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, 1999
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934 (No Fee Required)
For the Transaction Period from ________ to ________
Commission File Number 2-90654
AMRECORP REALTY FUND II
(Exact name of registrant as specified in its charter)
Texas 75-1956009
(State or Other Jurisdiction of (I.R.S. Employer
(Incorporation or Organization) (Identification Number)
6210 Campbell Road, Suite 140, Dallas, Texas 75248
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including area code(972) 380-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on
which Registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-k or any Amendment to the Form 10-k. _______
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No .
Documents Incorporated by Reference
The Prospectus dated July 6, 1985 filed pursuant to Rule 424(b) as
supplemented pursuant to Rule 424(b) on December 11, 1985
Part I
Item 1. Business
The Registrant, Amrecorp Realty Fund II, (the "Partnership"), is a
limited partnership organized under the Texas Uniform Limited
Partnership Act pursuant to a Certificate of Limited Partnership
dated April 16, 1984 and amended on July 5, 1984. As of
December 31, 1998, the Partnership consisted of an individual
general partner, Mr. Robert J. Werra (the "General Partner") and
2,054 limited partners owning 14,544 limited partnership interests
at $1,000 per interest. The distribution of limited partnership
interests commenced pursuant to a Registration Statement on Form
S-11 under the Securities Act of 1933 (Registration #2-90654) as
amended.
The Partnership was organized to acquire a diversified portfolio of
income-producing real properties, primarily apartments, as well as
office buildings, industrial buildings, and other similar
properties. The Partnership intends to continue until December 31,
2014 unless terminated by an earlier sale of its Properties.
The General Partner manages the affairs of the Partnership and acts
as the Managing Agent with respect to the Partnership's properties.
The General Partner may also engage other on-site property managers
and other agents, to the extent the General Partner considers
appropriate. The General Partner makes all decisions regarding
investments in and disposition of properties and has ultimate
authority regarding all property management decisions.
The Partnership competes in the residential and commercial rental
markets. The General Partner prepared market analyses for the
property areas and determined these areas contain other like
properties which may be considered competitive on the basis of
location, amenities and rental rates.
No material expenditure has been made or is anticipated for either
Partnership-sponsored or consumer research and development
activities relating to the development or improvement of facilities
or services provided by the Partnership. There neither has been,
nor are any anticipated, material expenditures required to comply
with any Federal, State or local environmental provisions which
would materially affect the earnings or competitive position of the
Partnership.
The Partnership is engaged solely in the business of real estate
investments. Its business is believed by management to fall
entirely within a single industry segment. Management does not
anticipate that there will be any material seasonal effects upon
the operation of the Partnership.
Competition and Other Factors
The majority of the Properties' leases are of six to twelve month
terms. Accordingly, operating income is highly susceptible to
varying market conditions. Occupancy and local market rents are
driven by general market conditions which include job creation, new
construction of single and multi-family projects, and demolition
and other reduction in net supply of apartment units.
On the property owned at December 31, 1999, 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, 1999 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.
Occupancy Rates
Per cent
1995 1996 1997 1998 1999
Lancaster Shopping Center 89.0% NA NA NA NA
Chimney Square 90.9% 95.6% 90.6% 93.8% 97.0%
Shorewood Apartments 94.9% 94.0% NA NA NA
The property is encumbered by a non-recourse mortgage payable. For
information regarding the encumbrances to which the property is
subject and the status of the related mortgage loan, see
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" contained
in Item 7 hereof and Note B to the Financial Statements and
Schedule Index contained in Item 8.
Item 3. Legal Proceedings
The Partnership is not engaged in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Unit Holders
There were no matters submitted to a vote of unit holders during
the fourth quarter of the fiscal year.
By virtue of its organization as a limited partnership, the
Partnership has outstanding no securities possessing traditional
voting rights. However, as provided and qualified in the Limited
Partnership Agreement, limited partners have voting rights for,
among other things, the removal of the General Partner and
dissolution of the Partnership.
PART II
Item 5. Market for Registrant's Units and Related Unit-holders
Matters
The Partnerships outstanding securities are in the form of Limited
Partnership Interests ("Interests"). As of December 31, 1999 there
were approximately 1,946 limited partners owning 14,544 limited
partnership interests at $1,000 per interest. A public market for
trading Interests has not developed and none is expected to
develop. In addition, transfer of an Interest is restricted
pursuant to Article X, Section 2, of the Limited Partnership
Agreement.
Although a public market for trading Interests has not developed,
74- Mackenzie Patterson Fund ("Mackenzie") acquired 732,
approximately 5%, of the outstanding Interests of the partnership
in 1998 (as reported in Item 12(b)). - Mackenzie Patterson Special
Fund 4 L.L.C. ("Mackenzie") acquired 441, approximately 3%, of the
outstanding Interests of the partnership in 1999 (as reported in
Item 12(b)). The registrant knows of no other activity involving
the sale or acquisition of Interest.
