<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
FORM 1O-K
ANNUAL REPORT
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the Fiscal year ended December 31, 1997
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the Transaction Period from ________ to ________
Commission File Number 2-90654
AMRECORP REALTY FUND II
(Exact name of registrant as specified in its charter)
Texas 75-1956009
(State or Other Jurisdiction of (I.R.S. Employer
(Incorporation or Organization) (Identification Number)
6210 Campbell Road, Suite 140, Dallas, Texas 75248
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including area code (972)38O-8OOO
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-k or any Amendment to the Form 10-k. __________
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 9O days.
Yes X No
Documents Incorporated by Reference
The Prospectus dated July 6, 1985 filed pursuant to Rule 424(b) as
supplemented pursuant to Rule 424(b) on December 11, 1985
<PAGE>
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, 1997, the Partnership consisted of an individual
general partner, Mr. Robert J. Werra (the "General Partner") and
1,968 limited partners owning 14,544 limited partnership interests
at $1,000 per interest. The distribution of limited partnership
interests commenced pursuant to a Registration Statement on Form
S-11 under the Securities Act of 1933 (Registration #2-9O654) 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,
2014 unless terminated by an earlier sale of its Properties.
The General Partner manages the affairs of the Partnership and acts
as the Managing Agent with respect to the Partnership's properties.
The General Partner may also engage other on-site property managers
and other agents, to the extent the General Partner considers
appropriate. The General Partner makes all decisions regarding
investments in and disposition of properties and has ultimate
authority regarding all property management decisions.
The Partnership competes in the residential and commercial rental
markets. The General Partner prepared market analyses for the
property areas and determined these areas contain other like
properties which may be considered competitive on the basis of
location, amenities and rental rates.
No material expenditure has been made or is anticipated for either
Partnership-sponsored or consumer research and development
activities relating to the development or improvement of facilities
or services provided by the Partnership. There neither has been,
nor are any anticipated, material expenditures required to comply
with any Federal, State or local environmental provisions which
would materially affect the earnings or competitive position of the
Partnership.
The Partnership is engaged solely in the business of real estate
investments. Its business is believed by management to fall
entirely within a single industry segment. Management does not
anticipate that there will be any material seasonal effects upon
the operation of the Partnership.
<PAGE>
Competition and Other Factors
The majority of the Properties' leases are of six to twelve month
terms. Accordingly, operating income is highly susceptible to
varying market conditions. Occupancy and local market rents are
driven by general market conditions which include job creation, new
construction of single and multi-family projects, and demolition
and other reduction in net supply of apartment units.
On the property owned at December 31, 1997, the Partnership has
been able to maintain a generally high occupancy level and
increasing rents primarily due to the positive relationship between
apartment unit supply and demand in the market. However, the
property is subject to substantial competition from similar and
often newer properties in the vicinity in which they are located.
In addition, operating expenses and capitalized expenditures have
increased as units are updated and made more competitive in the
market place.
In 1996, the Partnership sold its commercial shopping center
located in Lancaster, Texas, receiving net proceeds of $949,649 and
recognizing a loss of $10,177. In addition, in January 1997 the
Partnership sold its apartment complex located in Charlotte, North
Carolina, for net proceeds of $4,149,635 and recognizing a gain of
$1,287,391.
Item 2. Properties
At December 31, 1997 the Partnership owned one property, Chimney
Square Apartments. Prior to the disposal during January 1997 and
August 1996 the Partnership also owned two other properties, as
indicated below:
Name and Location General Description of the Property
Chimney Square 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 128
apartment units and twenty four
townhouse units.
Shorewood Apartments A fee simple interest in a 96 unit
(sold January 1997) apartment community located in
Mecklenburg County, North Carolina,
purchased in 1985 and containing
approximately 124,194 net rentable
square feet on 10.058 acres of land.
In January 1997, the Partnership
sold this apartment community.
Lancaster Place (sold A fee simple interest in a
August 1996) neighborhood shopping center located
in Lancaster Texas purchased in 1984
containing 53,860 square feet on
approximately 7.89 acres of land
with paved surface parking for 372
cars. The shopping center was sold
in August of 1996.
