<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996 Commission file number 2-47115
CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
(Exact name of registrant as specified in its charter)
ILLINOIS 36-6503795
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
6210 Campbell Road Suite 140
Dallas, Texas 75248
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 380-8000.
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: Y No:
--------- ---------
REGISTRANT IS A LIMITED PARTNERSHIP
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TABLE OF CONTENTS
Item 1. Financial Statements
The following Unaudited financial statements are filed herewith:
Consolidated Balance Sheet as of June 30, 1996 and
December 31, 1995.................................................3
Consolidated Statements of Operations for the Six
Months Ended June 30, 1996 and 1995...............................4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995............................................5
Item 2. Results of Operations and Management's Discussion and Analysis of
Financial Condition...............................................6
Liquidity and Capital Resources...................................8
Other Information.................................................9
Signatures........................................................10
The statements, insofar as they relate to the period subsequent to
December 31, 1995, are Unaudited.
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
Condensed Consolidated Balance Sheets
June 30 December 31
1996 1995
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $ 137,971 $ 137,971
Buildings and improvements 841,116 841,116
------------ ------------
979,087 979,089
Less: Accumulated depreciation (380,243) (356,243)
------------ ------------
Real Estate, net 598,844 622,844
Cash including cash investments 11,673 37,448
Escrow deposits 37,628 21,440
Capital replacement reserve 2,772 3,357
Liquidity reserve 23,570 23,570
Other assets 85,934 83,713
------------ ------------
TOTAL ASSETS $ 760,421 $ 792,372
============ ============
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage and notes payable $ 1,328,158 $ 1,338,356
Payable to Affiliates 229,942 219,647
Distributions Payable 37,190 37,190
Real estate taxes payable 9,000 0
Security deposits 13,242 13,822
Interest payable 0 9,090
Accounts payable & accrued expenses 38,276 23,235
------------ ------------
Total liabilities 1,655,808 1,641,340
------------ ------------
Partners Capital (Deficit)
Limited Partners (651,343) (607,245)
General Partner (244,044) (241,723)
------------ ------------
Total Partners Capital (Deficit) (895,387) (848,968)
------------ ------------
Total Liability And Partners Deficit $ 760,421 $ 792,372
============ ============
See notes to Condensed Consolidated Financial Statements
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CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ---------------
1996 1995 1996 1995
---- ---- ---- ----
REVENUES
Rental income $ 106,786 $ 101,868 $ 220,606 $ 197,145
Other property 5,915 2,472 9,110 4,283
--------- --------- --------- --------
Total revenues 112,701 104,340 229,716 201,428
EXPENSES
Salaries & wages 21,483 28,384 40,669 48,440
Maintenance & repairs 29,095 40,770 52,520 78,775
Utilities 14,017 10,677 29,139 21,857
Real estate taxes 4,500 4,380 9,000 9,480
General administrative 16,240 6,799 29,946 19,643
Contract services 7,838 5,715 13,490 8,262
Insurance 3,737 2,664 6,530 5,547
Interest 27,098 27,499 54,378 55,094
Depreciation and
amortization 14,512 16,711 29,024 33,422
Property management fees 5,595 5,198 11,439 10,047
--------- --------- --------- --------
Total expenses 144,115 148,797 276,135 290,567
--------- --------- --------- --------
NET INCOME (LOSS) $(31,414) $(44,457) $(46,419) $(89,139)
========= ========== ========== =========
NET INCOME PER SHARE $ (6.28) $ (8.88) $ (9.27) $ (17.81)
========= ========== ========== =========
See Notes to Condensed Consolidated Financial Statements
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CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
Condensed Consolidated Statement of Cash Flows
Six Months Ended
June 30
-------------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($ 46,419) ($ 89,139)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 24,000 25,000
Net Effect of changes in operating accounts
Escrow deposits (16,188) (20,986)
Capital replacement reserve 585 20,047
Accrued real estate taxes 9,000 9,839
Security deposits (580) 60
Accounts payable 15,041 113,896
Other assets (2,221) 6,921
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Net cash provided by (used for) operating activities (16,782) 65,638
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CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of Interest Payable (9,090) (359)
Repayment of mortgage notes payable (10,198) (9,403)
Proceeds from amounts due affiliates 0 (65,922)
Repayment of amounts due affiliates 10,295 0
---------- ----------
Net cash used for investing activities (8,993) (75,684)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (25,775) (10,046)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 37,448 10,217
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,673 $ 171
========== ==========
See Notes to Condensed Consolidated Financial Statements
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Basis of Presentation:
- ----------------------
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and regula-
tions, although the Partnership believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Partnership's latest annual
report on Form 10-K.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
Results of Operations
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
- ---------------------------------------------------
Revenue from property operations increased $ 8,361, or 8.01%, for the second
quarter of 1996, as compared to the 1995 second quarter. Rental income
increased by $ 4,918 or 4.83% due to increases in occupancy and market rents.