The General Partner continues to review the Partnership's ability
to make distributions on a quarter by quarter basis. In 1998 the
Partnership distributed $35 per $1000 unit due to the refinancing
of Chimney Square Apartments. In 1997 the Partnership distributed
$100 per $1000 unit due to the sale of Shorewood Apartments. In
1996 the Partnership distributed $50 per $1000 unit due to the sale
of Lancaster Place.
An analysis of tax income or loss allocated and cash distributed
to Investors per $1,000 unit is as follows:
YEARS TAXABLE INCOME OR TAXABLE LOSS CASH
GAIN DISTRIBUTED
1984 - 1993 $0 $910 $30
1994 0 $27 0
1995 0 $28 0
1996 $62 0 $50
1997 $143 0 $100
1998 0 $1 $35
1999 0 $0 $0
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)
1999 1998 1997 1996 1995
Limited Partner Units 14,544 14,544 14,544 14,544 14,544
Outstanding
Statement of Operations
Total Revenues $833 $810 $2,122 $1,658 $1,629
Net Income (Loss)
before extraordinary items 41 32 1,266 (135) (672)
Extraordinary Item -
Gain on debt forgiveness (a) 0 0 0 1,377 0
Extraordinary Item-loss
on extinguishment of debt 0 0 0 0 0
Net Income (Loss) 41 32 1,266 1,241 (672)
Limited Partner Net
Income(Loss) per Unit - Basic 2.81 2.17 86.17 84.51 (45.74)
Cash Distributions to
Limited Partners per Unit -
Basic 0 35 100 50 0
Balance Sheet:
Real Estate, net (b) $2,275 $2,441 $2,602 $2,777 $6,971
Real Estate assets held
for sale, Net 0 0 0 2,862 0
Total Assets 2,901 2,887 3,408 6,271 7,499
Mortgages and Notes 2,325 2,363 2,397 5,054 6,571
Payable
Partner's Equity 407 366 843 1,032 517
(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, and $671,691 of revenues for the
years ended December 31, 1997, 1996, and 1995.
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: 1999 VERSUS 1998
Revenue from Property Operations increased $22,972 or 2.84% as
compared to 1998, due to increased occupancy and rental rates.
Additionally, interest income decreased $15,421resulting from lower
invested cash balances. Other income for 1999 increased $4,072
primarily due to increased fees to residents. The following table
illustrates the increases or (decreases):
Increase/
(Decrease)
Rental income $34,321
Interest (15,421)
Other 4,072
-----------
Net Increase $22,972
===========
Property operating expenses for 1999 increased $13,450 from 1998 or
1.73%. Expenses increased primarily due to payroll which rose
$9,085 or 14.3% due to higher salaries The following table
illustrates the increases or (decreases):
Increase
(Decrease)
---------------------
Repairs and Maintenance $(2,123)
Real estate taxes 8,156
General & Admin 267
Utilities (1,842)
Payroll 9,085
Interest (3,275)
Depreciation and amortization 1,305
Property management fees 1,877
----------------------
Net Decrease $13,450
======================
Results of Operations: 1998 VERSUS 1997 -
Revenue from Property Operations decreased $1,311,975 or 61.82% as
compared to 1997, due to the sale of Shorewood Apartments. The
Partnerships' sole asset at December 31, 1998 saw revenue increase
by $37,567 or 5.13% due to higher occupancy this was offset however
by the sale of Shorewood Apartments that contributed $60,349 in
rental revenue during 1997. Additionally interest income decreased
$4,170 due from the distribution during 1998. Other income for 1998
increased $2,368 primarily due to increased fees to residents. The
following table illustrates the increases or (decreases):
Increase/
(Decrease)
Rental income $(22,782)
Interest (4,170)
Gain On sale (1,287,391)
Other 2,368
--------------
Net Increase $(1,311,975)
==============
Property operating expenses for 1998 decreased $77,838 from 1997 or
9.09%. Expenses decreased primarily due to the sale of Shorewood
Apartments. Chimney Square Apartments, the sole asset as of
December 31, 1998, saw its operating expenses increase $5,429 or
1.70%. The following table illustrates the increases or
(decreases):
Increase
(Decrease)
-----------------------
Repairs and Maintenance $(26,936)
Real estate taxes 1,344
General & Admin (8,144)
Administrative Service Fee (192)
Utilities (7,785)
Payroll (15,813)
Interest (21,354)
Depreciation and amortization 2,041
Property management fees (999)
-----------------------
Net Decrease $(77,838)
=======================
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, 1999, the Partnership had $378,479 in cash and
cash equivalents as compared to $217,493 as of December 31, 1997.
The net increase in cash of $160,986 is principally due to cash
flow from operations.
The remaining property is encumbered by this nonrecourse mortgage
as of December 31, 1999, with an interest rate of 9.325%. Required
principal payments on this mortgage note for the five years ended
December 31, 2004, are $40,717, $44,680, $49,029 $53,802 and
$59,039 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.
