SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the Fiscal year ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from __________ to ___________
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 (I.R.S. Employer
Incorporation or Organization) Identification Number)
6210 Campbell Road, Suite 140, Dallas, Texas 75248
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including area code (972) 38O-8OOO
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained, to the best of Registrants knowledge
in definitive proxy or information to statements incorporated by reference
in Part III of the Form 10-k or any Amendment to this 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 3, 1973.
<PAGE>
PART I
Item I. Business
- ----------------
(a) General Development of Business: Capital Resources Real Estate
Partnership II (the "Partnership" or the "Registrant"), a limited
partnership formed under the laws of Illinois in 1972, owns and
operates the following apartment community:
Brookhollow Apartments, Tulsa, Oklahoma
(b) Financial Information about Industry Segments: Registrant's business is
the ownership and operation of certain real estate assets. See (a)
above.
(c) Narrative Description of Business:
(1) Registrant is the owner of the equity interest in
one multiple unit apartment community, name and location of
which is set forth above. Its business is the rental and
operation of the apartment community.
(i) Renting residential apartments in the community is
the principal product/service of Registrant. On site property
management promotes the renting of the Brookhollow Apartments
(the "Property") to residents of the Tulsa, Oklahoma area.
(ii) Not applicable. No new product or service is
in development.
(iii) Not applicable. No raw materials are essential
to the Registrant's business.
(iv) The Registrant does not hold any patents, trademarks,
licenses, franchises or concessions.
(v) Registrant's business is not seasonal.
(vi) Not applicable. Inventory, right to return
merchandise and extended payment terms are not part of
Registrant's business.
(vii) Not applicable. The Registrant does not depend
upon any single tenant or a very few tenants.
(viii) Not applicable. Due to the nature of Registrant's
business, there is no backlog of orders.
(ix) The Registrant is not subject to renegotiating of
profits or termination of contracts at the election of the
Government.
(x) Brookhollow Apartments competes with many apartment
complexes in the Tulsa, Oklahoma area. As of December 31, 1996,
Brookhollow rentals were comparable to rentals for competitive
projects in the Tulsa area.
<PAGE>
Item 1. Business, Continued
- ---------------------------
(xi) Registrant does not anticipate that compliance with
federal, state or local provisions which have been enacted or
adopted regulating the discharge of materials into the
environment or otherwise relating to the protection of the
environment will have any material adverse effect upon its
capital expenditures, cash flows, earnings or competitive
position.
(xii) Registrant is a limited partnership. The
business of the limited partnership is managed by Univesco,
Inc. a Texas corporation ("Univesco"). The General Partner
is CRREP, Inc. Registrant has no employees. Univesco, Inc., a
Texas corporation wholly owned by Robert J. Werra, manages
the Registrant's property.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales: Registrant has no foreign operations or export sales.
Competition and Other Factors
The majority of the Property's 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.
Rents have generally been increasing in recent years due to the generally
positive relationship between apartment unit supply and demand in the
Partnership's markets. However, the properties are subject to substantial
competition from similar and often newer properties in the vicinity in which
they are located. In addition, operating expenses and capitalized
expenditures have decreased primarily due to non-recurring 1995 mandated
repairs. (See Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations).
<PAGE>
Item 2. Properties
- -------------------
At December 31, 1996 the Partnership owned Brookhollow Apartments, a 112
unit apartment community located on 7.49 acres of land in Tulsa Oklahoma.
The Partnership purchased a fee simple interest in Brookhollow Apartments on
May 1, 1973.
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 3 to
Consolidated Financial Statements and Schedule Index contained in Item 8.
Occupancy Rates
Per Cent
1992 1993 1994 1995 1996
Brookhollow 86.90% 93.20% 83.60% 89.80% 86.90%
Item 3. Legal Proceedings
- -------------------------
The Registrant is not engaged in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Unit Holders
- -------------------------------------------------------
No matters were submitted to a vote of the unit holders of the Partnership
during the fourth quarter of 1996.
<PAGE>
PART II
Item 5. Market for the Registrant's Units and Related Unit Matters
- ------------------------------------------------------------------
The Partnership's outstanding securities are in the form of Limited
Partnership Interests ("Interests"). As of December 31, 1996 there were 468
holders of 5005 Interests. A public market for trading Interests has not
developed and none is expected to develop.