<PAGE>
Occupancy Rates
Per cent
1993 1994 1995 1996 1997
Lancaster Shopping 80.00% 90.00% 89.00% NA NA
Center
Chimney Square 98.90% 96.50% 90.90% 95.60% 90.6%
Shorewood Apartments 95.10% 96.50% 94.90% 94.00% NA
The property is encumbered by a non-recourse mortgage payable. For
information regarding the encumbrances to which the property is
subject and the status of the related mortgage loan, see
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" contained
in Item 7 hereof and Note 4 to the Financial Statements and
Schedule Index contained in Item 8.
Item 3. Legal Proceedings
The Partnership is not engaged in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Unit Holders
There were no matters submitted to a vote of unit holders during
the fourth quarter of the fiscal year.
By virtue of its organization as a limited partnership, the
Partnership has outstanding no securities possessing traditional
voting rights. However, as provided and qualified in the Limited
Partnership Agreement, limited partners have voting rights for,
among other things, the removal of the General Partner and
dissolution of the Partnership.
<PAGE>
PART II
Item 5. Market for Registrant's Units and Related Unit-holders
Matters
The Partnerships outstanding securities are in the form of Limited
Partnership Interests ("Interests"). As of December 31, 1997 there
were approximately 1,968 limited partners owning 14,544 limited
partnership interests at $1,000 per interest. A public market for
trading Interests has not developed and none is expected to
develop. In addition, transfer of an Interest is restricted
pursuant to Article X, Section 2, of the Limited Partnership
Agreement.
The General Partner continues to review the Partnership's ability
to make distributions on a quarter by quarter basis. In 1997 the
Partnership distributed $100 per $1000 unit due to the sale of
Shorewood Apartments. In 1996 the Partnership distributed $50 per
$1000 unit due to the sale of Lancaster Place.
An analysis of tax income or loss allocated and cash distributed
to Investors per $1,000 unit is as follows:
YEARS TAXABLE INCOME OR TAXABLE LOSS CASH
GAIN DISTRIBUTED
1984 - 1993 $0 $910 $30
1994 0 $27 0
1995 0 $28 0
1996 $62 0 $50
1997 $143 0 $100
<PAGE>
Item 6. Selected Financial Data
The following table sets forth selected financial data regarding
the Partnership's results of operations and financial position as
of the dates indicated. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in Item 7 hereof and
the Financial Statements and notes thereto contained in Item 8.
Year Ended December 31
(in thousands except unit and per unit amounts)
1997 1996 1995 1994 1993
Limited Partner Units 14,544 14,544 14,544 14,544 14,544
Outstanding
Statement of Operations
Total Revenues $2,122 $1,658 $1,629 $1,569 $1,533
Net Income (Loss) before 1,266 (135) (672) (252) (526)
extraordinary items
Extraordinary Item -Gain 0 1,377 0 0 0
on debt forgiveness (a)
Extraordinary Item-loss on 0 0 0 (53) 0
extinguishment of debt
Net Income (Loss) 1,266 1,241 (672) (305) (526)
Limited Partner Net Income 86.17 84.51 (45.74) (20.78) (35.82)
(Loss) per Unit - Basic
Cash Distributions to Limited 100 50 0 0 0
Limited Partners per Unit -
Basic
Balance Sheet:
Real Estate, net (b) $2,602 $2,777 $6,971 $7,633 $7,967
Real Estate assets held 0 2,862 0 0 0
for sale, Net
Total Assets 3,408 6,271 7,499 7,753 8,111
Mortgages and Notes 2,397 5,054 6,571 6,204 6,223
Payable
Partner's Equity 843 1,032 517 1,189 1,494
(a) In connection with the sale of the commercial property located
in Lancaster, Texas, the general partner relieved the Partnership
of its obligation to repay the mortgage note, resulting in gain on
forgiveness of debt.
(b) On August 23, 1996 the Partnership disposed of its shopping
center located in Lancaster, Texas. The shopping center had
accounted for $158,001, $230,651, $221,713, and $222,178 of
revenues for the years ended December 31, 1996, 1995, 1994, and
1993. Additionally in January 1997 the Partnership disposed of its
apartment complex in North Carolina. This apartment complex had
accounted for $61,408, $708,624, $671,691, $656,990, and $630,123
of revenues for the years ended December 31, 1997, 1996, 1995,
1994, and 1993
<PAGE>
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: 1997 VERSUS 1996 -
Revenue from Property Operations increased $464,318 or 28.01% as
compared to 1996, due to the sale of Shorewood Apartments. Rental
revenue at the Partnerships apartment communities decreased by
$805,303 which was primarily the result of the sale of Shorewood
Apartments. The Partnerships' sole asset at December 31, 1997 saw
revenue decrease $30,609 or 4.02% due to lower occupancy.
