Back to GetFilings.com
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, 1998
[ ]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) 380-8000
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 .
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, 1998, the Partnership consisted of an individual
general partner, Mr. Robert J. Werra (the "General Partner") and
2,054 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, 1998, 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, 1998 the Partnership owned one property, Chimney
Square Apartments. Prior to the disposal during January 1997 and
August 1996 the Partnership also owned two other properties, as
indicated below:
Name and Location General Description of the Property
Chimney Square 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
(sold January 1997) apartment community located in
Mecklenburg County, North Carolina,
purchased in 1985 and containing
approximately 124,194 net rentable
square feet on 10.058 acres of land.
In January 1997, the Partnership
sold this apartment community.
Lancaster Place (sold A fee simple interest in a
August 1996) neighborhood shopping center
located in Lancaster Texas
purchased in 1984 containing
53,860 square feet on
approximately 7.89 acres of land
with paved surface parking for
372 cars. The shopping center was sold
in August of 1996.
Occupancy Rates
Per cent
1994 1995 1996 1997 1998
Lancaster Shopping Center 90.0% 89.0% NA NA NA
Chimney Square 96.5% 90.9% 95.6% 90.6% 93.8%
Shorewood Apartments 96.5% 94.9% 94.0% NA NA
The property is encumbered by a non-recourse mortgage payable. For
information regarding the encumbrances to which the property is
subject and the status of the related mortgage loan, see
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" contained
in Item 7 hereof and Note 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, 1998 there
were approximately 2,054 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 has also tendered
offers to other owners subsequent to year-end, although no
additional Interests have been sold. 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 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
Item 6. Selected Financial Data
The following table sets forth selected financial data regarding
the Partnership's results of operations and financial position as
of the dates indicated. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in Item 7 hereof and
the Financial Statements and notes thereto contained in Item 8.
Year Ended December 31
(in thousands except unit and per unit amounts)
1998 1997 1996 1995 1994
Limited Partner Units Outstanding 14,544 14,544 14,544 14,544 14,544
Statement of Operations
Total Revenues $810 $2,122 $1,658 $1,629 $1,569
Net Income (Loss) before
extraordinary items 31 1,266 (135) (672) (252)
Extraordinary Item - Gain on
debt forgiveness (a) 0 0 1,377 0 0
Extraordinary Item-loss
on extinguishment of debt 0 0 0 0 (53)
Net Income (Loss) 31 1,266 1,241 (672) (305)
Limited Partner Net Income (Loss)
per Unit - Basic 2.17 86.17 84.51 (45.74) (20.78)
Cash Distributions to Limited Partners
per unit basic. 35 100 50 0 0
Balance Sheet:
Real Estate, net (b) $2,441 $2,602 $2,777 $6,971 $7,633
Real Estate assets held for sale,Net 0 0 2,862 0 0
Total Assets 2,887 3,408 6,271 7,499 7,753
Mortgages and Notes Payable 2,363 2,397 5,054 6,571 6,204
Partner's Equity 366 843 1,032 517 1,189
(a) In connection with the sale of the commercial property located
in Lancaster, Texas, the general partner relieved the Partnership
of its obligation to repay the mortgage note, resulting in gain on
forgiveness of debt.
(b) On August 23, 1996 the Partnership disposed of its shopping
center located in Lancaster, Texas. The shopping center had
accounted for $158,001, $230,651, $221,713, and $222,178 of
revenues for the years ended December 31, 1996, 1995, 1994, and
1993. Additionally in January 1997 the Partnership disposed of its
apartment complex in North Carolina. This apartment complex had
accounted for $61,408, $708,624, $671,691, $656,990, and $630,123
of revenues for the years ended December 31, 1997, 1996, 1995,
1994, and 1993
Item 7 Management's Discussion and Analysis of Financial
Conditions and Results of Operations
This discussion should be read in conjunction with Item 6 -
"Selected Financial Data" and Item 8 - "Financial Statements and
Supplemental Information" .
