIES AND PARTNERS' EQUITY MORTGAGES AND NOTES PAYABLE $2,396,692 $5,054,073 ACCOUNTS PAYABLE AND ACCRUED EXPENSES 96,605 103,019 DUE TO AFFILIATES 8,774 6,854 ACCRUED INTEREST PAYABLE 18,624 35,827 DISTRIBUTIONS PAYABLE 27,420 SECURITY DEPOSITS 16,800 40,002 2,564,915 5,239,775 COMMITMENTS AND CONTINGENCIES PARTNERS' EQUITY 843,133 1,031,589 TOTAL $3,408,048 $6,271,364 See notes to financial statements. AMRECORP REALTY FUND II (A Texas Limited Partnership) STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 1997 1996 1995 INCOME: Rentals $792,138 $1,597,441 $1,585,366 Gain on sale of property 1,287,391 Other 9,527 39,256 29,372 Interest 33,167 21,208 13,872 Total income 2,122,223 1,657,905 1,628,610 OPERATING EXPENSES: Repairs and maintenance 100,199 224,898 303,220 Real estate taxes 80,876 135,622 136,102 General and administrative 73,097 109,314 127,460 Administrative services fees to 5,664 9,176 10,176 affiliate Utilities 37,521 71,989 90,318 Payroll 79,383 166,707 167,147 Interest 243,185 536,118 587,618 Loss on sale of property - 10,177 - Depreciation and amortization 196,171 447,314 453,676 Loss on impairment - - 341,162 Property management fee to 40,183 82,020 83,732 affiliate Total operating expenses 856,279 1,793,335 2,300,611 NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 1,265,944 (135,430) (672,001) EXTRAORDINARY ITEM- Gain on debt forgiveness - 1,376,916 - NET INCOME (LOSS) $1,265,944 $1,241,486 $(672,001) NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT - Basic: Net income (loss) before $ 86.17 $ (9.22) $ (45.74) extraordinary item Gain on debt forgiveness - 93.73 - NET INCOME (LOSS) PER UNIT-Basic $ 86.17 $ 84.51 $ (45.74) LIMITED PARTNERSHIP UNITS OUTSTANDING - Basic 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, 1997, 1996 AND 1995 General Limited Partner Partners Total BALANCE, JANUARY 1, 1995 $(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 Distributions - (1,454,400) (1,454,400) Net income 12,659 1,253,285 1,265,944 BALANCE, DECEMBER 31, 1997 $(89,906) $933,039 $843,133 See notes to financial statements. AMRECORP REALTY FUND II (A Texas Limited Partnership) STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $1,265,944 $1,241,486 $(672,001) Adjustments to reconcile net income (loss) to net cash provided by operations: Gain on sale of assets (1,287,391) - - Loss on sale of assets - 10,177 - Gain on debt forgiveness - (1,376,916) - Depreciation and amortization 196,171 447,314 453,676 Loss on impairment - - 341,162 Changes in assets and - - - liabilities: Escrow deposits 221 5,716 (70,900) Deferred costs 29,599 - (43,421) Other assets 9,070 12,149 6,733 Accrued interest payable (17,203) 3,446 (1,513) Security deposits (23,202) (3,776) 2,535 Accounts payable and (6,414) (25,734) 48,971 accrued expenses Due to affiliates 1,920 2,475 1,096 (1,097,229) (925,149) 738,339 Net cash provided byoperating activities 168,715 316,337 66,338 CASH FLOWS FROM INVESTING ACTIVITIES: Investments in real estate (13,571) (61,073) (120,695) Proceeds from sale of assets, net 4,149,635 949,649 - Deposits to reserve for replacements (35,366) (34,997) (76,839) Disbursements from reserve for replacements 46,534 6,628 17,525 Net cash provided by (used in) investing activities 4,147,232 860,207 (180,009) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on mortgages and notes payable (2,657,381) (341,398) (2,107,620) Additions to mortgages and notes payable - - 2,475,000 Distributions (1,454,400) (727,200) - Distributions payable 27,420 - - Net cash provided by (used in) financing activities (4,084,361) (1,068,598) 367,380 NET INCREASE IN CASH AND CASH EQUIVALENTS 231,586 107,946 253,709 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 362,135 254,189 480 CASH AND CASH EQUIVALENTS, END OF YEAR $593,721 $362,135 $ 254,189 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 260,388 $532,672 $ 589,131 See notes to financial statements. AMRECORP REALTY FUND II (A TEXAS LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 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. 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. 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 $3,746,317 at December 31, 1997. Cash and Cash Equivalents - For purposes of the statement of cash flows, the Partnership considers all highly liquid investments with an original 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. Computation of Earnings per Unit - The Partnership has adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." Comparative earnings per unit data have been restated to conform to the adoption of this new standard. Basic earnings per unit is computed by dividing net income (loss) attributable to the limited partners' interests by the weighted average number of units outstanding. Earnings per unit assuming dilution would be computed by dividing net income (loss) attributable to the limited partners' interests by the weighted average number of units and equivalent units outstanding. The Partnership has no equivalent units outstanding for any period presented. 