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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
FORM 1O-K
ANNUAL REPORT
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934 (No Fee Required)
For the Fiscal year ended December 31, 1996
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934 (No Fee Required)
For the Transaction Period from ________ to ________
Commission File Number 2-90654
AMRECORP REALTY FUND II
(Exact name of registrant as specified in its charter)
Texas 75-1956009
(State or Other Jurisdiction of (I.R.S. Employer
(Incorporation or Organization) (Identification Number)
6210 Campbell Road, Suite 140, Dallas, Texas 75248
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including area code(972) 38O-8OOO
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
- ------------------- ---------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-k or any Amendment to the Form 10-k. _______
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 9O days.
Yes X No .
Documents Incorporated by Reference
The Prospectus dated July 6, 1985 filed pursuant to Rule 424(b) as
supplemented pursuant to Rule 424(b) on December 11, 1985
Part I
Item 1. Business
The Registrant, Amrecorp Realty Fund II, (the "Partnership"), is a
limited partnership organized under the Texas Uniform Limited
Partnership Act pursuant to a Certificate of Limited Partnership
dated April 16, 1984 and amended on July 5, 1984. As of
December 31, 1996, the Partnership consisted of an individual
general partner, Mr. Robert J. Werra (the "General Partner") and
1,978 limited partners owning 14,544 limited partnership interests
at $1,OOO per interest. The distribution of limited partnership
interests commenced pursuant to a Registration Statement on Form
S-11 under the Securities Act of 1933 (Registration #2-9O654) as
amended.
The Partnership was organized to acquire a diversified portfolio of
income-producing real properties, primarily apartments, as well as
office buildings, industrial buildings, and other similar
properties. The Partnership intends to continue until December 31,
2O14 unless terminated by an earlier sale of its Properties.
The General Partner manages the affairs of the Partnership and acts
as the Managing Agent with respect to the Partnership's properties.
The General Partner may also engage other on-site property managers
and other agents, to the extent the General Partner considers
appropriate. The General Partner makes all decisions regarding
investments in and disposition of properties and has ultimate
authority regarding all property management decisions.
The Partnership competes in the residential and commercial rental
markets. The General Partner prepared market analyses for the
property areas. These areas contain other like properties which may
be considered competitive on the basis of location, amenities and
rental rates.
No material expenditure has been made or is anticipated for either
Partnership-sponsored or consumer research and development
activities relating to the development or improvement of facilities
or services provided by the Partnership. There neither has been,
nor are any anticipated, material expenditures required to comply
with any Federal, State or local environmental provisions which
would materially affect the earnings or competitive position of the
Partnership.
The Partnership is engaged solely in the business of real estate
investments. Its business is believed by management to fall
entirely within a single industry segment. Management does not
anticipate that there will be any material seasonal effects upon
the operation of the Partnership.
Competition and Other Factors
The majority of the Apartment Community Properties leases are of
six to twelve month terms. Accordingly, operating income is highly
susceptible to varying market conditions. Occupancy and street
rents are driven by general market conditions which include job
creation, new construction of single and multi-family projects, and
demolition and other reduction in net supply of apartment units.
Due to increased market pressures, the Partnership's shopping
center located in Lancaster, Texas has continued to experience poor
economic performance and decreasing cash flows. Accordingly, in
1996 the Partnership sold its investment in the shopping center,
recognizing a loss of $10,177
On those properties owned at December 31, 1996, rents have
generally been increasing in recent years due to the generally
positive relationship between apartment unit supply and demand in
the Partnership's markets. However, the properties are subject to
substantial competition from similar and often newer properties in
the vicinity in which they are located. In addition, operating
expenses and capitalized expenditures have increased as units are
updated and made more competitive in the market place.
Item 2. Properties
At December 31, 1996 the Partnership owned two properties. The two
apartment communities aggregate approximately 250,748 net rentable
square feet. The Shopping Center, Lancaster Place which was
disposed of during 1996 consisted of approximately 53,860 net
rentable square feet.
Name and Location General Description of the Property
- ----------------- -----------------------------------
Chimney Square Apartments A fee simple interest in seventeen
two-story residential buildings
located in Abilene, Texas purchased
in 1984, containing approximately
126,554 net rentable square feet on
approximately 7.18 acres of land.
The community consists of 128
apartment units and twenty four
townhouse units.
Shorewood Apartments A fee simple interest in a 96 unit
apartment community located in
Mecklenburg County, North Carolina,
purchased in 1985 and containing
approximately 124,194 net rentable
square feet on 10.058 acres of land.
In January 1997, the Partnership sold
this apartment community.
Lancaster Place A fee simple interest in a neighborhood
shopping center sold located in
Lancaster Texas purchased in 1984
containing 53,860 square feet on
approximately 7.89 acres of land
with paved surface parking for 372 cars.
The shopping center was sold in August
of 1996.
Occupancy Rates
---------------
Per cent
--------
1992 1993 1994 1995 1996
Lancaster Shopping Center 80.00% 80.00% 90.00% 89.00% NA
Chimney Square 98.50% 98.90% 96.50% 90.90% 95.60%
Shorewood Apartments 90.00% 95.10% 96.50% 94.90% 94.00%
The properties are encumbered by non-recourse mortgages payable.