Other income increased by $ 3,443 or 139.28% due primarily to increase in
application fees and damage chargers. The following table illustrates the
components:
Increase
(Decrease)
----------------
Rental income 4,918
Other property 3,443
----------------
Net Increase (Decrease) 8,361
================
Property operating expenses decreased $ 4,682 or 3.15%, for the second quarter
of 1996, as compared to the same period in 1995, primarily due to increases
in salaries and wages, maintenance and repairs.
* Salaries and Wages decreased by $ 6,901 or 24.31% due to a cut back on
contract help.
* Maintenance and repairs decreased by $ 11,675 or 28.64% due to
substantial repairs and upgrades to apartment units completed in the
second quarter of 1995.
* Utilities increased by $ 3,340 or 31.28% due to rate and occupancy
increases.
* General administrative increased $ 9,441 or 138.86% primarily due to
legal costs associated with evictions.
* Contract services increased $ 2,123 or 37.15% due to increased ground
and landscaping maintenance costs.
* Insurance increased by $ 1,073 or 40.28% due to increase in insurance
premium rates.
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The following table illustrates the aforementioned components by category:
Increase
(Decrease)
----------------
Salaries & wages (6,901)
Maintenance & repairs (11,675)
Utilities 3,340
Real estate taxes 120
General administrative 9,441
Contract services 2,123
Insurance 1,073
Interest (401)
Depreciation and amortization (2,199)
Property management fees (a) 397
----------------
Net Increase (Decrease) $ (4,682)
================
SIX MONTHS ENDED JUNE 1996 COMPARED TO SIX MONTHS ENDED JUNE 1995
Revenue from property operations decreased $ 28,288, or 14.04%, for the first
six months of 1996, as compared to the first six months of 1995. The follow-
ing tables illustrates the components:
Year to date
Comparison
Increase
(Decrease)
----------------
Rental income 23,461
Other property 4,827
----------------
Net Increase (Decrease) 28,288
================
Property operating expenses decreased $ 14,432 or 4.97%, for the first six
months of 1996, as compared to the same period in 1995, primarily due to
decreases in interior painting throughout the property, as well as certain
maintenance personnel costs. The following table illustrates the components
by category:
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Increase
(Decrease)
----------------
Salaries & wages (7,771)
Maintenance & repairs (49,636)
Utilities (12,857)
Real estate taxes 20,466
General administrative (6,153)
Contract services (1,732)
Insurance 48,831
Interest (26,070)
Depreciation and amortization (21,983)
Property management fees (a) 266,088
----------------
Net Increase (Decrease) 209,183
================
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The partnership reacquired the Brookhollow Apartments through a fore-
closure sale on December 16, 1986. The property was recorded at its net
realizable value, $746,663, which determined to be the mortgage receivable
balance of $2,152,500 plus costs of repossession of $14,167, less deferred
gain on sale of $1,420,004.
In February, 1991, Amrecorp Realty Inc., resigned as the Managing
General Partner of the Partnership. As was communicated to all limited part-
ners, this step was taken in order to minimize any effect that Amrecorp's
financial difficulties might have on the partnership. Management of the
Partnership's assets is performed by Univesco, Inc., a Texas corporation,
Robert J. Werra, President.
