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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 (Fee Required)
For the Fiscal year ended December 31, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the Transaction Period from ________ to ________
Commission File Number 2-90654
AMRECORP REALTY FUND II
-----------------------
(Exact name of registrant as specified in its charter)
Texas 75-1956009
(State or Other Jurisdiction of (I.R.S. Employer
(Incorporation or Organization) (Identification Number)
6210 Campbell Road, Suite 140, Dallas, Texas 75248
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including area code(214) 38O-8OOO
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-k or any Amendment to the Form 10-k. _______
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 9O days.
Yes X No .
Documents Incorporated by Reference
The Prospectus dated July 6, 1985 filed pursuant to Rule 424(b) as
supplemented pursuant to Rule 424(b) on
December 11, 1985
Part I
Item 1. Business
The Registrant, Amrecorp Realty Fund II, (the "Partnership"), is a
limited partnership organized under the Texas Uniform Limited
Partnership Act pursuant to a Certificate of Limited Partnership
dated April 16, 1984 and amended on July 5, 1984. As of
December 31, 1995, the Partnership consisted of an individual
general partner, Mr. Robert J. Werra (the "General Partner") and
1,988 limited partners owning 14,544 limited partnership interests
at $1,OOO per interest. The distribution of limited partnership
interests commenced pursuant to a Registration Statement on Form
S-11 under the Securities Act of 1933 (Registration #2-9O654) as
amended.
The Partnership was organized to acquire a diversified portfolio of
income-producing real properties, primarily apartments, as well as
office buildings, industrial buildings, and other similar
properties. The Partnership intends to continue until December 31,
2O14 unless terminated by an earlier sale of its Properties.
The General Partner manages the affairs of the Partnership and acts
as the Managing Agent with respect to the Partnership's properties.
The General Partner may also engage other on-site property managers
and other agents, to the extent the General Partner considers
appropriate. The General Partner makes all decisions regarding
investments in and disposition of properties and has ultimate
authority regarding all property management decisions.
The Partnership competes in the residential and commercial rental
markets. The General Partner prepared market analyses for the
property areas. These areas contain other like properties which may
be considered competitive on the basis of location, amenities and
rental rates.
The Partnership is experiencing low rents due to overbuilding and
the resulting over-abundance of residential and commercial
developments. These soft markets are expected to improve as new
construction activity slows and general market conditions improve.
No material expenditure has been made or is anticipated for either
Partnership-sponsored or consumer research and development
activities relating to the development or improvement of facilities
or services provided by the Partnership. There neither has been,
nor are any anticipated, material expenditures required to comply
with any Federal, State or local environmental provisions which
would materially affect the earnings or competitive position of the
Partnership.
The Partnership is engaged solely in the business of real estate
investments. Its business is believed by management to fall
entirely within a single industry segment. Management does not
anticipate that there will be any material seasonal effects upon
the operation of the Partnership.
Competition and Other Factors
The majority of the Apartment Community Properties leases are of
six to twelve month terms. Accordingly, operating income is highly
susceptible to varying market conditions. Occupancy and street
rents are driven by general market conditions which include job
creation, new construction of single and multi-family projects, and
demolition and other reduction in net supply of apartment units.
Due to increased market pressures, the Partnership's shopping
center located in Lancaster, Texas has continued to experience poor
economic performance and decreasing cash flows, While,
approximately 90% of the shopping center is leased, a substantial
portion of the space is not occupied. Management is evaluating its
options in relation to the investment, including the disposal of
the property. An impairment loss of approximately $341,000 and
$186,000 were recorded during 1995 and 1993, respectively.
Rents and occupancies have generally been increasing in recent
years due to the generally positive relationship between apartment
unit supply and demand in the Partnership's markets. However, the
properties are subject to substantial competition from similar and
often newer properties in the vicinity in which they are located.
In addition, operating expenses and capitalized expenditures have
increased as units are updated and made more competitive in the
market place.
Item 2. Properties
At December 31, 1995 the Partnership owned three properties. The
two apartment communities aggregate approximately 250,748 net
rentable square feet. The Shopping Center, Lancaster Place consists
of approximately 53,860 net rentable square feet.
Name and Location General Description of the Property
Lancaster Place A fee simple interest in a
Shopping Center neighborhood shopping center,
located in Lancaster, Texas,
purchased in 1984, containing 53,860
square feet on approximately 7.89
acres of land with paved surface
parking for 372 cars.
Chimney Square A fee simple interest in seventeen
Apartments two-story residential buildings
located in Abilene, Texas purchased
in 1984, containing approximately
126,554 net rentable square feet on
approximately 7.18 acres of land.
The community consists of 104
apartment units and twenty four
townhome units.
Shorewood Apartments A fee simple interest in a 96 unit
apartment community located in
Mecklenburg County, North Carolina,
purchased in 1985 and containing
approximately 124,194 net rentable
square feet on 10.058 acres of land.
