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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
FORM 1O-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
For the Fiscal year ended December 31, 2002
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
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)
2800 N Dallas Pkwy #100 Plano, Texas 75093-5994
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including area code(972) 836-8000
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 90 days.
Yes X No .
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act).
Yes ..... No X.
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, 2002, the Partnership consisted of an individual general
partner, Mr. Robert J. Werra (the "General Partner") and 1,484
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 #2-90654) 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, 2002, 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, 2002 the Partnership owned one property, Chimney
Square Apartments. Prior to their 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.
Occupancy Rates
Percent
1998 1999 2000 2001 2002
Chimney Square 93.8% 97.0% 96.9% 97.9% 96.1%
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 B 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, 2002 there
were approximately 1,484 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.
Although a public market for trading Interests has not developed,
74-Mackenzie Patterson Fund ("Mackenzie") acquired 732,
approximately 5%, of the outstanding Interests of the partnership
in 1998 (as reported in Item 12(b)). - Mackenzie Patterson Special
Fund 4 L.L.C. ("Mackenzie") acquired 441, approximately 3%, of the
outstanding Interests of the partnership in 1999 (as reported in
Item 12(b)). The registrant knows of no other activity involving
the sale or acquisition of Interest.
The General Partner continues to review the Partnership's ability
to make distributions on a quarter-by-quarter basis. In 2002 the
partnership distributed $15 per limited partnership unit. In 2001
the partnership distributed $20 per limited partnership unit. In
2000 the partnership distributed $25 per limited partnership unit.
In 1998 the Partnership distributed $35 per $1000 unit due to the
refinancing of Chimney Square Apartments. 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
1998 0 $1 $35
1999 0 $0 $0
2000 $2 $0 $25
2001 $10 $0 $20
2002 $15 $0 $15
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.
2002 2001 2000 1999 1998
Limited Partner Units 14,544 14,544 14,544 14,544 14,544
Outstanding
Statement of Operations
Total Revenues $886 $892 $869 $833 $810
Net Income (Loss) $65 72 77 41 31
Limited Partner Net 4.45 4.45 4.78 2.81 2.17
Income(Loss) per Unit - Basic
Cash Distributions to 15 20 25 0 35
Limited Partners per Unit -
Basic
Balance Sheet:
Real Estate, net (b) 1,872 1,955 $2,119 $2,275 $2,441
Total Assets 2,169 2,339 2,586 2,901 2,887
Mortgages and Notes 2,191 2,240 2,285 2,325 2,363
Payable
Partner's Equity (251) (98) 121 407 366
(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, and $671,691 of revenues for the
years ended December 31, 1997, 1996, and 1995.
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: 2002 VERSUS 2001
Revenue from Property Operations decreased $5,863 or 0.66% as
compared to 2001, due to decreased occupancy and rental rates.
Additionally, interest income decreased $3,454 resulting from lower
cash balances and interest rates. Other income for 2002 decreased
$9,949 primarily due to decreased fees and vending income. The
following table illustrates the increases:
Increase/
(Decrease)
Rental income 7,540 0.88%
Interest -3,454 -14.41%
Fees & Other -9,949 -81.70%
Net Increase -5,863 -0.66%
Property operating expenses for 2002 increased $632 from 2001 or
0.08%. General & administrative increased $12,008 or 19.12%
primarily due to increased insurance costs. Real estate taxes rose
$1,444 or 1.24% primarily due to increased assessed valuations.
Repairs and Maintenance decreased $5.574 or 7.60% due to lower
overall maintenance costs. Utilities decreased $3,249 or 9.50% due
to lower electric rates. The following table illustrates the
increases or (decreases):
Increase
(Decrase)
General and 12,008 19.12%
administrative
Real estate taxes 1,444 1.24%
Payroll 426 0.55%
Property management 201 0.46%
fee
Depreciation -241 -0.12%
Interest -4,383 -2.08%
Repairs and -5,574 -7.60%
maintenance
Utilities -3,249 -9.50%
Total operating 632 0.08%
expenses
Results of Operations: 2001 VERSUS 2000
Revenue from Property Operations increased $23,158 or 2.66% as
compared to 2000, due to increased occupancy and rental rates.
Additionally, interest income decreased $4,754 resulting from lower
cash balances and interest rates. Other income for 2001 increased
$6,452 primarily due to increased fees and vending income. The
following table illustrates the increases:
Increase/
(Decrease)
Rental income 21,460
Interest (4,754)
Other 6,452
Net Increase 23,158
Property operating expenses for 2001 increased $28,567 from 2000 or
3.61%. Utilities increased $6,450 or 23.25% due to higher rates.