Additionally interest income increased $11,959 due to additional
funds available for investment. Other income for 1997 decreased
$29,729 primarily due to the aforementioned property sale. The
following table illustrates the increases or (decreases):
Increase/
(Decrease)
Rental income $(805,303)
Interest 11,959
Gain On sale 1,287,391
Other (29,729)
Net Increase $464,318
Property operating expenses for 1997 decreased $937,056 from 1996
or 52.25%. Expenses decreased primarily due to the sale of
Shorewood Apartments. Chimney Square Apartments, the sole asset
as of December 31, 1997, saw its operating expenses increase $3,227
or 1.16%. The following table illustrates the increases or
(decreases):
Increase/
(Decrease)
Repairs and Maintenance $(124,699)
Real estate taxes (54,746)
General & Administrative (36,217)
Administrative (3,512)
Utilities (34,468)
Payroll (87,324)
Interest (292,933)
Loss on Sale ofProperty (10,177)
Depreciation and (251,143)
amortization
Property management fees (41,837)
Net Decrease $(937,056)
<PAGE>
Results of Operations: 1996 VERSUS 1995 -
Revenue from Property Operations increased $29,295 or 1.80% as
compared to 1995, due to an increase in rental revenues of $12,075.
Rental revenue at the Partnerships apartment communities increased
by $85,755 which was primarily the result of increases in rents
resulting from improvements in the apartment rental markets. These
increases were partially offset by a reduction in rental revenue on
Lancaster of $73,680. The Partnership disposed of its investment
in Lancaster in August of 1996, thus only eight months of rental
revenues were recognized. Additionally interest income increased
$9,884 due to additional funds available for investment and other
income for 1996 increased $7,336 primarily due to the
aforementioned increase in occupancy. The following table
illustrates the increases:
Increase
Rental income $12,075
Interest 9,884
Other 7,336
Net Increase $29,295
Property operating expenses for 1996 decreased $507,276 from 1995
or 22.05%. Property operating expenses mainly decreased due to the
$341,162 impairment loss recorded in 1995 to lower the carrying
value of the partnership's investment in its shopping center
located in Lancaster, Texas to its estimated fair value. Property
operating expenses at the Partnerships' apartment communities also
decreased by $71,569 due to one time painting and parking lot
repairs to facilitate the sale of Shorewood Apartments which
occurred in 1997. The remaining decrease of $94,545 in property
operating expenses is due to the sale of Lancaster Shopping Center.
The following table illustrates the increases or (decreases):
Increase
(Decrease)
Repairs and $(78,322)
Maintenance
Real estate taxes (480)
General & Administrative (18,146)
Administrative Service fees (1,000)
Utilities (18,329)
Payroll (440)
Interest (51,500)
Loss on Sale ofProperty 10,177
Depreciation and (6,362)
amortization
Loss on Impairment (341,162)
Property management fees (1,712)
Net Decrease $(507,276)
Gain on debt forgiveness for 1996 was $1,376,916 due to the General
Partner relieving the Partnership of its obligations to repay the
mortgage note related to the commercial property located in
Lancaster, Texas and disposed of in August of 1996.
<PAGE>
Liquidity and Capital Resources
While it is the General Partners primary intention to operate and
manage the remaining real estate investment, the General Partner
also continually evaluates this investment in light of current
economic conditions and trends to determine if this asset should be
considered for disposal.
In 1996 the Partnership sold its investment in the shopping center
located in Lancaster, Texas , recognizing a loss of $10,177.
Shorewood Apartments, an apartment complex located in Charlotte,
North Carolina was sold in January 1997. Net gain from the sale
was $1,287,391.
As of December 31, 1997, the Partnership had $593,721 in cash and
cash equivalents as compared to $362,135 as of December 31, 1996.