The General Partner continues to review the Partnership's ability to make
distributions on a quarter by quarter basis. The Partnership has not made
distributions to the limited partners in the past two years and no such
distributions are anticipated in the immediate future due to required debt
service payments of the Partnership.
An analysis of taxable income or (loss) allocated, and cash distributed to
Investors per $1,000 unit is as follows:
YEARS INCOME GAIN LOSS CASH DISTRIBUTED
1973 $0 $0 $528 $0
1974 0 $32 $156 0
1975 0 0 $276 0
1976 0 0 $184 0
1977 0 0 $143 0
1978 0 $720 $120 $314
1979 0 0 $46 0
1980 0 0 $5 0
1981 $33 $61 0 0
1982 0 0 $1 $100
1983 0 0 $11 0
1984 0 $133 $28 $650
1985 $6 $134 $6 $200
1986 $39 $723 $39 $500
1987 0 0 $6 0
1988 $8 $1,100 $8 $500
1989 0 0 $16 0
1990 0 0 $4 0
1991 0 0 $1 0
1992 0 0 $1 0
1993 $20 0 0 $112
1994 $20 0 $27 0
1995 0 0 $16 0
1996 $2 0 0 0
<PAGE>
Item 6. Selected Financial Data
- -------------------------------
The following table sets forth selected financial data regarding the
Partnership's results of operations and financial positions 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 (in thousands except unit amounts).
Year Ended December 31,
(in thousands except unit amounts)
1996 1995 1994 1993 1992
Limited Partner Units Outstanding 5,005 5,005 5,005 5,005 5,005
Statements of Operation
Total Revenues $445 $414 $413 $465 $480
Net Income (Loss) (109) (160) (128) 70 116
Limited Partner Income (Loss)
per Unit (21) (30) (24) 13 22
Cash Distributions to
Limited Partner per Unit 0 0 0 112 18
Balance Sheet
Real Estate, net 592 623 617 652 681
Total Assets 721 792 830 891 806
Mortgages Payable 1,318 1,338 1,357 1,375 740
Partners' Equity (Deficit) (958) (849) (689) (562) (6)
<PAGE>
Item 7, Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
- ---------------------
This discussion should be read in conjunction with Item 6- Selected
Financial Data and Item 8 - Financial Statements and Supplemental
Information .
Results of Operations: 1996 VERSUS 1995 -
Revenue from Property Operations increased $17,850 or 4.4% as compared to
1995, principally due to an increase in rents in the apartment rental
markets in Tulsa, Oklahoma. Other income for 1996 increased $12,982 or a
108.51% primarily due to an increase in interest income, late and other
miscellaneous fees. The following table illustrates the increases or
(decreases):
Increase
(Decrease)
---------
Rental income 17,850
Other 12,982
---------
Net Increase (Decrease) 30,832
=========
Property operating expenses for 1996 decreased $20,055 or 3.5%. Repair and
maintenance expenses decreased $35,859 or 23.46% primarily due to non-
recurring 1995 mandated repairs and reserves imposed by covenants in
refinancing loan documents and in bringing additional units on line.
Interest Expense decreased due to normal amortization of the loan balance.
Utilities increased $9,628 or 19.33% due to increased electrical rates.
Depreciation and amortization expense increased $5,978 over 1996. The
increase is partially due to $17,892 in improvements, principally appliances
and other improvements to apartment units. Management fees are paid to an
affiliated entity and represent approximately 4% of gross revenues from
operations (see Note 4 to Consolidated Financial Statements contained in
Item 8). The following table illustrates the increases or (decreases):
Increase
(Decrease)
----------
Repairs and Maintenance (35,859)
Payroll (4,196)
General & Administration 2,905
General & Administration to Affiliate 0
Utilities 9,628
Real estate taxes 869
Interest (924)
Depreciation and amortization 5,978
Property management fees 1,544
---------
Net Increase (Decrease) $(20,055)
==========
<PAGE>
Results of Operations: 1995 VERSUS 1994 -
Revenue from Property Operations increased $1,431 or 0.3% as compared to
1994, principally due to an increase in rents in the apartment rental
markets in Tulsa, Oklahoma. Other income for 1995 decreased $4,217 or a
26.1% decrease primarily due to reduction of interest income due to
reduction in the Capital Replacement Reserve funds which were utilized to
make capital improvements during 1995.