Repairs and Maintenance increased $8,593 or 13.27% due to normal
maintenance operations. Real estate taxes rose $11,303 or 10.79%
primarily due to increased assessed valuations. General &
administrative increased $7,526 or 13.61% primarily due to
increased partnership administrative costs. The following table
illustrates the increases or (decreases):
Increase
(Decrease)
Repairs and 8,593 13.27%
Maintenance
Real estate taxes 11,303 10.79%
General & Admin 7,526 13.61%
Utilities 6,450 23.25%
Payroll -317 -0.40%
Interest -4,097 -1.91%
Depreciation and -2,232 -1.13%
amortization
Property 1,341 3.14%
management fees
Net Increase 28,567 3.61%
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, 2002, the Partnership had $7,833 in cash and
cash equivalents as compared to $142,797 as of December 31, 2001.
The net decrease in cash of $134,964 is principally due to
distributions paid in December 2002.
The remaining property is encumbered by a non-recourse mortgage as
of December 31, 2002, with an interest rate of 9.325%. Required
principal payments on this mortgage note for the three years ended
December 31, 2005, are, $53,082 $59,039 and $2,079,227
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.
Item 7a - Quantitative and Qualitative Disclosure about Market
Risk
Market Risk
The Partnership is exposed to interest rate changes primarily as a
result of its real estate mortgages. The Partnerships interest
rate risk management objective is to limit the impact of interest
rate changes on earnings and cash flows and to lower it's overall
borrowing costs. To achieve its objectives, the partnership
borrows primarily at fixed rates. The partnership does not enter
into derivative or interest rate transactions for any purpose.
The Partnerships' activities do not contain material risk due to
changes in general market conditions. The partnership invests only
in fully insured bank certificates of deposits, and mutual funds
investing in United States treasury obligations.
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
FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORTS
December 31, 2002 and 2001
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Reports 1
Financial Statements
Balance Sheets as of December 31, 2002 and 2001 3
Statements of Income for the years ended December 31, 2002,
2001 and 2000 4
Statements of Partners' Equity (Deficit) for the years ended
December 31, 2002, 2001 and 2000 5
Statements of Cash Flows for the years ended December 31,
2002, 2001 and 2000 6
Notes to Financial Statements 7
Schedule III - Real Estate and Accumulated Depreciation 13
All other schedules have been omitted because they are not
applicable, not required or the information has been supplied
in the financial statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partners of
Amrecorp Realty Fund II
We have audited the accompanying balance sheets of Amrecorp
Realty Fund II, a Texas limited partnership (the "Partnership")
as of December 31, 2002 and 2001, and the related statements of
income, partners' equity (deficit), and cash flows for the years
ended December 31, 2002, 2001 and 2000. These financial
statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with U.S. 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 presentation of the financial
statements. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the December 31, 2002 and 2001 financial
statements referred to above present fairly, in all material
respects, the financial position of Amrecorp Realty Fund II as of
December 31, 2002 and 2001, and the results of its operations and
its cash flows for the years ended December 31, 2002, 2001 and
2000 in conformity with U.S. generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. Schedule III for
the year ended December 31, 2002 is presented for the purpose of
complying with the Securities and Exchange Commission's rules and
is not a required part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion,
fairly states, in all material respects, the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
January 24, 2003
Plano, Texas
AMRECORP REALTY FUND II
BALANCE SHEETS
December 31, 2002 and 2001
ASSETS
2002 2001
Investments in real estate at cost
Land $580,045 $580,045
Buildings, improvements
and furniture and fixtures 4,783,433 4,678,271
5,363,478 5,258,316
Accumulated depreciation (3,491,552) (3,302,996)
1,871,926 1,955,320
Cash and cash equivalents 7,833 142,797
Deferred financing costs, net of accumulated
amortization of $65,906 and $59,064,
respectively 14,825 21,667
Escrow deposits 259,836 208,514
Other assets 14,966 10,444
TOTAL ASSETS 2,169,386 2,338,742
LIABILITIES AND PARTNERS' EQUITY