The net increase in cash of $231,586 is principally due to funds
provided from sale proceeds from the sale of the Shorewood
Apartments.
The remaining property is encumbered by this nonrecourse mortgage
as of December 31, 1997, with an interest rate of 9.325%. Required
principal payments on this mortgage note for the five years ended
December 31, 2002, are $33,813, $37,105, $40,717, $40,826 and
$48,654 respectively.
For the foreseeable future, the Partnership anticipates that
mortgage principal payments (excluding balloon mortgage payments),
improvements and capital expenditures will be funded by net cash
from operations. The primary source of capital to fund the balloon
mortgage payment will be proceeds from the sale, financing or
refinancing of the properties.
Year 2000
The partnership anticipates that it will not incur any costs
associated with its computers and building operating systems as it
relates to the conversion to the year 2000.
<PAGE>
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>
AMRECORP REALTY FUND II
(A TEXAS LIMITED PARTNERSHIP)
ITEM 8 - FINANCIAL STATEMENTS AND SCHEDULE
INDEX
Page
INDEPENDENT AUDITORS' REPORT 1
BALANCE SHEETS 2
STATEMENTS OF OPERATIONS 3
STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 4
STATEMENTS OF CASH FLOWS 5
NOTES TO FINANCIAL STATEMENTS 6-10
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 11-12
<PAGE>
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, 1997 and 1996, and the
related statements of operations, partners' equity (deficit)
and cash flows for each of the three years in the period ended
December 31, 1997. 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, 1997 and 1996, and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
/S/ DELOITTE & TOUCHE LLP
Dallas, Texas
February 23, 1998
<PAGE>
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996
INVESTMENTS IN REAL ESTATE, AT COST:
Land $580,045 $580,045
Buildings, improvements and 4,560,894 4,547,323
furniture and fixtures
5,140,939 5,127,368
Less accumulated depreciation (2,539,125) (2,350,376)
2,601,814 2,776,992
INVESTMENTS IN REAL ESTATE ASSETS HELD 2,862,244
FOR SALE, NET
CASH AND CASH EQUIVALENTS 593,721 362,135
DEFERRED COSTS 49,036 86,057
ESCROW DEPOSITS 154,681 166,070
OTHER ASSETS 8,796 17,866
TOTAL $3,408,048 $6,271,364
LIABILITIES AND PARTNERS' EQUITY
MORTGAGES AND NOTES PAYABLE $2,396,692 $5,054,073
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 96,605 103,019
DUE TO AFFILIATES 8,774 6,854
ACCRUED INTEREST PAYABLE 18,624 35,827
DISTRIBUTIONS PAYABLE 27,420
SECURITY DEPOSITS 16,800 40,002
2,564,915 5,239,775
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY 843,133 1,031,589
TOTAL $3,408,048 $6,271,364
See notes to financial statements.
<PAGE>
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
INCOME:
Rentals $792,138 $1,597,441 $1,585,366
Gain on sale of property 1,287,391
Other 9,527 39,256 29,372
Interest 33,167 21,208 13,872
Total income 2,122,223 1,657,905 1,628,610
OPERATING EXPENSES:
Repairs and maintenance 100,199 224,898 303,220
Real estate taxes 80,876 135,622 136,102
General and administrative 73,097 109,314 127,460
Administrative services fees to 5,664 9,176 10,176
affiliate
Utilities 37,521 71,989 90,318
Payroll 79,383 166,707 167,147
Interest 243,185 536,118 587,618
Loss on sale of property - 10,177 -
Depreciation and amortization 196,171 447,314 453,676
Loss on impairment - - 341,162
Property management fee to 40,183 82,020 83,732
affiliate
Total operating expenses 856,279 1,793,335 2,300,611
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 1,265,944 (135,430) (672,001)
EXTRAORDINARY ITEM-
Gain on debt forgiveness - 1,376,916 -
NET INCOME (LOSS) $1,265,944 $1,241,486 $(672,001)
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT - Basic:
Net income (loss) before $ 86.17 $ (9.22) $ (45.74)
extraordinary item
Gain on debt forgiveness - 93.73 -
NET INCOME (LOSS) PER UNIT-Basic $ 86.17 $ 84.51 $ (45.74)
LIMITED PARTNERSHIP UNITS
OUTSTANDING - Basic 14,544 14,544 14,544
See notes to financial statements.