The operations of the Brookhollow Apartments stabilized during 1993.
The property had an operating profit for 1993. An attempt was made to sell the
property prior to March, 1993. The proposed sales price was $1,695,000. The
purchaser was not able to close the purchase and forfeited the $50,000 of its
earnest money deposit. It's the General Partners intention to continue
operating the Brookhollow Apartments while considering offers to purchase the
property.
On November 12, 1993 the Partnership refinanced the property's secured
debt with a 8.15% ten year mortgage from Lexington Mortgage Company. The
loan proceeds were provided through a Real Estate Mortgage Investment Contract
sponsored by Donaldson, Lufkin & Jenrette. The $1,375,000 mortgage loan pro-
vides for monthly payments of principal and interest of $10,749 based on an
amortization period of 300 months with a final payment of approximately
$1,118.000 due in December, 2003. The loan proceeds were used to pay off the
old loan balance of $740,283, which includes a discount of $40,775 from the
old lender negotiated for early payment. The Partnership agreement was
amended by vote of the limited partners to include the appointment of a new
corporate General Partner, CRREP, Inc., a Texas corporation wholly owned by
Robert J. Werra. In conjunction with the 1993 refinancing, the Partnership
was required to establish a liquidity reserve and a capital replacement
reserve which had balances of $48,500 and $22,400, respectively, as of
December 31, 1993. Each of these reserves is refundable to the Partnership.
While it is the General Partners primary intention to operate and
manage the existing real estate investment, the General Partner also conti-
nually 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 Brookhollow Apartments.
As of June 30, 1996, the Partnership had $2,324 in cash and cash
equivalents as compared to $37,448 as of December 31, 1995. The net decrease
in cash of $35,124 is principally due to operating cash flow deficits,
increases in the escrow balance, and reduction of mortgage debt and amounts
due affiliates.
The property is encumbered by a non-recourse mortgage as of June 30,
1996. The note which bears interest at 8.15% has required principal payments
of $20,819, $22,581, $24,491, $26,564 and $28,811 for each of the years ending
December 31, 1995 through 2000, respectively.
9
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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
Property.
The Partnership has incurred negative cash flows from operations and
has a capital deficiency at June 30, 1996. The limited and general partners
have no further obligations to infuse additional capital into the Partnership.
Accordingly, the Partnership's ability to fund operating expenses and debt
service requirements, which is necessary to permit the realization of assets
and satisfaction of liabilities in the ordinary course of business, is un-
certain. Management intends to operate the Partnership in its present form;
however, there can be no assurance that the Partnership will be able to
generate sufficient cash flows to meet its obligations.
10
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PART II
Other Information
Item 1. Legal Proceedings
The Registrant is not engaged in any material legal
proceedings other than ordinary and routine litigation
incidental to the business.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K as of June 30, 1996
11
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SIGNATURES
Pursuant to the requirements 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.
CAPITAL RESOURCES REAL ESTATE
PARTNERSHIP II an Illinois limited
partnership
By: /s/ Robert J. Werra
-------------------
Robert J. Werra,
General Partner
Date: July 9, 1996
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12
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH
THE JUNE 30, 1996 BALANCE SHEET AND STATEMENT OF INCOME AND EXPENSES
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000017294
<NAME> CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,673
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 979,087
<DEPRECIATION> 380,243
<TOTAL-ASSETS> 760,421
<CURRENT-LIABILITIES> 0
<BONDS> 1,328,158
0
0
<COMMON> 0
<OTHER-SE> (895,387)
<TOTAL-LIABILITY-AND-EQUITY> 760,421
<SALES> 0
<TOTAL-REVENUES> 220,606
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 221,757
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,378
<INCOME-PRETAX> 0
<INCOME-TAX> 0
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<CHANGES> 0
<NET-INCOME> (46,419)
<EPS-PRIMARY> (9.27)
<EPS-DILUTED> 0
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