For information regarding the encumbrances to which the properties
are subject and the status of the related mortgage loans, see "
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" contained
in Item 7 hereof and Note 4 to Consolidated Financial Statements
and Schedule Index contained in Item 8.
Item 3. Legal Proceedings
- -------------------------
The Partnership is not engaged in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Unit Holders
- -------------------------------------------------------
There were no matters submitted to a vote of unit holders during
the fourth quarter of the fiscal year.
By virtue of its organization as a limited partnership, the
Partnership has outstanding no securities possessing traditional
voting rights. However, as provided and qualified in the Limited
Partnership Agreement, limited partners have voting rights for,
among other things, the removal of the General Partner and
dissolution of the Partnership.
PART II
Item 5. Market for Registrant's Units and Related Unit-holders Matters
- ----------------------------------------------------------------------
The Partnerships outstanding securities are in the form of Limited
Partnership Interests ("Interests"). As of December 31, 1996 there
were approximately 1,978 limited partners owning 14,544 limited
partnership interests at $1,000 per interest. A public market for
trading Interests has not developed and none is expected to
develop. In addition, transfer of an Interest is restricted
pursuant to Article X, Section 2, of the Limited Partnership
Agreement.
The General Partner continues to review the Partnership's ability
to make distributions on a quarter by quarter basis. In 1996 the
Partnership distributed $50 per $1000 unit due to the sale of
Lancaster Place . The Partnership anticipates a distribution of
$100 per $1000 unit in early 1997 due to the sale of Shorewood in
1997.
An analysis of tax income or (loss) allocated, and cash distributed
to Investors per $1,000 unit is as follows:
YEARS TAXABLE INCOME OR GAIN TAXABLE LOSS CASH DISTRIBUTED
1984 - 1993 $0 $910 $30
1994 0 $27 0
1995 0 $28 0
1996 $62 0 $50
Item 6. Selected Financial Data
- --------------------------------
The following table sets forth selected financial data regarding
the Partnership's result of operations and financial position as of
the dates indicated. This information should be read in conjunction
with Management's Discussion and Analysis of Financial Condition
and Results of Operations contained in Item 7 hereof and
Consolidated Financial Statements and notes thereto contained in
Item 8.
Year Ended December 31
(in thousands except unit amounts)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Limited Partner Units
Outstanding 14,544 14,544 14,544 14,544 14,544
------ ------ ------ ------ ------
Statement of Operations
Total Revenues $1,658 $1,629 $1,569 $1,533 $1,347
Net Income (Loss)
before extraordinary
items (135) (672) (252) (526) (422)
Extraordinary Item-
Gain on debt
forgiveness (a) 1,377 0 0 0 0
Extraordinary Item-loss
on extinguishment of
debt 0 0 (53) 0 0
Net Income (Loss) 1,241 (672) (305) (526) (422)
Limited Partner Net
Income(Loss) per Unit 85 (46) (21) (27) (34)
Cash Distributions to
Limited Partners
per Unit 50 0 0 0 0
Balance Sheet:
Real Estate, net (b) 2,777 6,971 7,633 7,967 8,533
Real Estate assets
held for sale 2,862 0 0 0 0
Total Assets 6,271 7,499 7,753 8,111 8,594
Mortgages Payable 5,054 6,571 6,204 6223 6,297
Partner's Equity(Deficit)1,032 517 1,189 1,494 2,020
(a) In connection with the sale of the commercial property located
in Lancaster, Texas, the general partner relieved the Partnership
of its obligation to repay the mortgage note, resulting in gain on
forgiveness of debt.
(b) On August 23, 1996 the Partnership disposed of its shopping
center located in Lancaster, Texas. The shopping center had
accounted for $158,001, $230,651, $221,713, $222,178 and $203,928
of revenues for the years ended December 31, 1996, 1995, 1994,
1993, and 1992
Item 7 Management's Discussion and Analysis of Financial Conditions and
- ------------------------------------------------------------------------
Results of Operations
---------------------
This discussion should be read in conjunction with Item 6- Selected
Financial Data and Item 8 - Financial Statements and Supplemental
Information .
Results of Operations: 1996 VERSUS 1995 -
Revenue from Property Operations increased $29,295 or 1.8% as
compared to 1995, due to an increase in rental revenues of $12,075,
which was primarily the result of increases in rents resulting from
improvements in the apartment rental markets.
(Rental revenue at the Partnership's apartment communities
increased by $85,755.) These increases were partially offset by a
reduction in rental revenue on Lancaster of $73,680. The
Partnership disposed of its investment in Lancaster in August of
1996, thus only eight months of rental revenues were recognized.
Additionally interest income increased $9,884 due to additional
funds available for investment and other income for 1996 increased
$7,336 primarily due to the aforementioned increase in occupancy.
The following table illustrates the increases or (decreases):
Increase
(Decrease)
----------
Rental income $12,075
Interest 9,884
Other 7,336
Net Increase --------
(Decrease) $29,295
========
Property operating expenses for 1996 decreased $507,276 from 1995
or 22.05%. Property operating expenses at the Partnership's
apartment communities decreased by $71,569 due to a one time
painting and parking lot repairs to facilitate the sale of
Shorewood Apartments in 1997. The remaining decrease of $94,545 in
property operating expenses is due to the sale of Lancaster
Shopping Center. The following table illustrates the increases or
(decreases):
Gain of debt forgiveness for 1996 was $1,376,916 due to the general
partner relieving the Partnership of its obligations to repay the
mortgage note related to the commercial property located in
Lancaster Texas and disposed of in August of 1996.