Mortgage payable
2,191,348 2,240,377
Accounts payable and accrued expenses 141,979 134,849
Due to affiliates 24,152 1,242
Accrued interest payable 17,028 17,410
Distributions payable 25,435 23,425
Security deposits 20,271 19,501
TOTAL LIABILITIES 2,420,213 2,436,804
PARTNERS' EQUITY (250,827) (98,062)
TOTAL LIABILITIES AND PARTNERS' EQUITY
$2,169,386 $2,338,742
AMRECORP REALTY FUND II
STATEMENTS OF INCOME
For the Years Ended December 31, 2002, 2001, and 2000
2002 2001 2000
INCOME
Rentals $863,640 $856,100 $834,640
Fees and other 20,520 23,974 17,522
Interest 2,228 12,177 16,931
Total income 886,388 892,251 869,093
OPERATING EXPENSES
Interest 206,474 210,857 214,954
Depreciation and amortization 195,398 195,639 197,871
Real estate taxes 117,501 116,057 104,754
Payroll 78,400 77,974 78,291
Repairs and maintenance 67,779 73,353 64,760
General and administrative 74,821 62,813 55,287
Property management fee to
affiliate 44,208 44,007 42,666
Utilities 30,940 34,189 27,739
Administrative services
fees to affiliate 5,472 5,472 5,472
Total operating expenses 820,993 820,361 791,794
NET INCOME $65,395 $71,890 $77,299
NET INCOME PER LIMITED PARTNERSHIP
UNIT - BASIC
Net income per unit - basic $ 4.45 $ 4.45 $ 4.78
LIMITED PARTNERSHIP UNITS
OUTSTANDING - BASIC 14,544 14,544 14,544
AMRECORP REALTY FUND II
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 2002, 2001 and 2000
Genera Limited
Partner Partners Total
Balance, January 1, 2000 (89,175) 496,404 407,229
Distributions --- (363,600) (363,600)
Net income 7,730 69,569 77,299
Balance, December 31, 2000 (81,445) 202,373 120,928
Distributions --- (290,880) (290,880)
Net income 7,189 64,701 71,890
Balance, December 31, 2001 (74,256) (23,806) (98,062)
Distributions --- (218,160) (218,160)
Net income 654 64,741 65,395
Balance, December 31, 2002 $(73,602)$(177,225)$(250,827)
AMRECORP REALTY FUND II
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2002, 2001 and 2000
2002 2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $65,395 $71,890 $77,299
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 195,398 195,639 197,871
Changes in assets and liabilities:
Escrow deposits (34,928) 14,180 (14,795)
Other assets (4,522) (2,482) (1,280)
Accrued interest payable (382) (347) (404)
Due to affiliates 22,910 1,560 (977)
Accounts payable and
accrued expenses 7,130 13,981 15,052
Security deposits 770 1,200 (600)
Net cash provided by
operating activities 251,771 295,621 272,166
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in real estate (105,162) (25,215) (35,078)
Deposits to reserve for
replacements (32,220) (32,298) (33,388)
Disbursements from reserve
for replacements 15,826 30,056 33,581
Net cash used for
investing activities (121,556) (27,457) (34,885)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on mortgages and
notes payable (49,029) (44,680) (40,717)
Distributions (218,160)(290,880) (363,600)
Distributions payable 2,010 --- (1,250)
Net cash used for
financing activities (265,179)(335,560) (405,567)
Net decrease in cash and
cash equivalents (134,964) (67,396) (168,286)
Cash and cash equivalents at
beginning of period 142,797 210,193 378,479
Cash and cash equivalents at
end of period $ 7,833 $142,797 $210,193
Supplemental disclosure of cash flow information:
Cash paid during the year
for interest $206,855 $211,204 $215,167
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Amrecorp Realty Fund II (the "Partnership"), a Texas limited
partnership, was formed on April 16, 1984, under the laws of
the state of Texas, for the purpose of acquiring,
maintaining, developing, operating, and selling buildings
and improvements. The Partnership owns and operates rental
apartments in Abilene, 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 outstanding for each of the
three years ended December 31, 2002. Under the terms of the
offering, no additional units will be offered.
Allocation of Net Income (Loss) and Cash
Net operating income and loss are allocated 1% to general
partners and 99% to limited partners. Net operating cash
flow, as defined in the partnership agreement, shall be
distributed to the limited and general partners first to the
limited partners in an amount equal to a variable
distribution preference on capital contributions for the
current year and then to the extent the preference has not
been satisfied for all preceding years, and, thereafter, 10%
to the general partner and 90% 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.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Basis of Accounting
The Partnership maintains its books on the basis of
accounting used for federal income tax reporting purposes.
