-----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, PvxdNQb5jcUVTT5eZxkt+ekiwCWuYf5KpLFSuiNqhDaatS1Ezb0R1aLEuOuPpd1Z Vwg8YK2sdcaWysRkPTwfDg== 0000745061-96-000001.txt : 19960423 0000745061-96-000001.hdr.sgml : 19960423 ACCESSION NUMBER: 0000745061-96-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960422 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: 96549310 BUSINESS ADDRESS: STREET 1: 16415 ADDISON RD STE 200 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 2143808000 MAIL ADDRESS: STREET 1: 16415 ADDISON ROAD STREET 2: SUITE 200 CITY: DALLAS STATE: TX ZIP: 75248 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 (Fee Required) For the Fiscal year ended December 31, 1995 [ ] 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(214) 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, 1995, the Partnership consisted of an individual general partner, Mr. Robert J. Werra (the "General Partner") and 1,988 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. The Partnership is experiencing low rents due to overbuilding and the resulting over-abundance of residential and commercial developments. These soft markets are expected to improve as new construction activity slows and general market conditions improve. 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, While, approximately 90% of the shopping center is leased, a substantial portion of the space is not occupied. Management is evaluating its options in relation to the investment, including the disposal of the property. An impairment loss of approximately $341,000 and $186,000 were recorded during 1995 and 1993, respectively. Rents and occupancies 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, 1995 the Partnership owned three properties. The two apartment communities aggregate approximately 250,748 net rentable square feet. The Shopping Center, Lancaster Place consists of approximately 53,860 net rentable square feet. Name and Location General Description of the Property Lancaster Place A fee simple interest in a Shopping Center 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. 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 104 apartment units and twenty four townhome 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. Occupancy Rates Per cent 1991 1992 1993 1994 1995 Lancaster Shopping Ctr 80.0 80.0 80.0 90.0 89.0 Chimney Square 96.6 98.5 98.9 96.5 90.9 Shorewood Apartments 81.2 90.0 95.1 96.5 94.9 The properties are encumbered by nonresourse mortages 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 Unitholders Matters The Partnerships outstanding securities are in the form of Limited Partnership Interests ("Interests"). As of December 31, 1995 there were approximately 1,945 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, however, no such distributions have been made in recent years and none are anticipated in the immediate future due to debt service requirements of the Partnership. An analysis of tax income or (loss) allocated, and cash distributed to Investors per $1,000 unit is as follows: TAXABLE INCOME TAXABLE LOSS CASH YEARS OR GAIN DISTRIBUTED 1984 - 1993 $0 $910 $30 1994 0 $27 0 1995 0 $28 0 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) 1995 1994 1993 1992 1991 Limited Partner Units 14,544 14,544 14,544 14,544 14,544 Outstanding Statement of Operations Total Revenues $1,629 $1,569 $1,533 $1,347 $1,671 Net loss before (672) (252) (526) (422) (1,410) extraordinary items Extraordinary Item- loss on exinguishment of debt 0 53 0 0 0 Net Loss (672) (305) (526) (422) (1,410) Net loss per Limited (46) (21) (27) (34) (10)(a) Partnership Unit Cash distributions to 0 0 0 0 0 limited partners Gross rental income per rentable squre feet: Shopping center 4.36 4.06 4.20 3.79 4.07 Apartments 4.44 4.28 4.16 3.63 4.59 Balance Sheet: Real Estate, net 6,971 7,633 7,997 8,533 8,903 Total Assets 7,499 7,753 8,111 8,594 9,046 Mortgages Payable 6,571 6,204 6,223 6,297 6,323 Partner's Equity 517 1,189 1,494 2,020 2,442 (a)Income was reallocated in accordance with 704(b) and the regulations promulgated thereunder of the Internal Revenue Code of 1986 as amended 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: 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. 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. 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. The following table illustrates the increases or (decreases): Repairs and maintenance $107,367 Real estate taxes (3,880) General and administrative 7,508 Administrative services see to affiliate 0 Utilities 5,628 Payroll 17,811 Interest (17,765) Depreciation and amortization 18,453 Loss on impairment 341,162 Property management fee to affiliate 3,000 -------- Total expenses $479,284 ======== Results of Operations: 1994 VERSUS 1993 - Revenue from Property Operations increased $35,653 or 2.3% as compared to 1993, primarily as a result of increases in rental revenues of $30,589, principally due to an increase in rents and occupancy resulting from improvements in the apartment rental markets. Additionally, other income for 1994 increased $6,279 primarily due to the aforementioned increase in occupancy. These increases were partially offset by a small decrease in interest income of $1,215. Property operating expenses for 1994 decreased $238,388 or 11.6%. Real estates taxes decreased as a result of successful tax appeals. Depreciation and amortization expense and loss on impairment decreased by $189,722 due primarily to the recording of an impairment in 1993 to lower the value of fixed assets to net realizable value ( see Note 8 to Consolidated Financial Statements contained in Item 8.) Payroll increases were due primarily to cost of living increases. Interest expense decreased by $75,965 due primarily to the refinancing of an 11.75% mortgage with a 7.75% mortgage. (see Note 4 to Consolidated Financial Statements and Schedule Index contained in Item 8.) 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 (decreases): Interest $ (75,965) General and Administrative 793 Payroll 5,284 Maintenance and Repairs 32,713 Utilities 6,647 Real Estate Taxes (13,983) Depreciation and Amortization and loss on impairment (189,722) Property Management Fee 1,845 Amortization of Deferred Costs to General Partner (6,000) -------- Total Increase (Decrease) in Operating Expenses $(238,388) ========== 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. At this time, there is no plan to dispose of Chimney Squares or Shorewood Apartments. As of December 31, 1995, the Partnership had $254,189 in cash and cash equivalents as compared to $480 as of December 31, 1994. The net increase in cash of $253,709 is principally due to funds provided from excess cash proceeds from the refinancing of a mortgage payable and positive cash flow from operations offest by capital expenditures. The properties are encumbered by nonrecourse mortages as of December 31, 1995, with interest rates ranging from 7.75% to 11%. Required principal payments on these mortgage notes for the five years ended December 31, 2000, are $66,398, $75,828, $1,533,091, $86,639 and $97,471, 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. 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 STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 14 STATEMENTS OF CASH FLOWS 15 NOTES TO FINANCIAL STATEMENTS 16-21 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, 1995 and 1994, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, 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. As discussed in Note 1, during 1995, the Partnership adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to Be Disposed Of." DELOITTE & TOUCHE LLP Dallas, Texas February 16, 1996 AMRECORP REALTY FUND II (A Texas Limited Partnership) BALANCE SHEETS DECEMBER 31, 1995 AND 1994 - ---------------------------------------------------------------------------- ASSETS 1995 1994 INVESTMENTS IN REAL ESTATE, AT COST (Note 4): Land $ 1,858,048 $ 1,858,048 Buildings, improvements and furniture and fixtures 10,347,641 10,568,108 ---------- ---------- 12,205,689 12,426,156 Less accumulated depreciation (5,234,192) (4,793,182) ---------- ---------- 6,971,497 7,632,974 CASH AND CASH EQUIVALENTS 254,189 480 DEFERRED COSTS (Note 3) 99,863 69,108 ESCROW DEPOSITS 143,417 13,203 OTHER ASSETS 30,015 36,748 --------- -------- TOTAL $ 7,498,981 $ 7,752,513 =========== =========== LIABILITIES AND PARTNERS' EQUITY MORTGAGES AND NOTES PAYABLE (Notes 4 and 5) $ 6,571,120 $ 6,203,740 ACCOUNTS PAYABLE AND ACCRUED EXPENSES 128,753 79,782 DUE TO AFFILIATES 4,379 3,283 ACCRUED INTEREST PAYABLE 233,648 235,161 SECURITY DEPOSITS 43,778 41,243 ---------- --------- 6,981,678 6,563,209 COMMITMENTS AND CONTINGENCIES PARTNERS' EQUITY (Note 2) 517,303 1,189,304 ---------- ---------- TOTAL $ 7,498,981 $ 7,752,513 =========== =========== See notes to financial statements. AMRECORP REALTY FUND II (A Texas Limited Partnership) STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 - --------------------------------------------------------------------------- 1995 1994 1993 INCOME: Rentals $1,585,366 $1,542,098 $1,511,509 Other 29,372 25,696 19,417 Interest 13,872 1,295 2,510 ---------- ---------- ---------- Total income 1,628,610 1,569,089 1,533,436 OPERATING EXPENSES: Repairs and maintenance 303,220 195,853 163,140 Real estate taxes 136,102 139,982 153,965 General and administrative 127,460 119,952 119,159 Administrative services fees to affiliate (Note 5) 10,176 10,176 10,176 Utilities 90,318 84,690 78,043 Payroll 167,147 149,336 144,052 Interest 587,618 605,383 681,348 Depreciation and amortization 453,676 435,223 438,789 Loss on impairment (Note 8) 341,162 186,156 Property management fee to affiliate (Note 5) 83,732 80,732 78,887 Amortization of deferred costs to the general partner (Note 3) 6,000 --------- ---------- ---------- Total operating expenses 2,300,611 1,821,327 2,059,715 NET LOSS BEFORE EXTRAORDINARY ITEM (672,001) (252,238) (526,279) EXTRAORDINARY ITEM - loss on extinguishment of debt (Note 4) (53,030) ---------- ---------- ---------- NET LOSS (Note 6) $(672,001) $(305,268) $(526,279) ========== ========== ========== NET LOSS PER LIMITED PARTNERSHIP UNIT: Net loss