Increase
(Decrease)
----------
Rental income 5,648
Other (4,217)
----------
Net Increase (Decrease) $1,431
==========
Property operating expenses for 1995 increased $33,282 or 6.2%. Payroll
increases were primarily the result of cost of living increases and
additional use of contract labor. Repair and maintenance expenses increased
primarily due to mandated repairs and reserves imposed by covenants in
refinancing loan documents and in bringing additional units on line.
Interest Expense decreased due to normal amortization of the loan balance.
Depreciation and amortization expense increased $2,175 over 1994. The
increase is partially due to $47,898 in improvements, principally appliances
and other improvements to apartment units. Management fees are paid to an
affiliated entity and represent approximately 5% of gross revenues from
operations (see Note 4 to Consolidated Financial Statements contained in
Item 8). The following table illustrates the increases or (decreases):
Increase
(Decrease)
----------
Repairs and Maintenance 17,457
Payroll 14,091
General & Administration 459
General & Administration to Affiliate (8)
Utilities 2,182
Real estate taxes (708)
Interest (2,439)
Depreciation and amortization 2,175
Property management fees 73
----------
Net Increase (Decrease) $33,282
==========
<PAGE>
Liquidity and Capital Resources
- --------------------------------
Brookhollow Apartments is currently under contract to be sold for $1,725,000
plus assumption of the existing financing. The sale is expected to close on
or before April 30, 1997.
As of December 31, 1996, the Partnership had $0 in cash and cash equivalents
as compared to $37,448 as of December 31, 1995. The net decrease in cash of
$37,448 is principally due to net loss from operating activities of $48,893
partially offset by funds provided by affiliates.
The property is encumbered by a non-recourse mortgage as of December 31,
1996. The note which bears interest at 8.15% has required principal
payments of $22,581, $24,491, $26,564 and $28,811, $31,249 for each of the
years ending December 31, 1997 through 2001, respectively. See Note 3 to
Consolidated Financial Statements contained in Item 8 for information
regarding loan maturities and required principal payments.
If the foregoing sale does not close as expected, then for the foreseeable
future, the Partnership anticipates that mortgage principal payments
(excluding balloon mortgage payments), improve-ments 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 preceeds from the sale, financing or refinancing of the
Property.
The Partnership has incurred negative cash flows from operations and has a
capital deficiency at December 31, 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 uncertain. 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.
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.
<PAGE>
CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
(AN ILLINOIS LIMITED PARTNERSHIP)
ITEM 8 - FINANCIAL STATEMENTS AND SCHEDULE INDEX
- ---------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 11-12
BALANCE SHEETS 13
STATEMENTS OF OPERATIONS 14
STATEMENTS OF PARTNERS' DEFICIT 15
STATEMENTS OF CASH FLOWS 16
NOTES TO FINANCIAL STATEMENTS 17-20
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 21-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partners of
Capital Resources Real Estate Partnership II
Dallas, Texas
We have audited the accompanying balance sheets of Capital Resources Real
Estate Partnership II (an Illinois limited partnership) (the "Partnership")
as of December 31, 1996 and 1995, and the related statements of operations,
partners' deficit and cash flows for each of the three years in the period
ended December 31, 1996. Our audits also included the financial statement
schedule listed in the index at Item 14(a)(2). These financial statements
and financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Capital Resources Real Estate
Partnership II as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. As discussed in Note 7 to the
financial statements, conditions exist which raise substantial doubt about
the Partnership's ability to continue as a going concern unless it is able
to generate sufficient cash flows to meet its obligations and sustain its
operations. Management's plans in regard to these matters are also
described in Note 7. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
DELOITTE & TOUCHE llp
Dallas, Texas
February 22, 1996
<PAGE>
CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
(An Illinois Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- ----------------------------------------------------------------------------
ASSETS 1996 1995
INVESTMENT IN REAL ESTATE, AT COST (Note 3):
Land $ 137,971 $ 137,971
Buildings and improvements 859,008 841,116
----------- ----------
996,979 979,087
Less accumulated depreciation (404,574) (356,243)
----------- ----------
592,405 622,844
CASH AND CASH EQUIVALENTS - 37,448
ESCROW DEPOSITS 27,603 21,440
CAPITAL REPLACEMENT RESERVE (Note 3) 2,210 3,357
LIQUIDITY RESERVE (Note 3) 24,689 23,570
OTHER ASSETS, NET OF ACCUMULATED AMORTIZATION
OF $31,544 AND $21,497 IN 1996 AND 1995, RESPECTIVELY 74,556 83,713
---------- ----------
TOTAL $ 721,463 $ 792,372
========== ==========
LIABILITIES AND PARTNERS' DEFICIT
MORTGAGE PAYABLE (Note 3) $1,317,678 $1,338,356
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 33,728 23,235
DISTRIBUTIONS PAYABLE 37,190 37,190
SECURITY DEPOSITS 11,940 13,822
ACCRUED INTEREST PAYABLE 8,949 9,090
AMOUNTS DUE TO AFFILIATES (Note 4) 269,634 219,647
---------- ----------
1,679,119 1,641,340
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' DEFICIT (957,656) (848,968)
---------- ----------
TOTAL $ 721,463 $ 792,372
========== ==========
See notes to financial statements.