Occupancy Rates
Per cent
1991 1992 1993 1994 1995
Lancaster Shopping Ctr 80.0 80.0 80.0 90.0 89.0
Chimney Square 96.6 98.5 98.9 96.5 90.9
Shorewood Apartments 81.2 90.0 95.1 96.5 94.9
The properties are encumbered by nonresourse mortages payable. For
information regarding the encumbrances to which the properties are
subject and the status of the related mortgage loans, see "
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" contained
in Item 7 hereof and Note 4 to Consolidated Financial Statements
and Schedule Index contained in Item 8.
Item 3. Legal Proceedings
The Partnership is not engaged in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Unit Holders
There were no matters submitted to a vote of unit holders during
the fourth quarter of the fiscal year.
By virtue of its organization as a limited partnership, the
Partnership has outstanding no securities possessing traditional
voting rights. However, as provided and qualified in the Limited
Partnership Agreement, limited partners have voting rights for,
among other things, the removal of the General Partner and
dissolution of the Partnership.
PART II
Item 5. Market for Registrant's Units and Related Unitholders
Matters
The Partnerships outstanding securities are in the form of Limited
Partnership Interests ("Interests"). As of December 31, 1995 there
were approximately 1,945 limited partners owning 14,544 limited
partnership interests at $1,000 per interest. A public market for
trading Interests has not developed and none is expected to
develop. In addition, transfer of an Interest is restricted
pursuant to Article X, Section 2, of the Limited Partnership
Agreement.
The General Partner continues to review the Partnership's ability
to make distributions on a quarter by quarter basis, however, no
such distributions have been made in recent years and none are
anticipated in the immediate future due to debt service
requirements of the Partnership.
An analysis of tax income or (loss) allocated, and cash distributed
to Investors per $1,000 unit is as follows:
TAXABLE INCOME TAXABLE LOSS CASH
YEARS OR GAIN DISTRIBUTED
1984 - 1993 $0 $910 $30
1994 0 $27 0
1995 0 $28 0
Item 6. Selected Financial Data
The following table sets forth selected financial data regarding
the Partnership's result of operations and financial position as of
the dates indicated. This information should be read in conjunction
with Management's Discussion and Analysis of Financial Condition
and Results of Operations contained in Item 7 hereof and
Consolidated Financial Statements and notes thereto contained in
Item 8.
Year Ended December 31.
(in thousands except unit amounts)
1995 1994 1993 1992 1991
Limited Partner Units 14,544 14,544 14,544 14,544 14,544
Outstanding
Statement of Operations
Total Revenues $1,629 $1,569 $1,533 $1,347 $1,671
Net loss before (672) (252) (526) (422) (1,410)
extraordinary items
Extraordinary Item-
loss on exinguishment
of debt 0 53 0 0 0
Net Loss (672) (305) (526) (422) (1,410)
Net loss per Limited (46) (21) (27) (34) (10)(a)
Partnership Unit
Cash distributions to 0 0 0 0 0
limited partners
Gross rental income
per rentable squre
feet:
Shopping center 4.36 4.06 4.20 3.79 4.07
Apartments 4.44 4.28 4.16 3.63 4.59
Balance Sheet:
Real Estate, net 6,971 7,633 7,997 8,533 8,903
Total Assets 7,499 7,753 8,111 8,594 9,046
Mortgages Payable 6,571 6,204 6,223 6,297 6,323
Partner's Equity 517 1,189 1,494 2,020 2,442
(a)Income was reallocated in accordance with 704(b) and the
regulations promulgated thereunder of the Internal Revenue Code
of 1986 as amended
Item 7 Management's Discussion and Analysis of Financial
Conditions and Results of Operations
This discussion should be read in conjunction with Item 6- Selected
Financial Data and Item 8 - Financial Statements and Supplemental
Information .
Results of Operations: 1995 VERSUS 1994 -
Revenue from Property Operations increased $59,521 or 3.8% as
compared to 1994, due to an increase in rental revenues of $43,268
which was primarily the result of increases in rents resulting from
improvements in the apartment rental markets. Additional interest
income increased $12,577 due to additional funds available for
investment and other income for 1995 increased $3,676 primarily due
to the aforementioned increase in occupancy.
Property operating expenses for 1995 increased $479,284 from 1994
or 26.32%. Real estates taxes decreased as a result of successful
tax appeals. Depreciation and amortization expense increased
primarily due to additions to buildings, improvements and fixtures.
Payroll increases were due primarily to cost of living increases.