Increase
(Decrease)
----------
Repairs and Maintenance $(78,322)
Real estate taxes (480)
General & Administrative (18,146)
Administrative Service Fee (1,000)
Utilities (18,329)
Payroll (440)
Interest (51,500)
Loss on Sale of Property 10,177
Depreciation and amortization (6,362)
Property management fees (1,712)
----------
Net Increase (Decrease) $(106,114)
==========
Results of Operations: 1995 VERSUS 1994 -
Revenue from Property Operations increased $59,521 or 3.8% as
compared to 1994, due to an increase in rental revenues of $43,268
which was primarily the result of increases in rents resulting from
improvements in the apartment rental markets. Additional interest
income increased $12,577 due to additional funds available for
investment and other income for 1995 increased $3,676 primarily due
to the aforementioned increase in occupancy. The following table
illustrates the increases or (decreases):
Increase
(Decrease)
----------
Rental income $43,268
Interest 3,676
Other 12,577
-------
Net Increase
(Decrease) $59,521
=======
Property operating expenses for 1995 increased $479,284 from 1994
or 26.32%. Real estates taxes decreased as a result of successful
tax appeals. Depreciation and amortization expense increased
primarily due to additions to buildings, improvements and fixtures.
Payroll increases were due primarily to cost of living increases.
Interest expense decreased by $17,765 due primarily to the
refinancing of an 11.75% mortgage with a 7.75% mortgage in 1994 and
the refinancing of an 9.625% mortgage payable with a 9.325% note
payable in February of 1995. Repair and maintenance expenses
increased primarily due to mandated repairs and in bringing
additional units on line. Property management fees are paid to an
affiliated entity and represent approximately 5% to 6% of gross
revenues. The following table illustrates the increases or (decreses):
Increase
(Decrease)
----------
Repairs and Maintenance $107,367
Real estate taxes (3,880)
General & Administrative 7,508
Administrative Service Fee 0
Utilities 5,628
Payroll 17,811
Interest (17,765)
Loss on Sale of Property 0
Depreciation and amortization 18,453
Property management fees 3,000
--------
Net Increase (Decrease) $138,122
========
Due to the poor economic performance brought about by increased
pressures, the Partnership's investment in its shopping center
located in Lancaster, Texas, has experienced decreased cash flows.
Accordingly, during 1995, the Partnership recorded an impairment
loss of approximately $341,000 to lower the carrying value of the
assets to their estimated fair value, determined based on estimated
cash flows and sales proceeds. The impairment has been reflected
in the balance sheet as a reduction in the basis of the fixed
assets. Lancaster Place was sold in August of 1996.
Liquidity and Capital Resources
- -------------------------------
While it is the General Partners primary intention to operate and
manage the existing real estate investments, the General Partner
also continually evaluates this investment in light of current
economic conditions and trends to determine if these assets should
be considered for disposal. Accordingly, in 1996 the Partnership
sold its investment in the shopping center located in Lancaster
Texas , recognizing a loss of $10,177. Shorewood Apartments, an
apartment complex located in Charlotte, North Carolina was sold in
January 1997. Net gain from the sale will be approximately 1.3
million dollars. The partnership anticipates marketing Chimney
Square during 1997.
As of December 31, 1996, the Partnership had $362,135 in cash and
cash equivalents as compared to $254,189 as of December 31, 1995.
The net increase in cash of $107,946 is principally due to funds
provided from sale proceeds from the sale of the shopping center
at Lancaster Texas.
The properties are encumbered by nonrecourse mortgages as of
December 31, 1996, with interest rates ranging from 7.75% to
9.325%. Required principal payments on these mortgage notes for
the five years ended December 31, 2001, are $75,828, $82,422,
$86,639, $97,471 and $2,464,463 respectively.
For the foreseeable future, the Partnership anticipates that
mortgage principal payments (excluding balloon mortgage payments),
improvements and capital expenditures will be funded by net cash
from operations. The primary source of capital to fund future
Partnership acquisitions and balloon mortgage payments will be
proceeds from the sale, financing or refinancing of the properties.
Risk Associated with Forward-Looking Statements Included in this Form 10-k
This Form 10-K contains certain forward-looking statements within the
meaning of Section 27A of the Securities Actof 1933 and Section 21E of
the Securities Exchange Act of 1934, which are intended to be covered
by the safe harbors created
thereby. These statements include the plans and objectives of
management for future operations, including plans and objectives
relating to capital expenditures and rehabilitation costs on the
Properties. The forward-looking statements included herein are
based on current expectations that involve numerous risks and
uncertainties. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions,
all of which are difficult or impossible to predict accurately and
many of which are beyond the control of the Company. Although the
Company believes that the assumptions underlying the forward-
looking statements are reasonable, any of the assumptions could be
inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this Form 10-K will prove to
be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the
Company will be achieved.