<PAGE>
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
General Limited
Partner Partners Total
BALANCE, JANUARY 1, 1995 $(108,260) $ 1,297,564 $ 1,189,304
Net loss (6,720) (665,281) (672,001)
BALANCE, DECEMBER 31, 1995 (114,980) 632,283 517,303
Distributions - (727,200) (727,200)
Net income 12,415 1,229,071 1,241,486
BALANCE, DECEMBER 31, 1996 (102,565) 1,134,154 1,031,589
Distributions - (1,454,400) (1,454,400)
Net income 12,659 1,253,285 1,265,944
BALANCE, DECEMBER 31, 1997 $(89,906) $933,039 $843,133
See notes to financial statements.
<PAGE>
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $1,265,944 $1,241,486 $(672,001)
Adjustments to reconcile
net income (loss) to net cash
provided by operations:
Gain on sale of assets (1,287,391) - -
Loss on sale of assets - 10,177 -
Gain on debt forgiveness - (1,376,916) -
Depreciation and amortization 196,171 447,314 453,676
Loss on impairment - - 341,162
Changes in assets and - - -
liabilities:
Escrow deposits 221 5,716 (70,900)
Deferred costs 29,599 - (43,421)
Other assets 9,070 12,149 6,733
Accrued interest payable (17,203) 3,446 (1,513)
Security deposits (23,202) (3,776) 2,535
Accounts payable and (6,414) (25,734) 48,971
accrued expenses
Due to affiliates 1,920 2,475 1,096
(1,097,229) (925,149) 738,339
Net cash provided byoperating activities
168,715 316,337 66,338
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate (13,571) (61,073) (120,695)
Proceeds from sale of assets, net
4,149,635 949,649 -
Deposits to reserve for replacements
(35,366) (34,997) (76,839)
Disbursements from reserve for replacements
46,534 6,628 17,525
Net cash provided by (used in) investing activities
4,147,232 860,207 (180,009)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgages and notes payable
(2,657,381) (341,398) (2,107,620)
Additions to mortgages and notes payable
- - 2,475,000
Distributions
(1,454,400) (727,200) -
Distributions payable 27,420 - -
Net cash provided by (used in) financing activities
(4,084,361) (1,068,598) 367,380
NET INCREASE IN CASH
AND CASH EQUIVALENTS 231,586 107,946 253,709
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 362,135 254,189 480
CASH AND CASH EQUIVALENTS,
END OF YEAR $593,721 $362,135 $ 254,189
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year
for interest $ 260,388 $532,672 $ 589,131
See notes to financial statements.
<PAGE>
AMRECORP REALTY FUND II
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
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. Partnership management routinely reviews its
investments for impairments whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable (Note 7).
Deferred Costs - Loan commitment fees are amortized by the
straight-line method over the term of the loan, which
approximates the interest method.
Syndication Costs - Costs or fees incurred to raise capital for
the Partnership are netted against the respective partners'
equity accounts.
Revenue Recognition - The Partnership has leased its investment
in residential property under operating leases for periods
generally less than one year.
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
$3,746,317 at December 31, 1997.
Cash and Cash Equivalents - For purposes of the statement of
cash flows, the Partnership considers all highly liquid
investments with an original maturity of three months or less at
the date of acquisition to be cash equivalents. Univesco Inc.
("Univesco"), an affiliate of general partner, Robert J. Werra,
and the management agent, maintains a single controlled
disbursement account for all properties managed by Univesco.
Funds are transferred at the time of cash disbursements from the
project's operating account to the controlled disbursement
account to reimburse checks issued.
Computation of Earnings per Unit - The Partnership has adopted
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." Comparative earnings per unit data have
been restated to conform to the adoption of this new standard.
Basic earnings per unit is computed by dividing net income
(loss) attributable to the limited partners' interests by the
weighted average number of units outstanding. Earnings per unit
assuming dilution would be computed by dividing net income
(loss) attributable to the limited partners' interests by the
weighted average number of units and equivalent units
outstanding. The Partnership has no equivalent units
outstanding for any period presented.
<PAGE>
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.