Results of Operations: 1998 VERSUS 1997 -
Revenue from Property Operations decreased $1,311,975 or 61.82% as
compared to 1997, due to the sale of Shorewood Apartments. The
Partnerships' sole asset at December 31, 1998 saw revenue increase
by $37,567 or 5.13% due to higher occupancy this was offset however
by the sale of Shorewood Apartments that contributed $60,349 in
rental revenue during 1997. Additionally interest income decreased
$4,170 due from the distribution during 1998. Other income for 1998
increased $2,368 primarily due to increased fees to residents. The
following table illustrates the increases or (decreases):
Increase
(Decrease)
Rental income $(22,782)
Interest (4,170)
Gain On sale (1,287,391)
Other 2,368
Net Increase $(1,311,975)
Property operating expenses for 1998 decreased $77,838 from 1997 or
9.09%. Expenses decreased primarily due to the sale of Shorewood
Apartments. Chimney Square Apartments, the sole asset as of
December 31, 1998, saw its operating expenses increase $5,429 or
1.70%. The following table illustrates the increases or
(decreases):
Increase
(Decrease)
Repairs and Maintenance $(26,936)
Real estate taxes 1,344
General & Admin (8,144)
Administrative Service Fee (192)
Utilities (7,785)
Payroll (15,813)
Interest (21,354)
Depreciation and amortization 2,041
Property management fees (999)
Net Decrease $(77,838)
Results of Operations: 1997 VERSUS 1996 -
Revenue from Property Operations increased $464,318 or 28.01% as
compared to 1996, due to the sale of Shorewood Apartments. Rental
revenue at the Partnerships apartment communities decreased by
$805,303 which was primarily the result of the sale of Shorewood
Apartments. The Partnerships' sole asset at December 31, 1997 saw
revenue decrease $30,609 or 4.02% due to lower occupancy.
Additionally interest income increased $11,959 due to additional
funds available for investment. Other income for 1997 decreased
$29,729 primarily due to the aforementioned property sale. The
following table illustrates the increases or (decreases):
Increase
(Decrease)
Rental income $(805,303)
Interest 11,959
Gain On sale 1,287,391
Other (29,729)
Net Increase $464,318
Property operating expenses for 1997 decreased $937,056 from 1996
or 52.25%. Expenses decreased primarily due to the sale of
Shorewood Apartments. Chimney Square Apartments, the sole asset
as of December 31, 1997, saw its operating expenses increase $3,227
or 1.16%. The following table illustrates the increases or
(decreases):
Increase
(Decrease)
Repairs and Maintenance $(124,699)
Real estate taxes (54,746)
General & Admin (36,217)
Administrative Service Fee (3,512)
Utilities (34,468)
Payroll (87,324)
Interest (292,933)
Loss on Sale of Property (10,177)
Depreciation and amortization (251,143)
Property management fees (41,837)
Net Decrease $(937,056)
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, 1998, the Partnership had $217,493 in cash and
cash equivalents as compared to $593,721 as of December 31, 1997.
The net decrease in cash of $376,228 is principally due to funds
used for distributions.
The remaining property is encumbered by this nonrecourse mortgage
as of December 31, 1998, with an interest rate of 9.325%. Required
principal payments on this mortgage note for the five years ended
December 31, 2003, are $37,105, $40,717, $44,680, $49,029 and
$53,802 respectively.
For the foreseeable future, the Partnership anticipates that
mortgage principal payments (excluding balloon mortgage payments),
improvements and capital expenditures will be funded by net cash
from operations. The primary source of capital to fund the balloon
mortgage payment will be proceeds from the sale, financing or
refinancing of the properties.
Year 2000
The Partnership and Management Company have replaced all data
processing systems within the last three years with year 2000 compliant
software and hardware. The Partnership and Management Company have
completed testing of its data processing systems and while compliance
can not be assured, the systems tested were compliant.
Surveys of financial institutions and vendors used by the
Partnership and Management Company also indicate compliance to date.
this survey is expected to be completed by June 1999. The Partnership and
Management Company have prepared contingency plans. These include redundant
back-ups and paper copies of all system reports through 1999.
The Partnership anticipates that it will not incur any significant costs
associated with its computers and building operating systems as it
relates to the conversion to the year 2000.