<PAGE>
CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
(An Illinois Limited Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------
1996 1995 1994
INCOME:
Rentals $ 419,977 $ 402,127 $ 396,479
Other 24,946 11,964 16,181
--------- --------- ---------
Total income 444,923 414,091 412,660
OPERATING EXPENSES:
Repairs and maintenance 117,000 152,859 135,402
Payroll 95,437 99,633 85,542
General and administrative 69,455 66,550 66,091
Administrative service fee to general partner 5,088 5,088 5,096
Utilities 59,432 49,804 47,622
Real estate taxes 18,326 17,457 18,165
Interest 108,254 109,178 111,617
Depreciation and amortization 58,378 52,400 50,225
Management fees (Note 4) 22,241 20,697 20,624
-------- -------- --------
Total operating expenses 553,611 573,666 540,384
-------- -------- --------
NET LOSS (Note 5) $(108,688) $(159,575) $(127,724)
========== ========= =========
NET LOSS PER LIMITED PARTNERSHIP UNIT $(20.63) $(30.29) $(24.24)
======= ======= =======
LIMITED PARTNERSHIP UNITS OUTSTANDING 5,005 5,005 5,005
===== ===== =====
See notes to financial statements.
<PAGE>
CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' DEFICIT
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------
General Limited
Partner Partners Total
BALANCE, JANUARY 1, 1994 $ (227,358) $ (334,311) $ (561,669)
Net loss (6,386) (121,338) (127,724)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1994 (233,744) (455,649) (689,393)
Net loss (7,979) (151,596) (159,575)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1995 (241,723) (607,245) (848,968)
Net loss (5,434) (103,254) (108,688)
---------- ---------- ---------
BALANCE, DECEMBER 31, 1996 $ (247,157) $ (710,499) $(957,656)
========== ========== =========
See notes to financial statements.
<PAGE>
CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ----------------------------------------------------------------------------
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (108,688) $(159,575) $(127,724)
Adjustments to reconcile net loss to
cash provided by operations:
Depreciation and amortization 58,378 52,400 50,225
Change in assets and liabilities:
Escrow deposits (6,163) (9,688) (7,005)
Other assets (890) 3,325 (1,881)
Accrued interest payable (141) (749) (5,414)
Security deposits (1,882) 2,740 (5,339)
Accounts payable and accrued expenses 10,493 (13,403) 16,831
Distributions payable - 11,250 3,740
---------- ---------- ---------
59,795 45,875 51,157
---------- ---------- ---------
Net cash used in operating
activities (48,893) (113,700) (76,567)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate (17,892) (47,898) (5,680)
Capital replacement reserve 1,147 67,233 (22,090)
---------- ---------- ----------
Net cash provided by (used in)
investing activities (16,745) 19,335 (27,770)
------------ ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgages payable (20,678) (19,066) (17,578)
Liquidity reserve (1,119) (228) (942)
Amounts due to affiliates 49,987 140,890 74,647
------------ ---------- ---------
Net cash provided by
financing activities 28,190 121,596 56,127
------------ ---------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (37,448) 27,231 (48,210)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 37,448 10,217 58,427
----------- --------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ - $ 37,448 $ 10,217
=========== ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest $ 108,395 $109,927 $117,031
=========== ======== ========
See notes to financial statements.