Other - SFAS No. 130, "Reporting on Comprehensive Income," was
issued in June 1997 and establishes standards for reporting and
presenting comprehensive income in financial statements. It is
effective for periods beginning after December 15, 1997, and
will be adopted by the Partnership effective January 1, 1998.
The Partnership anticipates the adoption of SFAS No. 130 will
not have any impact on its current disclosures.
Also issued in June 1997 was SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which
redefines how operating segments are determined and requires
disclosure of certain financial and descriptive information
about a company's operating segments. SFAS No. 131 may require
additional disclosure by the Partnership and will be effective
for the Partnership beginning January 1, 1998.
SFAS No. 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits," was issued in February 1998 and
revises disclosures about pension and other postretirement
benefit plans. It is effective for periods beginning after
December 15, 1997, and will be adopted by the Partnership
effective January 1, 1998. As the Partnership does not have any
such benefit plans, the adoption will not have any impact on its
current disclosures.
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 1997, the Partnership owned
and operated one apartment complex located in Abilene, Texas.
During the two years ended December 31, 1996, the Partnership
owned and operated two apartment complexes located in Abilene,
Texas, and Charlotte, North Carolina, and a commercial shopping
center located in Lancaster, Texas. In 1996, the Partnership
sold the commercial shopping center located in Lancaster, Texas,
receiving net proceeds of $949,649 and recognizing a loss of
$10,177. In addition, in January 1997, the Partnership sold the
apartment complex located in Charlotte, North Carolina, for net
proceeds of $4,149,635 and recognizing a gain of $1,287,391.
This property was considered held for sale at December 31, 1996.
The Partnership will terminate by December 31, 2014, although
this date can be extended if certain events occur.
<PAGE>
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, 1997. 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, 1997 and 1996, consist of the
following:
1997 1996
Loan fees $87,573 $117,172
Less accumulated amortization (38,537) (31,115)
<PAGE>
$49,036 $86,057
4. MORTGAGES AND NOTES PAYABLE
Mortgages and notes payable at December 31, 1997 and 1996,
consist of the following:
1997 1996
9.325% mortgage note, payable in
monthly principal and interest
installments of $21,324 through
March 2005, at which time a lump-sum
payment of approximately $2,089,000
is due. This mortgage note is
secured by real estate assets with
a net book value of approximately
$2,777,000 $2,396,692 $2,427,506
7.75% mortgage note, which required
monthly principal and interest
installments of $20,583. This
mortgage note was repaid with proceeds
from the sale of the apartment complex
located in Charlotte, North Carolina - 2,626,567
$2,396,692 $5,054,073
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, 1997,
are as follows:
1998 $ 33,813
1999 37,105
2000 40,717
2001 40,826
2002 48,654
Thereafter 2,195,577
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 1997, 1996
and 1995:
1997 1996 1995
Property management fees $40,183 $82,020 $83,732
Administrative services 5,664 9,176 10,176
Univesco receives an ongoing property management fee generally
payable at 5% of the Partnership's gross receipts for
residential properties.
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. No such fees were paid to Univesco in
connection with the 1996 and 1997 disposals.
During 1996, in connection with the sale of the commercial
property located in Lancaster, Texas, the general partner
relieved the Partnership of its obligation to repay the mortgage
note, resulting in a gain on forgiveness of debt of $1,376,916,
which included $201,267 in accrued interest.
<PAGE>
6. RECONCILIATION OF BOOK TO TAXABLE INCOME (UNAUDITED)
If the accompanying financial statements had been prepared in
accordance with the accrual income tax basis of accounting
rather than generally accepted accounting principles, excess
revenues over expenses for 1997 would have been as follows:
Net income per accompanying financial statements $1,265,944
Add back book basis depreciation expense using
straight-line method 188,749
Add back gain on disposition of property - tax 2,158,157
Deduct income tax basis depreciation expense using
ACRS method (247,335)
Deduct gain on disposition of property - GAAP (1,287,391)
Excess revenues over expenses, accrual income tax
basis $2,078,124
7. IMPAIRMENT AND DISPOSAL OF LANCASTER SHOPPING CENTER
Due to the poor economic performance brought about by increased
market pressures, the Partnership's investment in its shopping
center located in Lancaster, Texas, experienced decreased cash
flows. Accordingly, during 1995, the Partnership recorded an
impairment loss of approximately $341,000 to lower the carrying
value of the assets to their estimated fair value, determined
based on estimated cash flows and sales proceeds. The
impairment was reflected in the balance sheet as a reduction in
the basis of the fixed assets.