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 its 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 partners invests only in
fully insured bank certificates of deposits, and mutual funds
investing in United States treasury obligations.
Forward Looking Information
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, 1998, 1997, and 1996
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Reports 1
Financial Statements
Balance Sheets as of December 31, 1998 and 1997 3
Statements of Income for the years ended December 31, 1998,
1997 and 1996 4
Statements of Partners' Equity (Deficit) for the years ended
December 31, 1998, 1997, and 1996 5
Statements of Cash Flows for the years ended December 31,1998,
1997 and 1996 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 sheet of Amrecorp Realty
Fund II, a Texas limited partnership (the "Partnership") as of
December 31, 1998, and the related statements of income,
partners' equity (deficit), and cash flows for the year then
ended. 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 audit. The
financial statements of Amrecorp Realty Fund II as of December
31, 1997, were audited by other auditors whose report dated
February 23, 1998, expressed an unqualified opinion on those
statements.
We conducted our audit 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 presentation of the financial statements. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the December 31, 1998 financial statements
referred to above present fairly, in all material respects, the
financial position of Amrecorp Realty Fund II as of December 31,
1998, and the results of its operations and its cash flows for
the year then ended in conformity with 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 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.
FARMER, FUQUA, HUNT & MUNSELLE, P.C.
February 12, 1999
Dallas, Texas
INDEPENDENT AUDITORS' REPORT
To the General Partner
and Limited Partners of
Amrecorp Realty Fund II
Dallas, Texas
We have audited the accompanying balance sheet of Amrecorp Realty
Fund II (a Texas limited partnership) (the "Partnership") as of
December 31, 1997 and the related statements of income, partners'
equity (deficit) and cash flows for the years ended December 31,
1997 and 1996. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to
express an opinion on the financial statements 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 combined financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Amrecorp Realty Fund
II as of December 31, 1997 and the results of its operations and
its cash flows for the years ended December 31, 1997 and 1996, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
February 23, 1998
AMRECORP REALTY FUND II
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
Investments in real estate at cost
Land $580,045 $580,045
Buildings, improvements and furniture and fixtures 4,590,987 4,560,894
5,171,032 5,140,939
Accumulated depreciation (2,730,495) (2,539,125)
2,440,537 2,601,814
Cash and cash equivalents 217,493 593,721
Deferred financing costs,net of accumulated
amortization of $45,379 and $38,537,respectively 42,194 49,036
Escrow deposits 179,757 154,681
Other assets 6,552 8,796
TOTAL ASSETS $2,886,533 $3,408,048
LIABILITIES AND PARTNERS' EQUITY
Mortgage payable $2,362,879 $2,396,692
Accounts payable and accrued expenses 94,466 96,605
Due to affiliates 1,284 8,774
Accrued interest payable 18,384 18,624
Distributions payable 26,420 27,420
Security deposits 17,200 16,800
TOTAL LIABILITIES 2,520,633 2,564,915
PARTNER'S EQUITY 365,900 843,133
TOTAL LIABILITIES AND PARTNER'S EQUITY $2,886,533 $3,408,048
AMRECORP REALTY FUND II
STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
INCOME
Rentals $769,356 $792,138 $1,597,441
Interest 28,997 33,167 21,208
Other 11,895 9,527 39,256
Gain on sale of property --- 1,287,391 ---
Total income 810,248 2,122,223 1,657,905
OPERATING EXPENSES
Interest 221,831 243,185 536,118
Depreciation and amortization 198,212 196,171 447,314
Real estate taxes 82,220 80,876 135,622
Repairs and maintenance 73,263 100,199 224,898
General and administrative 64,953 73,097 109,314
Payroll 63,570 79,383 166,707
Property management fee to affiliate 39,184 40,183 82,020
Utilities 29,736 37,521 71,989
Administrative services fees to affiliate 5,472 5,664 9,176
Loss on sale of property --- --- 10,177
Total operating expenses 778,441 856,279 1,793,335
NET INCOME (LOSS) BEFORE
EXTRAORDINARY GAIN 31,807 1,265,944 (135,430)
Extraordinary gain-gain on debt forgiveness --- --- 1,376,916
NET INCOME $31,807 $1,265,944 $ 1,241,486
NET INCOME PER LIMITED PARTNERSHIP
UNIT - BASIC
Net income (loss) before extraordinary item $2.17 $86.17 $(9.22)
Gain on debt forgiveness --- --- 93.73