<PAGE>
CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
(AN ILLINOIS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------
1.SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting - Capital Resources Real Estate Partnership II (an
Illinois limited partnership) (the "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 5). 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 and improvements are depreciated
primarily using the straight-line method over the estimated useful lives
of the assets which are five years for improvements and 25 years for
buildings. In accordance with Statement of Financial Accounting Standards
No. 121 ("SFAS"), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," Partnership management routinely
reviews its investments for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
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's assets is approximately
$1,340,411 at December 31, 1996.
For the year ended December 31, 1996, the Partnership experienced minimum
gain limitations for income tax purposes. Accordingly, the allocation of
losses to the limited partners is subject to this limitation.
Revenue Recognition - Rentals - The Partnership has leased substantially
all of its investment in real estate (apartment buildings) under operating
leases for periods generally less than one year.
Cash and Cash Equivalents - For purposes of the statement of cash flows,
the Partnership considers all highly liquid investments with a remaining
maturity at the date of purchase of three months or less to be cash
equivalents. Univesco, Inc. ("Univesco"), an affiliate of the general
partner, Robert J. Werra and the management agent, maintains a single
controlled disbursement account for all properties managed by Univesco.
Funds are transferred at the time of cash disbursements from the project's
operating account to the controlled disbursement account to reimburse
checks issued.
<PAGE>
Refinancing Costs - Costs or fees incurred to obtain mortgage financing
for the Partnership are included in other assets and are amortized over
the respective lives of the mortgages on the straight-line basis, which
approximates the interest method.
Environmental Remediation Costs - The Partnership accrues for losses
associated with environmental remediation obligations when such losses are
probable and reasonably estimable. Accruals for estimated losses from
environmental remediation obligations generally are recognized no later
than completion of the remedial feasibility study. Such accruals are
adjusted as further information develops or circumstances change. Costs
of future expenditures for environmental remediation obligations are not
discounted to their present value. Recoveries of environmental
remediation costs from other parties are recorded as assets when their
receipt is deemed probable. Partnership management is not aware of any
environmental remediation obligations which would materially affect the
operations, financial position or cash flows of the Partnership.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of certain assets,
liabilities, revenues and expenses as of and for the reporting periods.
Actual results may differ from such estimates.
2.PARTNERSHIP
General - The Partnership was formed on December 29, 1972, under the
Illinois Uniform Limited Partnership Act, for the purpose of acquiring,
maintaining, developing, operating and selling buildings and improvements.
The Partnership operates an apartment property located in Tulsa, Oklahoma.
The Partnership will be terminated by January 31, 2023, although this date
can be extended if certain events occur.
CRREP, Inc., a Texas corporation wholly owned by Mr. Robert J. Werra, is
the general partner. Under the terms of the partnership agreement, 5,005
units were authorized, issued and outstanding during the three years ended
December 31, 1996, 1995 and 1994, and no additional units will be offered.
Allocation of Net Income (Loss) and Cash - Under the terms of the
partnership agreement, the general partner will be allocated 5% of the net
income or loss of the Partnership, and all limited partners will be
allocated 95% of the net income or loss of the Partnership in proportion
to their respective participating percentages. Gains or losses on sale of
properties will be allocated 10% to the general partner and 90% to the
limited partners. In the event proceeds from the sale of the property are
not distributed to the general partner, the entire gain on such sale will
be allocated to the limited partners.
Net cash receipts as defined in the partnership agreement are allocated 5%
to the general partner and 95% to all the limited partners. Such 5%
distribution shall be considered as full compensation to the general
partner for his services in connection with managing and supervising the
Partnership.
<PAGE>
Sales proceeds shall be allocated first to the limited partners to the
extent of their capital contributions and 10% simple interest on the
average capital invested and, thereafter, 10% to the general partner and
90% to the limited partners.
3.MORTGAGE PAYABLE
The Partnership's mortgage payable bears interest at a rate of 8.15% which
is payable in monthly principal and interest installments of $10,749
through December 2003, at which time a lump-sum payment of approximately
$1,118,000 is due.