AMRECORP REALTY FUND II
(A TEXAS LIMITED PARTNERSHIP)
ITEM 8 - FINANCIAL STATEMENTS AND SCHEDULE
INDEX
- --------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 11
BALANCE SHEETS 12
STATEMENTS OF OPERATIONS 13-14
STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 15
STATEMENTS OF CASH FLOWS 16
NOTES TO FINANCIAL STATEMENTS 17-21
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 22-23
INDEPENDENT AUDITORS' REPORT
To the General Partner
and Limited Partners
Amrecorp Realty Fund II
Dallas, Texas
We have audited the accompanying balance sheets of Amrecorp
Realty Fund II (a Texas limited partnership) (the Partnership)
as of December 31, 1996 and 1995, and the related statements of
operations, partners' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedule listed in
the index at Item 14(a)(2). These financial statements and
financial statement schedule are the responsibility of the
Partnership's management. Our responsibility is to express an
opinion on the financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of Amrecorp
Realty Fund II as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
Deloitte & Touche LLP
Dallas, Texas
February 17, 1997
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
INVESTMENTS IN REAL ESTATE, AT COST (Note 4):
Land $ 580,045 $ 1,858,048
Buildings, improvements and furniture
and fixtures 4,547,323 10,347,641
----------- ----------
5,127,368 12,205,689
Less accumulated depreciation (2,350,376) (5,234,192)
----------- ----------
2,776,992 6,971,497
INVESTMENTS IN REAL ESTATE ASSETS HELD FOR SALE,
NET (Note 2) 2,862,244 -
CASH AND CASH EQUIVALENTS 362,135 254,189
DEFERRED COSTS (Note 3) 86,057 99,863
ESCROW DEPOSITS 166,070 143,417
OTHER ASSETS 17,866 30,015
---------- ----------
TOTAL $6,271,364 $7,498,981
========== ==========
LIABILITIES AND PARTNERS' EQUITY
MORTGAGES AND NOTES PAYABLE (Notes 4 and 5) $5,054,073 $6,571,120
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 103,019 128,753
DUE TO AFFILIATES 6,854 4,379
ACCRUED INTEREST PAYABLE 35,827 233,648
SECURITY DEPOSITS 40,002 43,778
---------- ---------
5,239,775 6,981,678
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY (Note 2) 1,031,589 517,303
---------- ---------
TOTAL $6,271,364 $7,498,981
========== =========
See notes to financial statements.
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ----------------------------------------------------------------------------
1996 1995 1994
INCOME:
Rentals $1,597,441 $1,585,366 $1,542,098
Other 39,256 29,372 25,696
Interest 21,208 13,872 1,295
---------- ---------- ----------
Total income 1,657,905 1,628,610 1,569,089
OPERATING EXPENSES:
Repairs and maintenance 224,898 303,220 195,853
Real estate taxes 135,622 136,102 139,982
General and administrative 109,314 127,460 119,952
Administrative services fees to
affiliate (Note 5) 9,176 10,176 10,176
Utilities 71,989 90,318 84,690
Payroll 166,707 167,147 149,336
Interest 536,118 587,618 605,383
Loss on sale of property (Note 2) 10,177 - -
Depreciation and amortization 447,314 453,676 435,223
Loss on impairment (Note 8) - 341,162 -
Property management fee to
affiliate (Note 5) 82,020 83,732 80,732
---------- ---------- ----------
Total operating expenses 1,793,335 2,300,611 1,821,327
---------- ---------- ----------
NET LOSS BEFORE EXTRAORDINARY ITEM (135,430) (672,001) (252,238)
EXTRAORDINARY ITEM:
Gain on debt forgiveness 1,376,916 - -
Loss on extinguishment of debt
(Note 4) - - (53,030)
---------- ---------- ----------
NET INCOME (LOSS) (Note 6) $1,241,486 $(672,001) $(305,268)
========== ========== ==========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT:
Net loss before extraordinary item $(9.22) $(45.74) $(17.17)
Gain on debt forgiveness 93.73 - -
Loss on extinguishment of debt - - (3.61)
---------- ---------- ----------
NET INCOME (LOSS) PER UNIT $84.51 $(45.74) $(20.78)
========== ========== ==========
LIMITED PARTNERSHIP UNITS OUTSTANDING 14,544 14,544 14,544
========== ========== ==========
See notes to financial statements.
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ----------------------------------------------------------------------------
General Limited
Partner Partners Total
BALANCE, JANUARY 1, 1994 $(105,207) $1,599,779 $1,494,572
Net loss (3,053) (302,215) (305,268)
--------- -------- ---------
BALANCE, DECEMBER 31, 1994 (108,260) 1,297,564 1,189,304
Net loss (6,720) (665,281) (672,001)
--------- -------- ---------
BALANCE, DECEMBER 31, 1995 (114,980) 632,283 517,303
Distributions - (727,200) (727,200)
Net income 12,415 1,229,071 1,241,486
--------- --------- ----------
BALANCE, DECEMBER 31, 1996 $(102,565) $1,134,154 $1,031,589
========= ========== ==========
See notes to financial statements.