Net income per unit - basic $ 2.17 $ 86.17 $ 84.51
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, 1998, 1997 and 1996
General Limited
Partner Partners Total
Balance, January 1, 1996 $(114,980) $632,283 $517,303
Distributions --- (727,200) (727,200)
Net income 12,415 1,229,071 1,241,486
Balance, December 31, 1996 (102,565) 1,134,154 1,031,589
Distributions --- (1,454,400) (1,454,400)
Net income 12,659 1,253,285 1,265,944
Balance, December 31, 1997 (89,906) 933,039 843,133
Distributions --- (509,040) (509,040)
Net income 318 31,489 31,807
Balance, December 31, 1998 $(89,588) $455,488 $365,900
AMRECORP REALTY FUND II
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $31,807 $1,265,944 $ 1,241,486
Adjustments to reconcile net income to
net cash provided by operations:
Gain on sale of assets --- (1,287,391) ---
Loss on sale of assets --- --- 10,177
Gain on debt forgiveness --- --- (1,376,916)
Depreciation and amortization 198,212 196,171 447,314
Changes in assets and liabilities:
Escrow deposits (11,482) 221 5,716
Deferred costs --- 29,599 ---
Other assets 2,244 9,070 12,149
Accrued interest payable (240) (17,203) 3,446
Due to affiliates (7,490) 1,920 2,475
Accounts payable and accrued expenses (2,139) (6,414) (25,734)
Security deposits 400 (23,202) (3,776)
Net cash provided by operating activities 211,312 168,715 316,337
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in real estate (30,093) (13,571) (61,073)
Proceeds from sale of assets, net --- 4,149,635 949,649
Deposits to reserve for replacements (34,649) (35,366) (34,997)
Disbursements from reserve for replacements 21,055 46,534 6,628
Net cash provided by (used for)
investing activities (43,687) 4,147,232 860,207
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on mortgages and notes payable (33,813) (2,657,381) (341,398)
Distributions (509,040) (1,454,400) (727,200)
Distributions payable (1,000) 27,420 ---
Net cash used for financing activities (543,853) (4,084,361) (1,068,598)
Net increase (decrease) in cash
and cash equivalents (376,228) 231,586 107,946
Cash and cash equivalents at
beginning of period 593,721 362,135 254,189
Cash and cash equivalents at end of period $217,493 $593,721 $362,135
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $222,071 $260,388 $532,672
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, 1997, and 1996
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. During the year ended December
31, 1996, the Partnership owned and operated an additional
apartment complex in Charlotte, North Carolina and a
commercial shopping center located in Lancaster, Texas. In
1996, the commercial shopping center was sold for a loss of
$10,177. Net proceeds received as a result of this sale
amounted to $949,649. In 1997, the Partnership sold the
apartment complex located in Charlotte, North Carolina and
recognized a gain of $1,287,391. Net proceeds received as a
result of this sale amounted to $4,149,635. 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, 1998. 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
limited 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.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
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
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
investments in real estate under operating leases for
periods generally less than one year.
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, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Computation of Earnings Per Unit
The Partnership has adopted Statement of Financial
Accounting Standards ("SFAS") No.128, "Earnings per Share".
Comparative earnings per unit data have been restated to
conform to the adoption of this new standard. Basic
earnings per unit is computed by dividing net income (loss)
attributable to the limited partners' interests by the
weighted average number of units outstanding. Earnings per
unit assuming dilution would be computed by dividing net
income (loss) attributable to the limited partners'
interests by the weighted average number of units and
equivalent units outstanding. The Partnership has no
equivalent units outstanding for any period presented.
Use of Estimates
The preparation of financial statements in conformity with
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.
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.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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, 1998, December
31, 1997, and December 31, 1996, 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 $2,362,879 and $2,396,692 at December
31, 1998 and 1997, 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 $2,089,000 is due. This
mortgage note is secured by real estate with a net book
value of $2,440,537.