During 1996, the Partnership disposed of its investment in the
Lancaster shopping center, recognizing a loss of $10,177.
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following 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.
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, 1997 and 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>
AMRECORP REALTY FUND II
(A Texas Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
Initial Cost
to Partnership
Buildings,
Improvements, Total Cost
Encum- & Furniture Subsequent to
Description brances Land & fixtures Acquistion
A 128-unit two stort
apartment community of
wooden frame construction
and a combination brick
veneer and wood siding
exterior located in
Abilene, Texas (b) $580,045 $4,341,569 $219,325
- ---------------------------------------------------------------------------
Gross Amounts at Which
Carried at Close of Period
Buildings,
Improvements,
& Furniture Accumulated Date of
Land & Fixtures Total Depreciation Construction
(c) (d)
Complete at
$580,045 $4,560,894 $5,140,939 $2,539,125 date acquired
- -----------------------------------------------------------------------------
Life on Which
Date Depreciation
Acquired is Computed
11/1/84 (a)
See notes to Schedule III.
<PAGE>
AMRECORP REALTY FUND II
(A TEXAS LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
DECEMBER 31, 1997
NOTES TO SCHEDULE III:
(a)See Note 1 to financial statements outlining depreciation
methods and lives.
(b)See description of mortgage payable in Note 4 to the financial
statements.
(c)Reconciliation of investments in real estate and accumulated
depreciation for the years ended December 31, 1997, 1996 and
1995.
Accumulated
Investments Estate
in Real Depreciation
BALANCE, JANUARY 1, 1995 $12,426,156 $4,793,182
Additions during the year:
Additions 120,695 -
Depreciation expense - 441,010
Loss on impairment (341,162) -
BALANCE, DECEMBER 31, 1995 12,205,689 5,234,192
Additions during the year:
Additions 61,073 -
Depreciation expense - 433,508
Sale of real estate (2,290,847) (1,331,021)
BALANCE, DECEMBER 31, 1996 9,975,915 4,336,679
Additions during the year:
Additions 13,571 -
Depreciation expens - 188,749
Sale of real estate (4,848,547) (1,986,303)
BALANCE, DECEMBER 31, 1997 $5,140,939 $2,539,125
(d)Aggregate cost for federal income tax purposes is $5,158,532.
<PAGE>
Item 9. Disagreements 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 Officers of the Partnership
The Partnership itself has no officers or directors. Robert J.
Werra is the General Partner of the Partnership.
Robert J. Werra, 57, the General Partner, Mr. Werra joined Loewi &
Co., Incorporated ("Loewi") in 1967 as a Registered Representative.
In 1971, he formed the Loewi real estate department, and was
responsible for its first sales of privately placed real estate
programs. Loewi Realty was incorporated in 1974, as a wholly owned
subsidiary of Loewi & Co., with Mr. Werra as President. In 1980,
Mr. Werra along with three others formed Amrecorp Inc. to purchase
the stock of Loewi Real Estate Inc., and Loewi Realty. In 1991
Univesco, Inc. became the management agent for the Partnership.
Limited Partners have no right to participate in management of the
Partnership.
Item 11. Management Remuneration and Transactions
As stated above, the Partnership has no officers or directors.
Pursuant to the terms of the Limited Partnership Agreement, the
General Partner receives 1% of Partnership income and loss up to
15% of the net proceeds received from sale or refinancing of
Partnership properties (after return of Limited Partner capital
contributions and payments of a 6% Current Distribution Preference
thereon).
Univesco, Inc., an affiliate of the General Partner, is entitled to
receive a management fee with respect to the properties actually
managed of 5% of actual gross receipts from a property or an amount
competitive in price or terms for comparable services available
from a non-affiliated persons. The Partnership is also permitted
to engage in various transactions involving affiliates of the
General Partner as described under the caption "Compensation and
Fees" at pages 6-8, "Management" at page 17 "Allocation of Net
Income and Losses and Cash Distributions" at pages 34-36 of the
Prospectus as supplemented, incorporated in the Form S-11
Registration Statement which was filed with the Securities and
Exchange Commission and made effective on May 2, 1983.