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $1,241,486 $(672,001) $(305,268)
Adjustments to reconcile net
income (loss) to cash
provided by operations:
Loss on extinguishment of debt - - 53,030
Loss on sale of assets 10,177 - -
Gain on debt forgiveness (Note 5) (1,376,916) - -
Depreciation and amortization 447,314 453,676 435,223
Loss on impairment (Note 8) - 341,162 -
Changes in assets and liabilities: - - -
Escrow deposits 5,716 (70,900) (7,479)
Deferred costs - (43,421) (41,501)
Other assets 12,149 6,733 (16,205)
Accrued interest payable 3,446 (1,513) (16,717)
Security deposits (3,776) 2,535 (3,067)
Accounts payable and accrued
expenses (25,734) 48,971 (17,791)
Due to/from affiliates 2,475 1,096 6,400
---------- ---------- ----------
(925,149) 738,339 391,893
---------- ---------- ----------
Net cash provided by
operating activities 316,337 66,338 86,625
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate (61,073) (120,695) (66,924)
Proceeds from sale of assets 949,649 - -
Deposits to reserve for replacements (34,997) (76,839) -
Disbursements from reserve
for replacements 6,628 17,525 -
---------- ---------- ----------
Net cash provided by (used in)
investing activities 860,207 (180,009) (66,924)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgages and notes payable (341,398) (2,107,620) (2,797,087)
Additions to mortgages and notes payable - 2,475,000 2,725,000
Distributions (727,200) - -
---------- ---------- ----------
Net cash provided by (used in)
financing activities (1,068,598) 367,380 (72,087)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH 107,946 253,709 (52,386)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 254,189 480 52,866
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $362,135 $254,189 $480
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest $532,672 $589,131 $622,100
========== ========== ==========
See notes to financial statements.
AMRECORP REALTY FUND II
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ----------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting - Amrecorp Realty Fund II (the
"Partnership"), a Texas limited partnership, maintains its books
and prepares its income tax returns using the accrual income tax
basis of accounting. Memo adjustments have been made in
preparing the accompanying financial statements in accordance
with generally accepted accounting principles (see Note 6). The
financial statements include only those assets, liabilities and
results of operations which relate to the business of the
Partnership. The financial statements do not include any
assets, liabilities, revenues or expenses attributable to the
partners' individual activities.
Property and Equipment- Buildings, improvements, and furniture
and fixtures are depreciated using the straight-line method over
the estimated useful lives of the assets which are five years
for improvements, furniture and fixtures and 25 years for
buildings. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
Partnership management routinely reviews its investments for
impairments whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable
(Note 7).
Deferred Costs - Loan commitment fees are amortized by the
straight-line method over the term of the loan, which
approximates the interest method.
Syndication Costs - Costs or fees incurred to raise capital for
the Partnership are netted against the respective partners'
equity accounts.
Revenue Recognition - The Partnership has leased its investment
in residential property under operating leases for periods
generally less than one year. For its investments in commercial
property, there are operating leases ranging from 2 to 25 years.
Income Taxes - No provision has been made for income taxes since
these taxes are the responsibility of the individual partners.
For tax purposes, the basis of the Partnership assets is
$5,797,453 at December 31, 1996.
Cash and Cash Equivalents - For purposes of the statement of
cash flows, the Partnership considers all highly liquid
investments with a remaining maturity of three months or less at
the date of acquisition to be cash equivalents. Univesco Inc.
("Univesco"), an affiliate of general partner, Robert J. Werra,
and the management agent, maintains a single controlled
disbursement account for all properties managed by Univesco.
Funds are transferred at the time of cash disbursements from the
project's operating account to the controlled disbursement
account to reimburse checks issued.
Environmental Remediation Costs - The Partnership accrues for
losses associated with environmental remediation obligations
when such losses are probable and reasonably estimable.
Accruals for estimated losses from environmental remediation
obligations generally are recognized no later than completion of
the remedial feasibility study. Such accruals are adjusted as
further information develops or circumstances change. Costs of
future expenditures for environmental remediation obligations
are not discounted to their present value. Recoveries of
environmental remediation costs from other parties are recorded
as assets when their receipt is deemed probable. Partnership
management is not aware of any environmental remediation
obligations which would materially affect the operations,
financial position or cash flows of the Partnership.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect reported amounts of certain assets, liabilities, revenues
and expenses as of and for the reporting periods. Actual
results may differ from such estimates.
Reclassifications - Certain reclassifications have been made in
the previous years' financial statements to conform to the
classifications used in the current year.
2. PARTNERSHIP
General - The Partnership was formed on April 16, 1984, under
the Texas Uniform Limited Partnership Act, for the purpose of
acquiring, maintaining, developing, operating, and selling
buildings and improvements. During the two years ended
December 31, 1996, the Partnership owned and operated two
apartment complexes located in Abilene, Texas, and Charlotte,
North Carolina, and a commercial shopping center located in
Lancaster, Texas. In 1996, the Partnership sold the commercial
shopping center located in Lancaster, Texas, receiving net
proceeds of $949,649 and recognizing a loss of $10,177. In
addition, in January 1997, the Partnership sold the apartment
complex located in Charlotte, North Carolina, for net proceeds
of approximately $4.2 million. This property was considered
held for sale at December 31, 1996. The Partnership will
terminate by December 31, 2014, although this date can be
extended if certain events occur.