before extraordinary $ (45.74) $ (17.17) $ (35.82) item Loss on extinguishment of debt (3.61) ---------- ---------- ---------- NET LOSS PER UNIT $ (45.74) $ (20.78) $ (35.82) ========== ========== ========== 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, 1995, 1994 AND 1993 - ---------------------------------------------------------------------------- General Limited Partner Partners Total BALANCE, JANUARY 1, 1993 $ (99,944) $2,120,795 $2,020,851 Net loss (5,263) (521,016) (526,279) --------- ---------- ---------- BALANCE, DECEMBER 31, 1993 (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 ========= ========= ========= See notes to financial statements. AMRECORP REALTY FUND II (A Texas Limited Partnership) STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 - ---------------------------------------------------------------------------- 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (672,001) $ (305,268) $(526,279) Adjustments to reconcile net loss to cash provided by operations: Loss on extinguishment of debt 53,030 Depreciation and amortization 453,676 435,223 444,789 Loss on impairment (Note 8) 341,162 186,156 Deferral of interest 126,351 Changes in assets and liabilities: Escrow deposits (70,900) (7,479) 5,459 Deferred costs (43,421) (41,501) (32,250) Other assets 6,733 (16,205) (3,701) Accrued interest payable (1,513) (16,717) 21,892 Security deposits 2,535 (3,067) 1,364 Accounts payable and accrued expenses 48,971 (17,791) (18,224) Due to/from affiliates 1,096 6,400 (10,257) -------- -------- -------- 738,339 391,893 721,579 -------- -------- -------- Net cash provided by operating activities 66,338 86,625 195,300 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in real estate (120,695) (66,924) (78,849) Deposits to reserve for replacements (76,839) Disbursements from reserve for replacements 17,525 -------- -------- ------- Net cash used in investing activities (180,009) (66,924) (78,849) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on mortgages and notes payable (2,107,620) (2,744,057) (81,138) Additions to mortgages and notes payable 2,475,000 2,725,000 Loss on extinguishment of debt (53,030) ---------- ---------- -------- Net cash provided by (used in) financing activities 367,380 (72,087) (81,138) ---------- ---------- -------- NET INCREASE (DECREASE) IN CASH 253,709 (52,386) 35,313 CASH, BEGINNING OF YEAR 480 52,866 17,553 ---------- --------- -------- CASH, END OF YEAR $ 254,189 $ 480 $ 52,866 ========== ========= ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 589,131 $ 622,100 $659,456 ========== ========= ======== See notes to financial statements. AMRECORP REALTY FUND II (A TEXAS LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 and 1993 - ----------------------------------------------------------------------------- 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. The Partnership has adopted 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." Accordingly, 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 8). 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 $7,359,345 at December 31, 1995. 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. 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 three years ended December 31, 1995, 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. The Partnership will be terminated 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, 1995. 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, 1995 and 1994, consist of the following: 1995 1994 Loan fees $117,172 $73,751 Less accumulated amortization 17,309 4,643 -------- ------- $ 99,863 $ 69,108 ======== ======== 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). Amortization expense of $6,000 was incurred in 1993 on deferred costs to the general partner. During 1995 and 1994, amortization expense of $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, 1995 and 1994, consist of the following: 1995 1994 9.625% mortgage note, payable in monthly principal and interest installments of $22,597 until January 1995, at which time a lump-sum payment of approximately $2,040,000 was due. In 1995, this mortgage note was paid in full with the proceeds from the 9.325% mortgage note described below $ - $2,046,287 11% mortgage note due to the general partner, payable in monthly installments of interest only due until September 30, 1998, at which time a lump-sum payment of approximately $1,451,000 is due. Payments are to be made from the monthly net cash flow of the property. This mortgage note is secured by real estate assets with a net book value of approximately $1,020,000 1,450,649 1,450,649 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 $2,998,000 2,664,884 2,706,804 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 $2,954,000 2,455,587 ---------- --------- $6,571,120 $6,203,740 ========== ========== 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, 1995, are as follows: 1996 $ 66,398 1997 75,828 1998 1,533,091 1999 89,639 2000 97,471 Thereafter 4,708,693 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 1995, 1994 and 1993: 1995 1994 1993 