Interest expense decreased by $17,765 due primarily to the
refinancing of an 11.75% mortgage with a 7.75% mortgage in 1994 and
the refinancing of an 9.625% mortgage payable with a 9.325% note
payable in February of 1995. Repair and maintenance expenses
increased primarily due to mandated repairs and in bringing
additional units on line. Property management fees are paid to an
affiliated entity and represent approximately 5% to 6% of gross
revenues. Due to the poor economic performance brought about by
increased pressures, the Partnership's investment in its shopping
center located in Lancaster, Texas, has experienced decreased cash
flows. Accordingly, during 1995, the Partnership recorded an
impairment loss of approximately $341,000 to lower the carrying
value of the assets to their estimated fair value, determined based
on estimated cash flows and sales proceeds. The impairment has
been reflected in the balance sheet as a reduction in the basis of
the fixed assets. The following table illustrates the increases or
(decreases):
Repairs and maintenance $107,367
Real estate taxes (3,880)
General and administrative 7,508
Administrative services see to affiliate 0
Utilities 5,628
Payroll 17,811
Interest (17,765)
Depreciation and amortization 18,453
Loss on impairment 341,162
Property management fee to affiliate 3,000
--------
Total expenses $479,284
========
Results of Operations: 1994 VERSUS 1993 -
Revenue from Property Operations increased $35,653 or 2.3% as
compared to 1993, primarily as a result of increases in rental
revenues of $30,589, principally due to an increase in rents and
occupancy resulting from improvements in the apartment rental
markets. Additionally, other income for 1994 increased $6,279
primarily due to the aforementioned increase in occupancy. These
increases were partially offset by a small decrease in interest
income of $1,215.
Property operating expenses for 1994 decreased $238,388 or 11.6%.
Real estates taxes decreased as a result of successful tax appeals.
Depreciation and amortization expense and loss on impairment
decreased by $189,722 due primarily to the recording of an
impairment in 1993 to lower the value of fixed assets to net
realizable value ( see Note 8 to Consolidated Financial Statements
contained in Item 8.) Payroll increases were due primarily to cost
of living increases. Interest expense decreased by $75,965 due
primarily to the refinancing of an 11.75% mortgage with a 7.75%
mortgage. (see Note 4 to Consolidated Financial Statements and
Schedule Index contained in Item 8.) Property management fees are
paid to an affiliated entity and represent approximately 5% to 6%
of gross revenues. The following table illustrates the increases
or (decreases):
Interest $ (75,965)
General and Administrative 793
Payroll 5,284
Maintenance and Repairs 32,713
Utilities 6,647
Real Estate Taxes (13,983)
Depreciation and Amortization and loss on impairment (189,722)
Property Management Fee 1,845
Amortization of Deferred Costs to General Partner (6,000)
--------
Total Increase (Decrease) in Operating Expenses $(238,388)
==========
Liquidity and Capital Resources
While it is the General Partners primary intention to operate and
manage the existing real estate investments, the General Partner
also continually evaluates this investment in light of current
economic conditions and trends to determine if these assets should
be considered for disposal. At this time, there is no plan to
dispose of Chimney Squares or Shorewood Apartments.
As of December 31, 1995, the Partnership had $254,189 in cash and
cash equivalents as compared to $480 as of December 31, 1994. The
net increase in cash of $253,709 is principally due to funds
provided from excess cash proceeds from the refinancing of a
mortgage payable and positive cash flow from operations offest by
capital expenditures.
The properties are encumbered by nonrecourse mortages as of
December 31, 1995, with interest rates ranging from 7.75% to 11%.
Required principal payments on these mortgage notes for the five
years ended December 31, 2000, are $66,398, $75,828, $1,533,091,
$86,639 and $97,471, respectively.
For the foreseeable future, the Partnership anticipates that
mortgage principal payments (excluding balloon mortgage payments),
improvements and capital expenditures will be funded by net cash
from operations. The primary source of capital to fund future
Partnership acquisitions and balloon mortgage payments will be
proceeds from the sale, financing or refinancing of the properties.
AMRECORP REALTY FUND II
(A TEXAS LIMITED PARTNERSHIP)
ITEM 8 - FINANCIAL STATEMENTS AND SCHEDULE
INDEX
- ----------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 11
BALANCE SHEETS 12
STATEMENTS OF OPERATIONS 13
STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 14
STATEMENTS OF CASH FLOWS 15
NOTES TO FINANCIAL STATEMENTS 16-21
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 22-23
INDEPENDENT AUDITORS' REPORT
To the General Partner
and Limited Partners
Amrecorp Realty Fund II
Dallas, Texas
We have audited the accompanying balance sheets of Amrecorp Realty Fund II (a
Texas limited partnership) (the Partnership) as of December 31, 1995 and 1994,
and the related statements of operations, partners' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1995. Our
audits also included the financial statement schedule listed in the index at
Item 14(a)(2). These financial statements and financial statement schedule are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on the financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Amrecorp Realty Fund II as of December 31,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 1, during 1995, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of."