The general partner is Mr. Robert J. Werra. An aggregate of
25,000 units at $1,000 per unit are authorized of which 14,544
were issued and outstanding during the three years ended
December 31, 1996. Under the terms of the offering, no
additional units will be offered.
Allocation of Net Income (Loss) and Cash - Net income and net
operating cash flow, as defined in the partnership agreement,
are allocated first to the limited partners in an amount equal
to a distribution preference (as defined) on capital
contributions from the first day of the month following their
capital contribution and thereafter generally 10% to the general
partner and 90% to the limited partners. Net loss is allocated
1% to the general partner and 99% to the limited partners.
Net income from the sale of property is allocated first, to the
extent there are cumulative net losses, 1% to the general
partner and 99% to the limited partners; second, to the limited
partners in an amount equal to their distribution preference as
determined on the date of the partners' entry into the
Partnership; and thereafter 15% to the general partner and 85%
to the limited partners.
Cash proceeds from the sale of property or refinancing are
allocated first to the limited partners to the extent of their
capital contributions and distribution preference as determined
on the date of the partners' entry into the Partnership and
thereafter 15% to the general partner and 85% to the limited
partners.
3. DEFERRED COSTS
Deferred costs at December 31, 1996 and 1995, consist of the
following:
1996 1995
Loan fees $117,172 $117,172
Less accumulated amortization (31,115) (17,309)
---------- ----------
$86,057 $99,863
========== ==========
During 1995 and 1994, the Partnership incurred $68,421 in fees
related to its successful effort to refinance its 9.625%
mortgage (see Note 4). During 1996, 1995 and 1994, amortization
expense of $13,806, $12,666 and $4,643, respectively, was
incurred on fees paid to an unrelated party.
4. MORTGAGES AND NOTES PAYABLE
Mortgages and notes payable at December 31, 1996 and 1995,
consist of the following:
1996 1995
7.75% mortgage note, payable in monthly
principal and interest installments
of $20,583 through May 2001, at which
time a lump-sum payment of approximately
$2,400,000 is due. This mortgage note
is secured by real estate assets with a
net book value of approximately
$2,862,244 $2,626,567 $2,664,884
9.325% mortgage note, payable in monthly
principal and interest installments of
$21,324 through March 2005, at which time
a lump-sum payment of approximately
$2,089,000 is due. This mortgage note
is secured by real estate assets with a
net book value of approximately
$2,777,000 2,427,506 2,455,587
11% mortgage note due to the general
partner. In August 1996, the general
partner forgave principal and accrued
but unpaid interest totaling $1,376,916,
and the Partnership recognized a gain
on forgiveness of debt for such amount
(see Note 5) - 1,450,649
---------- ----------
$5,054,073 $6,571,120
========== ==========
In February 1995, the Partnership refinanced its 9.625% mortgage
payable with a 9.325% note payable. Direct costs incurred to
obtain the mortgage financing of $68,421 were capitalized and
are being amortized over the life of the mortgage.
In July 1994, the Partnership refinanced a mortgage payable. A
prepayment penalty of 2% of the outstanding mortgage balances
relieved was incurred and recorded as an extraordinary item
during 1994.
The following sets forth the required principal payments due
under the Partnership's mortgages and notes payable for the next
five years. Annual principal payments as of December 31, 1996,
are as follows:
1997 $ 75,828
1998 82,442
1999 89,639
2000 97,471
2001 2,464,463
Thereafter 2,244,230
5. RELATED PARTY TRANSACTIONS
The partnership agreement specifies certain fees to be paid to
the general partner or his designee. The following fees were
paid to the general partner or his designee during 1996, 1995
and 1994:
1996 1995 1994
Property management fees $82,020 $83,732 80,732
Administrative services 9,176 10,176 10,176
Univesco receives an ongoing property management fee generally
payable at 5% and 6% of the Partnership's gross receipts for
residential properties and the nonresidential property,
respectively.
The Partnership will pay a real estate commission to the general
partner or his affiliates in an amount not exceeding the lesser
of 50% of the amounts customarily charged by others rendering
similar services or 3% of the gross sales price of a property
sold by the Partnership.
In connection with the sale of the commercial property located
in Lancaster, Texas, the general partner relieved the
Partnership of its obligation to repay the mortgage note,
resulting in a gain on forgiveness of debt of $1,376,916, which
included $201,267 in accrued interest.
6. RECONCILIATION OF BOOK TO TAX LOSS (UNAUDITED)
If the accompanying financial statements had been prepared in
accordance with the accrual income tax basis of accounting
rather than generally accepted accounting principles, excess
revenues over expenses for 1996 would have been as follows:
Net income per accompanying financial statements $1,241,486
Add back book basis depreciation expense using
straight-line method 433,502
Add back gain on disposition of property - tax (282,636)
Deduct income tax basis depreciation expense
using ACRS method (495,318)
Deduct loss on disposition of property - GAAP 10,177
-----------
Excess revenues over expenses, accrual
income tax basis $907,211
===========
7. IMPAIRMENT OF FIXED ASSETS
Due to the poor economic performance brought about by increased
market pressures, the Partnership's investment in its shopping
center located in Lancaster, Texas, experienced decreased cash
flows. Accordingly, during 1995, the Partnership recorded an
impairment loss of approximately $341,000 to
lower the carrying value of the assets to their estimated fair
value, determined based on estimated cash flows and sales
proceeds. The impairment was reflected in the balance sheet as
a reduction in the basis of the fixed assets.