At December 31, 1998, required principal payments due under
the stated terms of the Partnership's mortgage note payable
are as follows
1999 $ 37,105
2000 40,717
2001 44,680
2002 49,029
2003 53,802
Thereafter 2,137,546
$2,362,879
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
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 1998, 1997 and 1996:
1998 1997 1996
Property management fee $39,184 $40,183 $82,020
Administrative service fee 5,472 5,664 9,176
Resulting from the above transactions, amounts due an
affiliate of the general partner as of December 31, 1998 and
1997, totaled $1,284 and $8,774, respectively.
During 1996, in connection with the sale of the commercial
property located in Lancaster, Texas, the general partner
relieved the Partnership of its obligation to repay the
mortgage note, resulting in a gain on forgiveness of debt of
$1,376,916, which included $201,267 in accrued interest.
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. No such fees
were paid to Univesco in connection with the 1996 and 1997
disposals.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
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 generally accepted accounting
principals ("GAAP"), the excess of expenses over revenues
for 1998 would have been as follows:
Net income per accompanying financial statements $31,807
Add - book basis depreciation using straight-line method 191,370
Deduct - income tax basis depreciation expense using ACRS method (234,507)
Excess of expenses over revenues, accrual income tax basis $(11,330)
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, 1998 and
1997.
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, 1998
Initial Cost
to Partnership
Description Encumbrances Land Building Total Cost
and Subsequent to
improvements Acquisition
A 128-unit two-story
apartment community of
wooden frame con-
struction and a
combination brick
veneer and wood siding
exterior located in
Abilene,Texas (b) $580,045 $4,341,569 $249,418
Gross Amounts at Which
Carried at Close of year
Buildings
and Accumulated
Description Land improvements Total Depreciation
(c)(d) (c)
A 128-unit two-story
apartment community of
wooden frame con-
struction and a
combination brick
veneer and wood siding
exterior located in
Abilene,Texas $580,045 $4,590,987 $5,171,032 $2,730,495
Life on Which
Date of Date Depreciation
Construction Acquired is Computed
Complete at
Date acquired 11/01/84 (a)
Gross Amounts at Which
Carried at Close of Year
See notes to Schedule III.
AMRECORP REALTY FUND II
Schedule III - Real Estate and Accumulated Depreciation (Continued)
December 31, 1998
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 of investments in real estate and
accumulated depreciation for the years ended December 31,1998,
1997 and 1996 is as follows:
Investments in Accumulated
Real Estate Depreciation
Balance, January 1, 1996 $12,205,689 $5,234,192
Acquisitions 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
Acquisitions 13,571 ---
Depreciation expense --- 188,749
Sale of real estate (4,848,547) (1,986,303) )
Balance, December 31, 1997 5,140,939 2,539,125
Acquisitions 30,093 ---
Depreciation expense --- 191,370
Balance, December 31, 1998 $5,171,032 2,730,495
(d) Aggregate cost for federal income tax purposes is $5,188,625.
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, 60, 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, 1998, 1997 and 1996,
property management fees earned totaled $39,184, $40,183, and
$82,020, respectively. An additional administration service fee
was paid to the general partner of $5,472, $5,664, and $9,176 for
the years ended December 31, 1998, 1997 and 1996, 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, 1999.
Title Name of Amount and Nature Percent
of Class Beneficial Owner of Beneficial Ownership of Interest
Limited Robert J. Werra 86 units 0.59%
Partnership 6210 Campbell Rd. #140
Interests Dallas, Texas 75248
Limited 74-Mackenzie Patterson Fund 732 units 5.033%
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).
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K
(A) 1. See accompanying Financial Statements Index
2. Additional financial information required to be furnished:
Schedule III- Real Estate and Accumulate Depreciation.
3. Exhibits
None.
(B) Reports on Forms 8-K for the quarter ended December 31, 1998.
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
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN REPUBLIC REALTY FUND II
ROBERT J. WERRA, GENERAL PARTNER
/s/ Robert J. Werra
March 29, 1999