For the Fiscal year ended December 31, 1997, 1996 and 1995,
property management fees earned totaled $40,183, $82,020 and
$83,732, respectively. An additional administration service fee
was paid to the general partner of $5,664, $9,176 and $10,176 for
the years ended December 31, 1997, 1996 and 1995, respectively.
<PAGE>
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. Persons performing
functions similar to those of officers and directors of the
Partnership, beneficially own, the following units of the
Partnership as of March 1, 1998.
Name of Amount & Nature
Title Beneficial of Benefiacial Percent
of Class Owner Ownership of Interest
Limited Robert J. Werra 71 units 0.48%
Partnership 6210 Campbell Rd. #140
Interests 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 Relationships and Related Transactions
As stated Item 11, the Partnership has no officers or directors.
Pursuant to the terms of the Limited Partnership Agreement, the
General Partner receives 1% of Partnership income and loss up to
15% of the net proceeds received from sale or refinancing of
Partnership properties (after return of Limited Partner capital
contributions and payments of a 6% Current Distribution Preference
thereon).
Univesco, Inc., an affiliate of the General Partner, is entitled to
receive a management fee with respect to the properties actually
managed by the corporate general partner. For nonresidential
properties (including all leasing and releasing fees and fees for
leasing related services) the management fee is lessor of 6% of
gross receipts from the Partnership from such properties or an
amount which is competitive in price and terms with other non-
affiliated persons rendering comparable services which would
reasonably be made available to the Partnership. For residential
properties ( including all leasing and releasing fees and fees for
leasing related services), the lessor of 5% of gross receipts of
the Partnership from such properties or an amount which is
competitive in price or terms with other non-affiliated persons
rendering comparable services which could reasonably be made
available to the Partnership. The Partnership is also permitted to
engage in various transactions involving affiliates of the General
Partner as described under the caption "Compensation and Fees" at
pages 6-8, "Management" at page 17 "Allocation of Net Income and
Losses and Cash Distributions" at pages 34-36 of the Prospectus as
supplemented, incorporated in the Form S-11 Registration Statement
which was filed with the Securities and Exchange Commission and
made effective on July 6,1984 and incorporated herein by reference.
See Note 5 to the Financial Statements for detailed information
concerning fees paid to Univesco, Inc. (an affiliate of the General
Partner).
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K
(A) 1. See accompanying Financial Statements Index
2. Additional financial information required to be furnished:
Schedule III- Real Estate and Accumulate Depreciation.
3. Exhibits
None.
(B) Reports on Forms 8-K for the quarter ended December 31, 1997.
None.
(C) Exhibits
3. Certificate of Limited Partnership, incorporated by reference
to Registration Statement No. 2-90654 effective July 6, 1984.
4. Limited Partnership Agreement, incorporated by reference to
Registration Statement No. 2-90654 effective July 6, 1984.
9. Not Applicable
10. Not Applicable
11. Not Applicable
12. Not Applicable
13. Not Applicable
18. Not Applicable
19. Not Applicable
22. Not Applicable
23. Not Applicable
24. Not Applicable
25. Power of Attorney, incorporated by reference to Registration
Statement No. 2-90654 effective July 5, 1984.
28. None
<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.
AMERICAN REPUBLIC REALTY FUND II
ROBERT J. WERRA, GENERAL PARTNER
/s/ Robert J. Werra
March 30, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH
THE DECEMBER 31, 1997 BALANCE SHEET AND STATEMENT OF INCOME AND EXPENSES
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000745061
<NAME> AMRECORP REALTY FUND II
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 593,721
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,140,939
<DEPRECIATION> 2,539,125
<TOTAL-ASSETS> 3,408,048
<CURRENT-LIABILITIES> 0
<BONDS> 2,396,692
0
0
<COMMON> 0
<OTHER-SE> 843,133
<TOTAL-LIABILITY-AND-EQUITY> 3,408,048
<SALES> 0
<TOTAL-REVENUES> 792,138
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 613,094
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 243,185
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,265,944
<EPS-PRIMARY> 86.17
<EPS-DILUTED> 0
</TABLE>