Memorandum entries have been made to present the
accompanying financial statements in accordance with U.S.
generally accepted accounting principles.
Investments in Real Estate and Depreciation
Buildings, improvements, and furniture and fixtures are
recorded at cost and depreciated using the straight-line
method over the estimated useful lives of the assets ranging
from 5 to 25 years.
Income Taxes
No provision for income taxes has been made since the
partners report their respective share of the results of
operations on their individual income tax return.
Revenue Recognition
The Partnership has leased substantially all of its rental
apartments under cancelable leases for periods generally
less than one year. Rental revenue is recognized on a
monthly basis as earned.
Deferred Financing Costs
Costs incurred to obtain mortgage financing are being
amortized over the life of the mortgage using the straight-
line method.
Syndication Costs
Costs or fees incurred to raise capital for the Partnership
are netted against the respective partners' equity accounts.
Cash and Cash Equivalents
The Partnership considers all highly liquid instruments with
a maturity of three months or less to be cash equivalents.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Long-Lived Assets
In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting For the Impairment
of Long-Lived Assets and For Long-Lived Assets to be
Disposed Of", the Partnership records impairment losses on
long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the
assets' carrying amount. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be
disposed of. Based on current estimates, management does
not believe impairment of operating properties is present.
Computation of Earnings Per Unit
The Partnership has adopted Statement of Financial
Accounting Standards ("SFAS") No.128, "Earnings per Share".
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.
Concentration of Credit Risk
Financial instruments, which potentially subject the
Partnership to concentrations of credit risk, consist
primarily of cash. The Partnership places its cash with
various financial institutions. The Partnership's exposure
to loss should any of these financial institutions fail
would be limited to any amount in excess of the amount
insured by the Federal Deposit Insurance Corporation or
Securities Investor Protection Corporation, where
applicable. Management does not believe significant credit
risk exists at December 31, 2002.
Use of Estimates
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during that reporting period. Actual results
could differ from those estimates.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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. Project management is not aware of any
environmental remediation obligations that would materially
affect the operations, financial position or cash flows of
the Project.
Comprehensive Income
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, (SFAS 130), requires that
total comprehensive income be reported in the financial
statements. For the years ended December 31, 2002, 2001,
2000, the Partnership's comprehensive income was equal to
its net income and the Partnership does not have income
meeting the definition of other comprehensive income.
Segment Information
The Partnership is in one business segment, the real estate
investments business, and follows the requirements of FAS
131, "Disclosures about Segments of an Enterprise and
Related Information."
NOTE B - MORTGAGE PAYABLE
Mortgage payable of $2,191,348 and $2,240,377 at December
31, 2002 and 2001, respectively, bears interest at a rate of
9.325% and is payable in monthly installments of principal
and interest of $21,324 through March 2005, at which time a
lump sum payment of approximately $2,069,000 is due. This
mortgage note is secured by real estate with a net book
value of $1,871,926.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE B - MORTGAGE PAYABLE - CONTINUED
At December 31, 2002, required principal payments due under
the stated terms of the Partnership's mortgage note payable
are as follows
2003 53,082
2004 59,039
2005 2,079,227
2006 ---
2007 ---
$2,191,348
NOTE C - RELATED PARTY TRANSACTIONS
The Partnership agreement specifies that certain fees be
paid to the general partner or his designee. An affiliate
of the general partner receives a property management fee
that is 5% of the Partnership's gross receipts.
Additionally, the Partnership reimburses the affiliate for
administrative expenditures. The following fees and
reimbursements earned by an affiliate of the general partner
in 2002, 2001 and 2000:
2002 2001 2000
Property management fee $44,208 $44,007 $42,666
Administrative service fee 5,472 5,472 5,472
Resulting from the above transactions, amounts due an
affiliate of the general partner as of December 31, 2002,
2001 and 2000 totaled $24,152, $1,242, and $-0-,
respectively.
NOTE D - COMMITMENTS
The Partnership will pay a real estate commission to the
general partner or his affiliates in an amount not exceeding
the lessor 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.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE E - 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 U.S. generally accepted accounting
principals ("GAAP"), the excess of revenues over expenses
for 2002 would have been as follows:
Net income per accompanying financial $
statements 65,395
Add - book basis depreciation using 188,556
straight-line method
Deduct - income tax basis depreciation
expense using ACRS method 28,471
Excess of revenues over expenses,
accrual income tax basis $ 225,480
NOTE F - 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 judgement 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, accounts
payable and other liabilities.