During 1996, the Partnership disposed of its investment in the
Lancaster shopping center, recognizing a loss of $10,177.
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments,"
requires disclosure of the estimated fair values of certain
financial instruments. The estimated fair value amounts have
been determined using available market information or other
appropriate valuation methodologies that require considerable
judgment in interpreting market data and developing estimates.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Partnership could realize in
a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
The fair value of financial instruments that are short-term or
reprice frequently and have a history of negligible credit
losses is considered to approximate their carrying value. These
include cash and cash equivalents, short-term receivables,
accounts payable and other liabilities. Real estate and other
assets consist of nonfinancial instruments, which are excluded
from the scope of SFAS No. 107.
Management has reviewed the carrying values of its mortgages and
notes payable in connection with interest rates currently
available to the Partnership for borrowings with similar
characteristics and maturities and has determined that their
carrying value approximates their estimated fair values as of
December 31, 1996.
As of December 31, 1996, the fair value information presented
herein is based on pertinent information available to
management. Although management is not aware of any factors
that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for
purposes of these financial statements since that date, and
therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
******
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
Initial Cost
to Partnership
-----------------------------
Buildings,
Encum- and Furniture Subsequent to
Description brances Land and Fixtures Acquisition
A 128-unit two-story
apartment community of
wooden frame construction
and a combination brick
veneer and wood siding
exterior located in
Abilene, Texas (b) $580,045 $4,341,569 $205,754
A 96-unit one- and two-story
apartment community of
wood frame and stucco
construction located
adjacent to the Raintree
Country Club in Charlotte,
North Carolina (b) 676,364 3,857,693 314,490
---------- ---------- --------
$1,256,409 $8,199,262 $520,244
========== ========== ========
DEPRECIATION (CONTINUED)
Gross Amounts at Which
Carried at Close of Period
---------------------------------
Buildings
and Accumulated
Description Land Improvements Total Depreciation
A 128-unit two-story
apartment community of
wooden frame construction
and a combination brick
vaneer and wood siding
exterior located in
Abilene, Texas $580,045 $4,547,323 $5,127,368 $2,350,376
A 96-unit one-and two-story
apartment community of
wood frame and stucco
construction located
adjacent to the Raintree
Country Club in Charlotte,
North Carolina 676,364 4,172,183 4,848,547 1,986,303
--------- --------- --------- ---------
$1,256,409 $8,719,506 $9,975,915 $4,336,679
=========== ========== ========== ==========
Date of Construction: Complete at date acquired
Date Acquired: 11/1/84
Life on Which Depreciation Is Computed: (a)
Date of Construction: Complete at date acquired
Date Acquired 8/12/85
Life on Which Depreciation Is Computed: (a)
See notes to Schedule III.
AMRECORP REALTY FUND II
(A TEXAS LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
DECEMBER 31, 1996
- ---------------------------------------------------------------------------
NOTES TO SCHEDULE III:
(a)See Note 1 to financial statements outlining depreciation
methods and lives.
(b)See description of mortgages and notes payable in Note 4 to the
financial statements.
(c)Reconciliation of investments in real estate and accumulated
depreciation for the years ended December 31, 1996, 1995 and
1994.
Investments Accumulated
in Real Estate Depreciation
BALANCE, JANUARY 1, 1994 $12,359,232 $4,362,602
Additions during the year:
Additions 66,924 -
Depreciation expense - 430,580
----------- ----------
BALANCE, DECEMBER 31, 1994 12,426,156 4,793,182
Additions during the year:
Additions 120,695 -
Depreciation expense - 441,010
Loss on impairment (341,162) -
----------- ----------
BALANCE, DECEMBER 31, 1995 12,205,689 5,234,192
Additions during the year:
Additions 61,073 -
Depreciation expense - 433,508
Sale of real estate (2,290,847) (1,331,021)
----------- ----------
BALANCE, DECEMBER 31, 1996 $9,975,915 $4,336,679
=========== ==========
(d)Aggregate cost for federal income tax purposes is $9,993,508.
Item 9. Changes in and Disagreements With Accountants on Accounting
- -------------------------------------------------------------------
and Financial Disclosure
------------------------
The Registrant has not been involved in any disagreements on
accounting and financial disclosure.
PART III
Item 10. Directors and Executive Officer of the Partnership
- ------------------------------------------------------------
The Partnership itself has no officers or directors. Robert J.
Werra is the General Partner of the Partnership.
Robert J. Werra, 57, the General Partner. Mr. Werra joined Loewi &
Co., Incorporated ("Loewi") in 1967 as a Registered Representative.
In 1971, he formed the Loewi real estate department, and was
responsible for its first sales of privately placed real estate
programs. Loewi Realty was incorporated in 1974, as a wholly owned
subsidiary of Loewi & Co., with Mr. Werra as President. In 198O,
Mr. Werra, along with three other individuals, formed Amrecorp Inc.
to purchase the stock of Loewi Real Estate Inc., and Loewi Realty.