DELOITTE & TOUCHE LLP
Dallas, Texas
February 16, 1996
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
- ----------------------------------------------------------------------------
ASSETS 1995 1994
INVESTMENTS IN REAL ESTATE, AT COST (Note 4):
Land $ 1,858,048 $ 1,858,048
Buildings, improvements and furniture and
fixtures 10,347,641 10,568,108
---------- ----------
12,205,689 12,426,156
Less accumulated depreciation (5,234,192) (4,793,182)
---------- ----------
6,971,497 7,632,974
CASH AND CASH EQUIVALENTS 254,189 480
DEFERRED COSTS (Note 3) 99,863 69,108
ESCROW DEPOSITS 143,417 13,203
OTHER ASSETS 30,015 36,748
--------- --------
TOTAL $ 7,498,981 $ 7,752,513
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
MORTGAGES AND NOTES PAYABLE (Notes 4 and 5) $ 6,571,120 $ 6,203,740
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 128,753 79,782
DUE TO AFFILIATES 4,379 3,283
ACCRUED INTEREST PAYABLE 233,648 235,161
SECURITY DEPOSITS 43,778 41,243
---------- ---------
6,981,678 6,563,209
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY (Note 2) 517,303 1,189,304
---------- ----------
TOTAL $ 7,498,981 $ 7,752,513
=========== ===========
See notes to financial statements.
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ---------------------------------------------------------------------------
1995 1994 1993
INCOME:
Rentals $1,585,366 $1,542,098 $1,511,509
Other 29,372 25,696 19,417
Interest 13,872 1,295 2,510
---------- ---------- ----------
Total income 1,628,610 1,569,089 1,533,436
OPERATING EXPENSES:
Repairs and maintenance 303,220 195,853 163,140
Real estate taxes 136,102 139,982 153,965
General and administrative 127,460 119,952 119,159
Administrative services fees to
affiliate (Note 5) 10,176 10,176 10,176
Utilities 90,318 84,690 78,043
Payroll 167,147 149,336 144,052
Interest 587,618 605,383 681,348
Depreciation and amortization 453,676 435,223 438,789
Loss on impairment (Note 8) 341,162 186,156
Property management fee to
affiliate (Note 5) 83,732 80,732 78,887
Amortization of deferred costs to
the general partner (Note 3) 6,000
--------- ---------- ----------
Total operating expenses 2,300,611 1,821,327 2,059,715
NET LOSS BEFORE EXTRAORDINARY ITEM (672,001) (252,238) (526,279)
EXTRAORDINARY ITEM - loss on
extinguishment of debt (Note 4) (53,030)
---------- ---------- ----------
NET LOSS (Note 6) $(672,001) $(305,268) $(526,279)
========== ========== ==========
NET LOSS PER LIMITED PARTNERSHIP
UNIT:
Net loss before extraordinary $ (45.74) $ (17.17) $ (35.82)
item
Loss on extinguishment of debt (3.61)
---------- ---------- ----------
NET LOSS PER UNIT $ (45.74) $ (20.78) $ (35.82)
========== ========== ==========
LIMITED PARTNERSHIP UNITS
OUTSTANDING 14,544 14,544 14,544
========= ========= ========
See notes to financial statements.
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ----------------------------------------------------------------------------
General Limited
Partner Partners Total
BALANCE, JANUARY 1, 1993 $ (99,944) $2,120,795 $2,020,851
Net loss (5,263) (521,016) (526,279)
--------- ---------- ----------
BALANCE, DECEMBER 31, 1993 (105,207) 1,599,779 1,494,572
Net loss (3,053) (302,215) (305,268)
-------- --------- ---------
BALANCE, DECEMBER 31, 1994 (108,260) 1,297,564 1,189,304
Net loss (6,720) (665,281) (672,001)
--------- --------- ---------
BALANCE, DECEMBER 31, 1995 $(114,980) $ 632,283 $ 517,303
========= ========= =========
See notes to financial statements.
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ----------------------------------------------------------------------------
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (672,001) $ (305,268) $(526,279)
Adjustments to reconcile net loss
to cash provided by operations:
Loss on extinguishment of debt 53,030
Depreciation and amortization 453,676 435,223 444,789
Loss on impairment (Note 8) 341,162 186,156
Deferral of interest 126,351
Changes in assets and
liabilities:
Escrow deposits (70,900) (7,479) 5,459
Deferred costs (43,421) (41,501) (32,250)
Other assets 6,733 (16,205) (3,701)
Accrued interest payable (1,513) (16,717) 21,892
Security deposits 2,535 (3,067) 1,364
Accounts payable and accrued
expenses 48,971 (17,791) (18,224)
Due to/from affiliates 1,096 6,400 (10,257)
-------- -------- --------
738,339 391,893 721,579
-------- -------- --------
Net cash provided by
operating activities 66,338 86,625 195,300
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate (120,695) (66,924) (78,849)
Deposits to reserve for
replacements (76,839)
Disbursements from reserve for
replacements 17,525
-------- -------- -------
Net cash used in investing
activities (180,009) (66,924) (78,849)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgages and notes
payable (2,107,620) (2,744,057) (81,138)
Additions to mortgages and notes
payable 2,475,000 2,725,000
Loss on extinguishment of debt (53,030)
---------- ---------- --------
Net cash provided by (used
in) financing activities 367,380 (72,087) (81,138)
---------- ---------- --------
NET INCREASE (DECREASE) IN CASH 253,709 (52,386) 35,313
CASH, BEGINNING OF YEAR 480 52,866 17,553
---------- --------- --------
CASH, END OF YEAR $ 254,189 $ 480 $ 52,866
========== ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for
interest $ 589,131 $ 622,100 $659,456
========== ========= ========
See notes to financial statements.