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. Other - SFAS No. 130, "Reporting on Comprehensive Income," was issued in June 1997 and establishes standards for reporting and presenting comprehensive income in financial statements. It is effective for periods beginning after December 15, 1997, and will be adopted by the Partnership effective January 1, 1998. The Partnership anticipates the adoption of SFAS No. 130 will not have any impact on its current disclosures. Also issued in June 1997 was SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which redefines how operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. SFAS No. 131 may require additional disclosure by the Partnership and will be effective for the Partnership beginning January 1, 1998. SFAS No. 132, "Employers' Disclosures About Pensions and Other Postretirement Benefits," was issued in February 1998 and revises disclosures about pension and other postretirement benefit plans. It is effective for periods beginning after December 15, 1997, and will be adopted by the Partnership effective January 1, 1998. As the Partnership does not have any such benefit plans, the adoption will not have any impact on its current disclosures. 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 1997, the Partnership owned and operated one apartment complex located in Abilene, Texas. 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 $4,149,635 and recognizing a gain of $1,287,391. 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, 1997. 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, 1997 and 1996, consist of the following: 1997 1996 Loan fees $87,573 $117,172 Less accumulated amortization (38,537) (31,115) $49,036 $86,057 4. MORTGAGES AND NOTES PAYABLE Mortgages and notes payable at December 31, 1997 and 1996, consist of the following: 1997 1996 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 $2,396,692 $2,427,506 7.75% mortgage note, which required monthly principal and interest installments of $20,583. This mortgage note was repaid with proceeds from the sale of the apartment complex located in Charlotte, North Carolina - 2,626,567 $2,396,692 $5,054,073 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, 1997, are as follows: 1998 $ 33,813 1999 37,105 2000 40,717 2001 40,826 2002 48,654 Thereafter 2,195,577 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 1997, 1996 and 1995: 1997 1996 1995 Property management fees $40,183 $82,020 $83,732 Administrative services 5,664 9,176 10,176 Univesco receives an ongoing property management fee generally payable at 5% of the Partnership's gross receipts for residential properties. 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. No such fees were paid to Univesco in connection with the 1996 and 1997 disposals. During 1996, 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 TAXABLE INCOME (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 1997 would have been as follows: Net income per accompanying financial statements $1,265,944 Add back book basis depreciation expense using straight-line method 188,749 Add back gain on disposition of property - tax 2,158,157 Deduct income tax basis depreciation expense using ACRS method (247,335) Deduct gain on disposition of property - GAAP (1,287,391) Excess revenues over expenses, accrual income tax basis $2,078,124 7. IMPAIRMENT AND DISPOSAL OF LANCASTER SHOPPING CENTER 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 The following 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. 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, 1997 and 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, 1997 Initial Cost to Partnership Buildings, Improvements, Total Cost Encum- & Furniture Subsequent to Description brances Land & fixtures Acquistion A 128-unit two stort 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 $219,325 - --------------------------------------------------------------------------- Gross Amounts at Which Carried at Close of Period Buildings, Improvements, & Furniture Accumulated Date of Land & Fixtures Total Depreciation Construction (c) (d) Complete at $580,045 $4,560,894 $5,140,939 $2,539,125 date acquired - ----------------------------------------------------------------------------- Life on Which Date Depreciation Acquired is Computed 11/1/84 (a) See notes to Schedule III. AMRECORP REALTY FUND II (A TEXAS LIMITED PARTNERSHIP) SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) DECEMBER 31, 1997 NOTES TO SCHEDULE III: (a)See Note 1 to financial statements outlining depreciation methods and lives. (b)See description of mortgage payable in Note 4 to the financial statements. (c)Reconciliation of investments in real estate and accumulated depreciation for the years ended December 31, 1997, 1996 and 1995. Accumulated Investments Estate in Real Depreciation BALANCE, JANUARY 1, 1995 $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 Additions during the year: Additions 13,571 - Depreciation expens - 188,749 Sale of real estate (4,848,547) (1,986,303) BALANCE, DECEMBER 31, 1997 $5,140,939 $2,539,125 (d)Aggregate cost for federal income tax purposes is $5,158,532. Item 9. Disagreements 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 Officers 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 1980, Mr. Werra along with three others formed Amrecorp Inc. to purchase the stock of Loewi Real Estate Inc., and Loewi Realty. In 1991 Univesco, Inc. became the management agent for the Partnership. 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 up to 15% of the net proceeds received from sale or refinancing of Partnership properties (after return of Limited Partner capital contributions and payments of a 6% Current Distribution Preference thereon). Univesco, Inc., an affiliate of the General Partner, is entitled to receive a management fee with respect to the properties actually managed of 5% of actual gross receipts from a property or an amount competitive in price or terms for comparable services available from a 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 page 17 "Allocation of Net Income and Losses and Cash Distributions" at pages 34-36 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 May 2, 1983. For the Fiscal year ended December 31, 1997, 1996 and 1995, property management fees earned totaled $40,183, $82,020 and $83,732, respectively. An additional administration service fee was paid to the general partner of $5,664, $9,176 and $10,176 for the years ended December 31, 1997, 1996 and 1995, respectively. 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. Persons performing functions similar to those of officers and directors of the Partnership, beneficially own, the following units of the Partnership as of March 1, 1998. Name of Amount & Nature Title Beneficial of Benefiacial Percent of Class Owner Ownership of Interest Limited Robert J. Werra 71 units 0.48% Partnership 6210 Campbell Rd. #140 Interests 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 Relationships and Related Transactions As stated 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 up to 15% of the net proceeds received from sale or refinancing of Partnership properties (after return of Limited Partner capital contributions and payments of a 6% Current Distribution Preference thereon). Univesco, Inc., an affiliate of the General Partner, is entitled to receive a management fee with respect to the 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 lessor of 6% of gross receipts from 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 lessor of 5% of gross receipts of the Partnership from such properties or an amount which is competitive in price or 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 General Partner as described under the caption "Compensation and Fees" at pages 6-8, "Management" at page 17 "Allocation of Net Income and Losses and Cash Distributions" at pages 34-36 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 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 Accumulate Depreciation. 3. Exhibits None. (B) Reports on Forms 8-K for the quarter ended December 31, 1997. None. (C) Exhibits 3. Certificate of Limited Partnership, incorporated by reference to Registration Statement No. 2-90654 effective July 6, 1984. 4. Limited Partnership Agreement, incorporated by reference to Registration Statement No. 2-90654 effective July 6, 1984. 9. Not Applicable 10. Not Applicable 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. 2-90654 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. AMERICAN REPUBLIC REALTY FUND II ROBERT J. WERRA, GENERAL PARTNER /s/ Robert J. Werra March 30, 1998 EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH THE DECEMBER 31, 1997 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-31-1997 DEC-31-1997 593,721 0 0 0 0 0 5,140,939 2,539,125 3,408,048 0 2,396,692 0 0 0 843,133 3,408,048 0 792,138 0 0 613,094 0 243,185 0 0 0 0 0 0 1,265,944 86.17 0
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