In 1991 Univesco, Inc. was formed to serve as the management agent
for the Partnership and other partnerships which Mr. Werra serves
as General Partner. Limited Partners have no right to participate
in management of the Partnership.
Item 11. Management Remuneration and Transactions
- --------------------------------------------------
As stated above, the Partnership has no officers or directors.
Pursuant to the terms of the Limited Partnership Agreement, the
General Partner receives 1% of Partnership income and loss and up
to 15% of Net Proceeds received from sale or refinancing of
Partnership properties (after return of Limited Partner capital
contributions and payment of a 6% Current Distribution Preference
thereon). The individual general partner receives one-half of the
General Partners' income and losses, provided that income not
exceed prior years' losses.
Univesco, Inc., an affiliate of the General Partner, is entitled to
receive a management fee with respect to properties actually
managed of 5% of the actual gross receipts from a property or an
amount competitive in price or terms for comparable services
available from non-affiliated persons. The Partnership is also
permitted to engage in various transactions involving affiliates of
the General Partner as described under the caption "Compensation
and Fees" at pages 6-8, "Management" at pages 18-2O and "Allocation
of Net Income and Losses and Cash Distributions" at pages 44-46 of
the Prospectus as supplemented, incorporated in the Form S-11
Registration Statement which was filed with the Securities and
Exchange Commission and made effective on July 6, 1984.
Item 12. Security Ownership of Certain Beneficial Owners and
- ------------------------------------------------------------
Management
----------
(a) No one owns of record, and the General Partner knows of no one
who owns beneficially, more than five percent of the Interests
in the Partnership, the only class of securities outstanding.
(b) By virtue of its organization as a limited partnership, the
Partnership has no officers or directors. The General Partner
is responsible for management of the Partnership, subject to
certain limited democracy
rights of the Limited Partners. The following persons performing
functions similar to those of officers and directors of the
partnership own units of limited partnership interest in the
partnership.
Title of Name and Address Amount and Nature Percent of
Class of Beneficial Owner of Beneficial Ownership Class
- -----------------------------------------------------------------------------
Limited Robert J. Werra 66 units .45%
Partnership 6210 Campbell Rd. #140
Interest Dallas, Texas 75248
(c) There is no arrangement, known to the Partnership, which may, at
a subsequent date, result in a change in control of the
Partnership.
Item 13. Certain Relations and Related Transactions
- ---------------------------------------------------
As stated in Item 11., the Partnership has no officers or
directors. Pursuant to the terms of the Limited Partnership
Agreement, the general partner receives 1% of partnership income
and loss and up to 15% of Net Proceeds received from the sale or
refinancing of Partnership properties (after return of Limited
Partner capital contributions and payment of a Current Distribution
Preference thereon).
Univesco, Inc. (an affiliate of the general partner) is entitled to
receive a management fee with respect to properties actually
managed by the corporate general partner. For nonresidential
properties (including all leasing and releasing fees and fees for
leasing-related services) the management fee is the lesser of 6% of
gross receipts of the Partnership from such properties or an amount
which is competitive in price and terms with other non-affiliated
persons rendering comparable services which would reasonably be
made available to the Partnership. For residential Properties
(including all leasing and releasing fees and fees for
leasing-related services), the lesser of 5% of gross receipts of
the Partnership from such properties or an amount which is
competitive in price and terms with other non-affiliated persons
rendering comparable services which could reasonably be made
available to the Partnership. The Partnership is also permitted to
engage in various transactions involving affiliates of the
corporate general partner a described under the caption
"Compensation and Fees" at pages 6-8, "Management" at pages 18-2O
and "Allocation of Net Income and Losses and Cash Distributions" at
pages 44-46 of the definitive Prospectus, incorporated in the Form
S-11 Registration Statement which was filed with the Securities and
Exchange Commission and made effective on July 6, 1984 and
incorporated herein by reference.
See Note 5 to the Financial Statements for detailed information
concerning fees paid to Univesco, Inc. (an affiliate of the General
Partner).
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
- ----------------------------------------------------------------------------
(A)1. See accompanying Financial Statements Index
2. Additional financial information required to be furnished:
Schedule III - Real Estate and Accumulated Depreciation
3. Exhibits
None.
(B)Reports on Form 8-K for the quarter ended December 31, 1996
None.
(C)Exhibits
3. Certificate of Limited Partnership, incorporated by
reference to Registration Statement No. 2-9O654 effective
July 6, 1984.
4. Limited Partnership Agreement, incorporated by reference
to Registration Statement No. 2-9O654 effective July 6,
1984.
9. Not Applicable.
1O.None.
11.Not Applicable.
12.Not Applicable.
13.Not Applicable.
18.Not Applicable.
19.Not Applicable.
22.Not Applicable.
23.Not Applicable.
24.Not Applicable.
25.Power of Attorney, incorporated by reference to
Registration Statement No. 2-9O654 effective July 5,
1984.
28.None.
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMRECORP REALTY FUND II
ROBERT J. WERRA, GENERAL PARTNER
April 10, 1997 /s/ Robert J. Werra
- -------------- -------------------