AMRECORP REALTY FUND II
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
- -----------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting - Amrecorp Realty Fund II (the "Partnership"), a Texas
limited partnership, maintains its books and prepares its income tax returns
using the accrual income tax basis of accounting. Memo adjustments have
been made in preparing the accompanying financial statements in accordance
with generally accepted accounting principles (see Note 6). The financial
statements include only those assets, liabilities and results of operations
which relate to the business of the Partnership. The financial statements
do not include any assets, liabilities, revenues or expenses attributable to
the partners' individual activities.
Property and Equipment- Buildings, improvements, and furniture and fixtures
are depreciated using the straight-line method over the estimated useful
lives of the assets which are five years for improvements, furniture and
fixtures and 25 years for buildings. The Partnership has adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Accordingly, Partnership management routinely reviews its investments
for impairments whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable (Note 8).
Deferred Costs - Loan commitment fees are amortized by the straight-line
method over the term of the loan, which approximates the interest method.
Syndication Costs - Costs or fees incurred to raise capital for the
Partnership are netted against the respective partners' equity accounts.
Revenue Recognition - The Partnership has leased its investment in
residential property under operating leases for periods generally less than
one year. For its investments in commercial property, there are operating
leases ranging from 2 to 25 years.
Income Taxes - No provision has been made for income taxes since these taxes
are the responsibility of the individual partners. For tax purposes, the
basis of the Partnership assets is $7,359,345 at December 31, 1995.
Cash and Cash Equivalents - For purposes of the statement of cash flows, the
Partnership considers all highly liquid investments with a remaining
maturity of three months or less at the date of acquisition to be cash
equivalents.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of certain assets,
liabilities, revenues and expenses as of and for the reporting periods.
Actual results may differ from such estimates.
Reclassifications - Certain reclassifications have been made in the previous
years' financial statements to conform to the classifications used in the
current year.
2. PARTNERSHIP
General - The Partnership was formed on April 16, 1984, under the Texas
Uniform Limited Partnership Act, for the purpose of acquiring, maintaining,
developing, operating, and selling buildings and improvements. During the
three years ended December 31, 1995, the Partnership owned and operated two
apartment complexes located in Abilene, Texas, and Charlotte, North
Carolina, and a commercial shopping center located in Lancaster, Texas. The
Partnership will be terminated by December 31, 2014, although this date can
be extended if certain events occur.
The general partner is Mr. Robert J. Werra. An aggregate of 25,000 units at
$1,000 per unit are authorized of which 14,544 were issued and outstanding
during the three years ended December 31, 1995. Under the terms of the
offering, no additional units will be offered.
Allocation of Net Income (Loss) and Cash - Net income and net operating cash
flow, as defined in the partnership agreement, are allocated first to the
limited partners in an amount equal to a distribution preference (as
defined) on capital contributions from the first day of the month following
their capital contribution and thereafter generally 10% to the general
partner and 90% to the limited partners. Net loss is allocated 1% to the
general partner and 99% to the limited partners.
Net income from the sale of property is allocated first, to the extent there
are cumulative net losses, 1% to the general partner and 99% to the limited
partners; second, to the limited partners in an amount equal to their
distribution preference as determined on the date of the partners' entry
into the Partnership; and thereafter 15% to the general partner and 85% to
the limited partners.
Cash proceeds from the sale of property or refinancing are allocated first
to the limited partners to the extent of their capital contributions and
distribution preference as determined on the date of the partners' entry
into the Partnership and thereafter 15% to the general partner and 85% to
the limited partners.
3. DEFERRED COSTS
Deferred costs at December 31, 1995 and 1994, consist of the following:
1995 1994
Loan fees $117,172 $73,751
Less accumulated amortization 17,309 4,643
-------- -------
$ 99,863 $ 69,108
======== ========
During 1995 and 1994, the Partnership incurred $68,421 in fees related to
its successful effort to refinance its 9.625% mortgage (see Note 4).
Amortization expense of $6,000 was incurred in 1993 on deferred costs to the
general partner. During 1995 and 1994, amortization expense of $12,666 and
$4,643, respectively, was incurred on fees paid to an unrelated party.