Property management fees $83,732 80,732 78,887 Administrative services 10,176 10,176 10,176 Univesco, Inc., an affiliated company (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 November 1993, the general partner negotiated the purchase of the 11% mortgage note with a balance at December 31, 1993, of $1,570,351 from a nonrelated party. During 1993, interest and other costs related to the mortgage note totaling $126,351 were capitalized into the mortgage balance. The general partner modified the terms of the note whereby payments of interest only are to be made until September 30, 1998, at which time a lump- sum payment of approximately $1,450,000 is due. Payments are to be made from the monthly net cash flow of the property collateralizing this debt. In 1995 and 1994, interest payments on this note totaled $159,571 each year. 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 expenses over revenues for 1995 would have been as follows: Net loss per accompanying financial statements $(672,001) Add back book basis depreciation expense using straight-line method 441,010 Add back loss on impairment 341,162 Deduct income tax basis depreciation expense using ACRS method (526,538) -------- Excess expenses over revenues, accrual income tax basis $(416,367) ========= 7. LEASES As of December 31, 1995, future minimum lease payments to be received on noncancelable operating leases for the shopping center in excess of one year are as follows: 1996 $186,428 1997 174,128 1998 143,572 1999 118,260 2000 72,989 Thereafter 116,624 The Partnership intends to enter into new leases as the leases discussed above expire. 8. 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, 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. The Partnership had previously recorded an impairment of $186,156 to lower the carrying value of the investment in the Lancaster shopping center during 1993 to its estimated net realizable value. 9. 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, 1995. As of December 31, 1995, 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 IID (A Texas Limited Partnership) SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 - ---------------------------------------------------------------------------- Initial Cost to Partnership --------------------------------- Buildings, Improvements, Total Cost Encum- and Furniture Subsequent to brances Land and Fixtures Acquisition Description A 53,860-square-foot neighborhood shopping center of precast aggregate construction with prefinished mansard exterior and a metal deck roof located in Lancaster, Texas (b) $ 601,639 $ 2,014,182 $ 16,188 A 128-unit two-story appartment community of wooden frame construction and a combination brick veneer and wood siding exterior located in Abilene, Texas (b) 580,045 4,341,569 193,709 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 Carlina (b) 676,364 3,857,693 265,462 ---------- ----------- -------- $1,858,048 $10,213,444 $475,359 ========== =========== ======== (Continuation of above table below) Goss Amounts at Which Carried at Close of Period - --------------------------------- Buildings, Life Improvements, on Which and Furniture Accumulated Date of Date Depreciation Land and Fixtures Total Depreciation Construction Acquired Is Computed (c)(d) (c) Complete at $ 601,639 $1,689,208 $2,290,847 $1,270,847 date acquired 7/31/84 (a) 580,045 4,535,278 5,115,323 2,161,626 Complete at date acquired 11/1/84 (a) 676,364 4,123,155 4,799,519 1,801,719 Complete at date acquired 8/12/85 (a) -------- --------- --------- ---------- $1,858,048 $10,347,641 $12,205,689 $5,234,192 ========== =========== =========== ========== See notes to Schedule III. AMRECORP REALTY FUND II (A TEXAS LIMITED PARTNERSHIP) SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) DECEMBER 31, 1995 - ---------------------------------------------------------------------------- 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, 1995, 1994 and 1993. Investments Accumulated in Real Estate Depreciation BALANCE, JANUARY 1, 1993 $12,280,383 $3,747,157 Additions during the year: Additions 78,849 Depreciation expense and impairment 615,445 ----------- ---------- BALANCE, DECEMBER 31, 1993 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 =========== ========== (d)Aggregate cost for federal income tax purposes is $12,564,444. 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, 54, 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 May 2, 1983. 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 $1O,OOO .O7O% Partnership 16415 Addison Road #2OO 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, 1995. 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, 1996 /s/ Robert J. Werra ------------------- EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH THE DECEMBER 31, 1995 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-31-1995 DEC-31-1995 254,189 0 0 0 0 0 12,205,689 5,234,197 7,498,981 128,753 6,571,120 0 0 0 517,303 7,498,981 0 1,585,360 0 0 1,712,993 0 587,618 0 0 0 0 0 0 (672,001) (45.74) 0
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