The mortgage payable is collateralized by the investment in real estate.
Annual principal payments as of December 31, 1996, are as follows:
1997 $ 22,581
1998 24,491
1999 26,564
2000 28,811
2001 31,249
Thereafter 1,183,982
In conjunction with its mortgage payable, the Partnership is required to
fund a liquidity reserve and a capital replacement reserve. Both reserves
are refundable to the Partnership.
4.RELATED PARTY TRANSACTIONS
The Partnership has an agreement with Univesco for the management of its
projects under which Univesco receives 4% of the gross revenues from
operations as a property management fee. Additionally, Univesco receives
a partnership fee equal to 1% of the gross revenues from operations to be
paid from Excess Property Income as defined in the agreement with the
lender. Additionally, the Partnership has been advanced funds from
Univesco to pay operating expenses. These advances are included in
amounts due to affiliates and presently are non-interest-bearing.
The partnership agreement specifies certain fees to be paid to the general
partner or his designee. The following fees were paid to the general
partner or his designee during 1996, 1995 and 1994:
1996 1995 1994
Management fees $22,241 $20,697 $20,624
Administrative services 5,088 5,088 5,096
<PAGE>
5.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 of expenses over revenues for 1996
would have been as follows:
Net loss per accompanying financial statements $ (108,688)
Add GAAP basis depreciation using straight-line method 48,330
Deduct tax basis depreciation using ACRS (61,053)
------------
Excess expenses over revenues, accrual income tax basis $ (121,411)
===========
6. 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 its estimated fair value would approximate its
carrying value as of December 31, 1996.
As of December 31, 1996, the fair value information presented herein is
based on pertinent information available to management. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and
therefore, current estimates of fair value may differ significantly from
the amounts presented herein.
<PAGE>
7. CONTINGENCIES
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. However, the Partnership
has incurred losses and has negative cash flows from operations and has a
capital deficiency at December 31, 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 uncertain. The financial statements do not include
any adjustments relating to the recoverability of recorded assets or the
amounts and satisfaction of liabilities that might be necessary should the
Partnership be unable to continue in its present form. Management intends
to continue operating the Partnership in its present form; however, there
is no assurance that the Partnership will be able to generate sufficient
cash flows to meet its obligations, and the ultimate outcome of this
matter cannot be determined at this time.
8.SUBSEQUENT EVENTS
On January 9, 1997, the Partnership entered into a contract to sell its
remaining operating property for a sales price of approximately $1,725,000.
Upon disposition of its remaining operating property, it is the intention
of the general partner to make a final distribution and liquidate the
Partnership.
******
<PAGE>
CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
(An Illinois Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
- ----------------------------------------------------------------------------
Initial Cost to Partnership
---------------------------
Buildings Total Cost
Encum- and Subsequent to
Description brances Land Improvements Acquisition
112 rental units contained in 26 two-
story buildings of frame and masonry
construction located in Tulsa,
Oklahoma (b) $137,971 $ 608,692 $ 250,316
======== ========= ==========
Continuation of above schedule...
Gross Amounts at Which
Carried at Close of Year Life On
------------------------- Which
Accumulated Date of Date Depreciation
Descript.. Land Improvements Total Depreciation Construct Acquired Is Computed
(c)(d) (c)
(as above) Complete
$137,971 $859,008 $996,979 $404,574 date acquired 12/86 (a)
See notes to Schedule III.
<PAGE>
CAPITAL RESOURCES REAL ESTATE PARTNERSHIP II
(AN ILLINOIS LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE III:
(a) See Note 1 to financial statements outlining depreciation methods and
lives.
(b) See description of mortgage payable in Note 3 to the financial
statements.