Management has reviewed the carrying values of its mortgages
payable and notes payable to related parties in connection
with interest rates currently available to the Partnership
for borrowings with similar characteristics and maturities
and has determined that their estimated fair value would
approximate their carrying value as of December 31, 2002 and
2001.
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
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2002
Initial Cost
to Partnership
Description Encumbrances Land Building Total Cost
And Subsequent
Improvements to
Acquisition
A 128-unit
two-story
apartment
community of
wooden frame (b)
construction $580,045 $4,341,569 $441,864
and a combination
brick veneer
and wood
siding
exterior
located in
Abilene,
Texas
Gross amounts at which
carried at Close of Year
Land Buildings & Total Accumulated
Improvements (c)(d) Depreciation
(c)
$580,045 $4,783,433 $5,363,478 $3,491,552
Date of Date Life on which
Construction Acquired Depreciation is computed
Complete at (a)
acquisition 11/1/84
Date
See notes to Schedule III.
AMRECORP REALTY FUND II
Schedule III - Real Estate and Accumulated Depreciation (Continued)
December 31, 2002
NOTES TO SCHEDULE III:
(a) See Note A to financial statements outlining depreciation
methods and lives.
(b) See description of mortgages and notes payable in Note B to
the financial statements.
(c) The reconciliation ofinvestments in real estate and
accumulated depreciation for the years ended December 31, 2002,
2001 and 2000 is as follows:
Investments in Accumulated
Real Depreciation
Estate
Balance, January 1, 2000 $5,190,023 $2,923,170
Acquisitions 35,078 ---
Depreciation expense --- 191,029
Balance, December 31, 2000 $ 5,223,101 $3,114,199
Acquisitions 25,215 ---
Depreciation expense --- 188,797
Balance, December 31, 2001 $5,258,316 $3,302,996
Acquisitions 105,162 ---
Depreciation expense --- 188,556
Balance, December 31, 2002 $5,363,478 $3,491,552
(d) Aggregate cost for federal income tax purposes is
$5,381,069.
Item 9. Changes in and Disagreements on Accounting and
Financial Disclosure
On November 6, 1998, an 8-K was filed to disclose the change in
auditors. No financial statements were issued in conjunction with
this filing. 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, 64, 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, 2002, 2001, and 2000,
property management fees earned totaled $44,208, $44,007, and
$42,666, respectively. An additional administration service fee
was paid to the general partner of $5,472, $5,472, and $5,472, for
the years ended December 31, 2002, 2001, and 2000, respectively.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) No one owns of record, except as noted in Item (b) below, 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, 2002.
Title Name of Amount and Nature Percent
of Class Beneficial Owner of Beneficial Ownership
Limited Robert J. Werra 86 units 0.59%
Partnership 2800 N Dallas Pkwy #100
Interests Plano, Texas 75093
Limited 74 - Mackenzie Patterson 732 units 5.033%
Partnership 1640 School St #100
Interests Morgana, CA 94556
Limited Mackenzie Patterson
Special Fund 4 L.L.C. 441 units 3.032%
Partnership 1640 School St #100
Interests Morgana, CA 94556
(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 C to the Financial Statements for detailed information
concerning fees paid to Univesco, Inc. (an affiliate of the General
Partner).
Item 14. Controls and Procedures
Based on their most recent evaluation, which was completed within
90 days of the filing of this Form 10-K, our Principal Financial
Officer and Principal Executive Officer, believe our disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) are effective. There were not any significant changes
in internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
and there has not been any corrective action with regard to
significant deficiencies and material weaknesses.
PART IV
Item 15. 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, 2002.
November 6, 1998, an 8-K was filed to disclose the change
in auditors. No financial statements were issued in conjunction
with this filing.
(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
(d) Financial Statement Schedules excluded from the annual report
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
/s/ Robert J. Werra
March 21, 2003
CERTIFICATION
I, Robert J Werra, certify that:
1. I have reviewed this annual report on Form 10-K of Amrecorp
Realty Fund II;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 21, 2003
/s/ Robert J. Werra
General Partner
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Amrecorp Realty Fund II
("the Company") on Form 10-K for the year ending December 31,
2002 as filed with the Securities and Exchange Commission on the
date hereof ("the Report"), I, Robert J. Werra, Acting Principal
Executive Officer and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/ Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
March 21, 2003