4. MORTGAGES AND NOTES PAYABLE
Mortgages and notes payable at December 31, 1995 and 1994, consist of the
following:
1995 1994
9.625% mortgage note, payable in monthly principal
and interest installments of $22,597 until January
1995, at which time a lump-sum payment of
approximately $2,040,000 was due. In 1995, this
mortgage note was paid in full with the proceeds
from the 9.325% mortgage note described below $ - $2,046,287
11% mortgage note due to the general partner,
payable in monthly installments of interest only
due until September 30, 1998, at which time a
lump-sum payment of approximately $1,451,000
is due. Payments are to be made from the monthly
net cash flow of the property. This mortgage note
is secured by real estate assets with a net book
value of approximately $1,020,000 1,450,649 1,450,649
7.75% mortgage note, payable in monthly principal
and interest installments of $20,583 through
May 2001, at which time a lump-sum payment of
approximately $2,400,000 is due. This mortgage
note is secured by real estate assets with a
net book value of approximately $2,998,000 2,664,884 2,706,804
9.325% mortgage note, payable in monthly principal
and interest installments of $21,324 through
March 2005, at which time a lump-sum payment of
approximately $2,089,000 is due. This mortgage
note is secured by real estate assets with a
net book value of approximately $2,954,000 2,455,587
---------- ---------
$6,571,120 $6,203,740
========== ==========
In February 1995, the Partnership refinanced its 9.625% mortgage payable
with a 9.325% note payable. Direct costs incurred to obtain the mortgage
financing of $68,421 were capitalized and are being amortized over the life
of the mortgage.
In July 1994, the Partnership refinanced a mortgage payable. A prepayment
penalty of 2% of the outstanding mortgage balances relieved was incurred and
recorded as an extraordinary item during 1994.
The following sets forth the required principal payments due under the
Partnership's mortgages and notes payable for the next five years. Annual
principal payments as of December 31, 1995, are as follows:
1996 $ 66,398
1997 75,828
1998 1,533,091
1999 89,639
2000 97,471
Thereafter 4,708,693
5. RELATED PARTY TRANSACTIONS
The partnership agreement specifies certain fees to be paid to the general
partner or his designee. The following fees were paid to the general
partner or his designee during 1995, 1994 and 1993:
1995 1994 1993
Property management fees $83,732 80,732 78,887
Administrative services 10,176 10,176 10,176
Univesco, Inc., an affiliated company (Univesco), receives an ongoing
property management fee generally payable at 5% and 6% of the Partnership's
gross receipts for residential properties and the nonresidential property,
respectively.
The Partnership will pay a real estate commission to the general partner or
his affiliates in an amount not exceeding the lesser of 50% of the amounts
customarily charged by others rendering similar services or 3% of the gross
sales price of a property sold by the Partnership.
In November 1993, the general partner negotiated the purchase of the 11%
mortgage note with a balance at December 31, 1993, of $1,570,351 from a
nonrelated party. During 1993, interest and other costs related to the
mortgage note totaling $126,351 were capitalized into the mortgage balance.
The general partner modified the terms of the note whereby payments of
interest only are to be made until September 30, 1998, at which time a lump-
sum payment of approximately $1,450,000 is due. Payments are to be made
from the monthly net cash flow of the property collateralizing this debt.
In 1995 and 1994, interest payments on this note totaled $159,571 each year.
6. RECONCILIATION OF BOOK TO TAX LOSS (UNAUDITED)
If the accompanying financial statements had been prepared in accordance
with the accrual income tax basis of accounting rather than generally
accepted accounting principles, excess expenses over revenues for 1995 would
have been as follows:
Net loss per accompanying financial statements $(672,001)
Add back book basis depreciation expense using
straight-line method 441,010
Add back loss on impairment 341,162
Deduct income tax basis depreciation expense using
ACRS method (526,538)
--------
Excess expenses over revenues, accrual
income tax basis $(416,367)
=========
7. LEASES
As of December 31, 1995, future minimum lease payments to be received on
noncancelable operating leases for the shopping center in excess of one year
are as follows:
1996 $186,428
1997 174,128
1998 143,572
1999 118,260
2000 72,989
Thereafter 116,624
The Partnership intends to enter into new leases as the leases discussed
above expire.
8. IMPAIRMENT OF FIXED ASSETS
Due to the poor economic performance brought about by increased market
pressures, the Partnership's investment in its shopping center located in
Lancaster, Texas, has experienced decreased cash flows. Accordingly, during
1995, the Partnership recorded an impairment loss of approximately $341,000
to lower the carrying value of the assets to their estimated fair value,
determined based on estimated cash flows and sales proceeds. The impairment
has been reflected in the balance sheet as a reduction in the basis of the
fixed assets.
The Partnership had previously recorded an impairment of $186,156 to lower
the carrying value of the investment in the Lancaster shopping center during
1993 to its estimated net realizable value.
9. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires disclosure of the estimated fair
values of certain financial instruments. The estimated fair value amounts
have been determined using available market information or other appropriate
valuation methodologies that require considerable judgment in interpreting
market data and developing estimates. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Partnership
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
The fair value of financial instruments that are short-term or reprice
frequently and have a history of negligible credit losses is considered to
approximate their carrying value. These include cash and cash equivalents,
short-term receivables, accounts payable and other liabilities. Real estate
and other assets consist of nonfinancial instruments, which are excluded
from the scope of SFAS No. 107.
Management has reviewed the carrying values of its mortgages and notes
payable in connection with interest rates currently available to the
Partnership for borrowings with similar characteristics and maturities and
has determined that their carrying value approximates their estimated fair
values as of December 31, 1995.
As of December 31, 1995, the fair value information presented herein is
based on pertinent information available to management. Although management
is not aware of any factors that would significantly affect the estimated
fair value amounts, such amounts have not been comprehensively revalued for
purposes of these financial statements since that date, and therefore,
current estimates of fair value may differ significantly from the amounts
presented herein.
******
AMRECORP REALTY FUND IID
(A Texas Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
- ----------------------------------------------------------------------------
Initial Cost
to Partnership
---------------------------------
Buildings,
Improvements, Total Cost
Encum- and Furniture Subsequent to
brances Land and Fixtures Acquisition
Description
A 53,860-square-foot
neighborhood shopping
center of precast
aggregate construction
with prefinished mansard
exterior and a metal
deck roof located in
Lancaster, Texas (b) $ 601,639 $ 2,014,182 $ 16,188
A 128-unit two-story
appartment community of
wooden frame construction
and a combination brick
veneer and wood siding
exterior located in
Abilene, Texas (b) 580,045 4,341,569 193,709
A 96-unit one-and two-story
apartment community of
wood frame and stucco
construction located
adjacent to the Raintree
Country Club in Charlotte,
North Carlina (b) 676,364 3,857,693 265,462
---------- ----------- --------
$1,858,048 $10,213,444 $475,359
========== =========== ========
(Continuation of above table below)
Goss Amounts at Which
Carried at Close of Period
- ---------------------------------
Buildings, Life
Improvements, on Which
and Furniture Accumulated Date of Date Depreciation
Land and Fixtures Total Depreciation Construction Acquired Is Computed
(c)(d) (c)
Complete at
$ 601,639 $1,689,208 $2,290,847 $1,270,847 date acquired 7/31/84 (a)
580,045 4,535,278 5,115,323 2,161,626 Complete at
date acquired 11/1/84 (a)
676,364 4,123,155 4,799,519 1,801,719 Complete at
date acquired 8/12/85 (a)
-------- --------- --------- ----------
$1,858,048 $10,347,641 $12,205,689 $5,234,192
========== =========== =========== ==========
See notes to Schedule III.
AMRECORP REALTY FUND II
(A TEXAS LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
DECEMBER 31, 1995
- ----------------------------------------------------------------------------
NOTES TO SCHEDULE III:
(a)See Note 1 to financial statements outlining depreciation
methods and lives.
(b)See description of mortgages and notes payable in Note 4 to the
financial statements.
(c)Reconciliation of investments in real estate and accumulated
depreciation for the years ended December 31, 1995, 1994 and
1993.
Investments Accumulated
in Real Estate Depreciation
BALANCE, JANUARY 1, 1993 $12,280,383 $3,747,157
Additions during the year:
Additions 78,849
Depreciation expense and impairment 615,445
----------- ----------
BALANCE, DECEMBER 31, 1993 12,359,232 4,362,602
Additions during the year:
Additions 66,924
Depreciation expense 430,580
----------- ----------
BALANCE, DECEMBER 31, 1994 12,426,156 4,793,182
Additions during the year:
Additions 120,695
Depreciation expense 441,010
Loss on impairment (341,162)
----------- ----------
BALANCE, DECEMBER 31, 1995 $12,205,689 $5,234,192
=========== ==========
(d)Aggregate cost for federal income tax purposes is $12,564,444.
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
The Registrant has not been involved in any disagreements on
accounting and financial disclosure.
PART III
Item 10. Directors and Executive Officer of the Partnership
The Partnership itself has no officers or directors. Robert J.
Werra is the General Partner of the Partnership.
Robert J. Werra, 54, the General Partner. Mr. Werra joined Loewi &
Co., Incorporated ("Loewi") in 1967 as a Registered Representative.
In 1971, he formed the Loewi real estate department, and was
responsible for its first sales of privately placed real estate
programs. Loewi Realty was incorporated in 1974, as a wholly owned
subsidiary of Loewi & Co., with Mr. Werra as President. In 198O,
Mr. Werra, along with three other individuals, formed Amrecorp Inc.
to purchase the stock of Loewi Real Estate Inc., and Loewi Realty.