(c) Reconciliation of investment in real estate and accumulated
depreciation for the years ended December 31, 1996, 1995 and 1994:
Investment Accumulated
in Real Estate Depreciation
BALANCE, JANUARY 1, 1994 $ 925,509 $ 273,712
Additions during the year:
Improvements 5,680 -
Depreciation expense - 40,178
---------- ----------
BALANCE, DECEMBER 31, 1994 931,189 313,890
Additions during the year:
Improvements 47,898 -
Depreciation expense - 42,353
---------- ----------
BALANCE, DECEMBER 31, 1995 979,087 356,243
Additions during the year:
Improvements 17,892 -
Depreciation expense - 48,331
---------- ----------
BALANCE, DECEMBER 31, 1996 $ 996,979 $ 404,574
========== ==========
(d) Aggregate cost of real estate for federal income tax purposes is
$2,075,957. The difference between the cost of real estate for financial
statement purposes and federal income tax purposes is primarily
attributable to a basis difference caused by the sale and reacquisition of
the property in an earlier year.
8. SUBSEQUENT EVENTS
- ----------------------
On January 9,1997, the Partnership entered into a contract to sell its
remaining operating property for a sales price of approximately
$1,725,000. Upon disposition of its remaining operating property, it is
the intention of general partner to make a final distribution and
liquidate the Partnership.
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 1O. Directors and Executive Officer of the Partnership
- -----------------------------------------------------------
Amrecorp Realty Inc., formerly American Republic Realty Corporation
resigned from the Partnership in February, 1991 as the Corporate General
Partner. The Partnership itself has no officers or directors. CRREP, Inc. a
Texas corporation, wholly owned by Robert J. Werra was appointed General
Partner in October, 1993.
Robert J. Werra, 57, President. 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. 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 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 Partnership Agreement allows for a management fee of five percent
(5%) of the gross income from operations. In connection with the new loan
obtained from Lexington Mortgage Company, Univesco, Inc. entered into a
management agreement that pays Univesco, Inc. four percent (4%) of the
monthly gross income from operations. The Partnership's obligation to pay an
additional one percent (1%) of the monthly gross income from operations
shall be paid by the Partnership from Excess Property Income, as that term
is defined in the Loan Agreement between Lexington Mortgage Company and the
Partnership dated November 12, 1993. 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 3-5,
"Management" at pages 36-38 and "Allocation of Net Income and Losses and
Cash Distributions" at pages 29-30 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, 1973.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) The following limited partnerships, through their affiliated
general partners, may be deemed, to beneficially own an aggregate
of 1167 interests, which represents approximately 23.34% of the
total outstanding interests.
Number of
Interests
Name and Address Beneficially
Title of Class of Beneficial Owner Owned %Class
-------------- --------------------- ----------- -------
Interest in Limited Liquidity Fund XII 145 2.9O%
Partnership Liquidity Fund XIII 243 4.86%
($1,OOO per Interest) Liquidity Fund XIV 25 O.5O%
Liquidity Fund XV 15 O.3O%
Liquidity Fund XVI 23 O.46%
Liquidity Fund High Yield
Institutional Investors 79 1.58%
Liquidity Fund Income
Growth 87 637 12.74%
19OO Powell Street
Suite 73O
Emeryville, CA 946O8
(b) The following table sets forth as of December 31, 1996 the
number of Interests in the Registrant, the only class of
securities outstanding, beneficially owned by the General Partner.
None.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
Effective February 1, 1991, Univesco, Inc. assumed total property
management responsibilities of the partnership property. Total
compensation paid to the managing agent was $22,241 in 1996. See Note 4 to
the Registrant's financial statements included in Item 8 hereof.
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
All other schedules are omitted because they are
inapplicable or the equivalent information is
included in the financial statements or notes
thereto.
(3) Exhibits: None
(b) There were no reports on Form 8-K filed in the fourth
quarter of the fiscal year.
<PAGE>
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.
CAPITAL RESOURCES REAL ESTATE
PARTNERSHIP II
CRREP, INC., General Partner
April 10, 1997 By: Robert J. Werra /s/
Robert J. Werra, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH
THE DECEMBER 31, 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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 996,979
<DEPRECIATION> 404,574
<TOTAL-ASSETS> 721,463
<CURRENT-LIABILITIES> 0
<BONDS> 1,317,678
0
0
<COMMON> 0
<OTHER-SE> (957,656)
<TOTAL-LIABILITY-AND-EQUITY> 721,463
<SALES> 0
<TOTAL-REVENUES> 419,977
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 445,357
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108,254
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (108,688)
<EPS-PRIMARY> (20.63)
<EPS-DILUTED> 0
</TABLE>