In 1991 Univesco, Inc. was formed to serve as the management agent
for the Partnership and other partnerships which Mr. Werra serves
as General Partner. Limited Partners have no right to participate
in management of the Partnership.
Item 11. Management Remuneration and Transactions
As stated above, the Partnership has no officers or directors.
Pursuant to the terms of the Limited Partnership Agreement, the
General Partner receives 1% of Partnership income and loss and up
to 15% of Net Proceeds received from sale or refinancing of
Partnership properties (after return of Limited Partner capital
contributions and payment of a 6% Current Distribution Preference
thereon). The individual general partner receives one-half of the
General Partners' income and losses, provided that income not
exceed prior years' losses.
Univesco, Inc., an affiliate of the General Partner, is entitled to
receive a management fee with respect to properties actually
managed of 5% of the actual gross receipts from a property or an
amount competitive in price or terms for comparable services
available from non-affiliated persons. The Partnership is also
permitted to engage in various transactions involving affiliates of
the General Partner as described under the caption "Compensation
and Fees" at pages 6-8, "Management" at pages 18-2O and "Allocation
of Net Income and Losses and Cash Distributions" at pages 44-46 of
the Prospectus as supplemented, incorporated in the Form S-11
Registration Statement which was filed with the Securities and
Exchange Commission and made effective on May 2, 1983.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a)No one owns of record, and the General Partner knows of no one
who owns beneficially, more than five percent of the Interests
in the Partnership, the only class of securities outstanding.
(b)By virtue of its organization as a limited partnership, the
Partnership has no officers or directors. The General Partner
is responsible for management of the Partnership, subject to
certain limited democracy
rights of the Limited Partners. The following persons performing
functions similar to those of officers and directors of the
partnership own units of limited partnership interest in the
partnership.
Title of Name and Address Amount and Nature Percent of
Class of Beneficial Owner of Beneficial Ownership Class
--------------------------------------------------------------------------
Limited Robert J. Werra $1O,OOO .O7O%
Partnership 16415 Addison Road #2OO
Interest Dallas, Texas 75248
(c)There is no arrangement, known to the Partnership, which may, at
a subsequent date, result in a change in control of the Partnership.
Item 13. Certain Relations and Related Transactions
As stated in Item 11., the Partnership has no officers or
directors. Pursuant to the terms of the Limited Partnership
Agreement, the general partner receives 1% of partnership income
and loss and up to 15% of Net Proceeds received from the sale or
refinancing of Partnership properties (after return of Limited
Partner capital contributions and payment of a Current Distribution
Preference thereon).
Univesco, Inc. (an affiliate of the general partner) is entitled to
receive a management fee with respect to properties actually
managed by the corporate general partner. For nonresidential
properties (including all leasing and releasing fees and fees for
leasing-related services) the management fee is the lesser of 6% of
gross receipts of the Partnership from such properties or an amount
which is competitive in price and terms with other non-affiliated
persons rendering comparable services which would reasonably be
made available to the Partnership. For residential Properties
(including all leasing and releasing fees and fees for
leasing-related services), the lesser of 5% of gross receipts of
the Partnership from such properties or an amount which is
competitive in price and terms with other non-affiliated persons
rendering comparable services which could reasonably be made
available to the Partnership. The Partnership is also permitted to
engage in various transactions involving affiliates of the
corporate general partner a described under the caption
"Compensation and Fees" at pages 6-8, "Management" at pages 18-2O
and "Allocation of Net Income and Losses and Cash Distributions" at
pages 44-46 of the definitive Prospectus, incorporated in the Form
S-11 Registration Statement which was filed with the Securities and
Exchange Commission and made effective on July 6, 1984 and
incorporated herein by reference.
See Note 5 to the Financial Statements for detailed information
concerning fees paid to Univesco, Inc. (an affiliate of the General
Partner).
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(A)1. See accompanying Financial Statements Index
2. Additional financial information required to be furnished:
Schedule III - Real Estate and Accumulated Depreciation
3. Exhibits
None.
(B)Reports on Form 8-K for the quarter ended December 31, 1995.
None.
(C)Exhibits
3. Certificate of Limited Partnership, incorporated by
reference to Registration Statement No. 2-9O654 effective
July 6, 1984.
4. Limited Partnership Agreement, incorporated by reference
to Registration Statement No. 2-9O654 effective July 6, 1984.
9. Not Applicable.
1O.None.
11.Not Applicable.
12.Not Applicable.
13.Not Applicable.
18.Not Applicable.
19.Not Applicable.
22.Not Applicable.
23.Not Applicable.
24.Not Applicable.
25.Power of Attorney, incorporated by reference to
Registration Statement No. 2-9O654 effective July 5,
1984.
28.None.
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMRECORP REALTY FUND II
ROBERT J. WERRA, GENERAL PARTNER
April 10, 1996 /s/ Robert J. Werra
-------------------