Item 7a - Quantitative and Qualitative Disclosure about Market
Risk
Market Risk
The Partnership is exposed to interest rate changes primarily as a
result of its real estate mortgages. The Partnerships interest
rate risk management objective is to limit the impact of interest
rate changes on earnings and cash flows and to lower its overall
borrowing costs. To achieve its objectives, the partnership
borrows primarily at fixed rates. The partnership does not enter
into derivative or interest rate transactions for any purpose.
The Partnerships' activities do not contain material risk due to
changes in general market conditions. The partners invests only in
fully insured bank certificates of deposits, and mutual funds
investing in United States treasury obligations.
Risk Associated with Forward-Looking Statements Included in this
Form 10-K This Form 10-K contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934,
which are intended to be covered by the safe harbors created
thereby. These statements include the plans and objectives of
management for future operations, including plans and objectives
relating to capital expenditures and rehabilitation costs on the
Properties. The forward-looking statements included herein are
based on current expectations that involve numerous risks and
uncertainties. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions,
all of which are difficult or impossible to predict accurately and
many of which are beyond the control of the Company. Although the
Company believes that the assumptions underlying the forward-
looking statements are reasonable, any of the assumptions could be
inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this Form 10-K will prove to
be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the
Company will be achieved.
AMRECORP REALTY FUND II
FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORTS
December 31, 1999 and 1998
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Reports 1
Financial Statements
Balance Sheets as of December 31, 1999 and 1998 3
Statements of Income for the years ended December 31, 1999,
1998 and 1997 4
Statements of Partners' Equity (Deficit) for the years ended
December 31, 1999, 1998, and 1997 5
Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997 6
Notes to Financial Statements 7
Schedule III - Real Estate and Accumulated Depreciation 13
All other schedules have been omitted because they are not
applicable, not required or the information has been supplied
in the financial statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partners of
Amrecorp Realty Fund II
We have audited the accompanying balance sheets of Amrecorp
Realty Fund II, a Texas limited partnership (the "Partnership")
as of December 31, 1999 and 1998, and the related statements of
income, partners' equity (deficit), and cash flows for the years
then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our 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 presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the December 31, 1999 and 1998 financial
statements referred to above present fairly, in all material
respects, the financial position of Amrecorp Realty Fund II as of
December 31, 1999 and 1998, and the results of its operations and
its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. Schedule III for
the year ended December 31, 1999 and 1998 is presented for the
purpose of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic
financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial
statements and, in our opinion, fairly states, in all material
respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
January 21, 2000
Dallas, Texas
INDEPENDENT AUDITORS' REPORT
To the General Partner
and Limited Partners of
Amrecorp Realty Fund II
Dallas, Texas
We have audited the accompanying statements of operations,
partners' equity (deficit) and cash flows of Amrecorp Realty Fund
II (a Texas limited partnership) (the "Partnership") for the year
ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility
is to express an opinion on the financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the results of operations and cash flows for
the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
February 23, 1998
AMRECORP REALTY FUND II
BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
Investments in real estate at cost
Land $580,045 $580,045
Buildings, improvements and furniture and fixtures
4,617,978 4,590,987
--------------------------
5,198,023 5,171,032
Accumulated depreciation (2,923,170) (2,730,495)
--------------------------
2,274,853 2,440,537
Cash and cash equivalents 378,479 217,493
Deferred financing costs, net of accumulated
amortization of $52,221 and $45,379, respectively 35,352 42,194
Escrow deposits 205,850 179,757
Other assets 6,681 6,552
--------------------------
TOTAL ASSETS 2,901,215 2,886,533
==========================
LIABILITIES AND PARTNERS' EQUITY
Mortgage payable 2,325,774 2,362,879
Accounts payable and accrued expenses 105,498 94,466
Due to affiliates 977 1,284
Accrued interest payable 18,161 18,384
Distributions payable 24,675 26,420
Security deposits 18,901 17,200
--------------------------
TOTAL LIABILITIES 2,493,986 2,520,633
PARTNERS' EQUITY 407,229 365,900
--------------------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $2,901,215 $2,886,533
==========================
AMRECORP REALTY FUND II
STATEMENTS OF INCOME
For the Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
---------------------------------------
INCOME
Rentals $803,677 $769,356 $792,138
Interest 13,576 28,997 33,167
Other 15,967 11,895 9,527
Gain on sale of property --- --- 1,287,391
---------------------------------------
Total income 833,220 810,248 2,122,223
OPERATING EXPENSES
Interest 218,556 221,831 243,185
Depreciation and amortization 199,517 198,212 196,171
Real estate taxes 90,376 82,220 80,876
Payroll 72,655 63,570 79,383
Repairs and maintenance 71,140 73,263 100,199
General and administrative 65,220 64,953 73,097
Property management fee to affiliate 41,061 39,184 40,183
Utilities 27,894 29,736 37,521
Administrative services fees to
affiliate 5,472 5,472 5,664
---------------------------------------
Total operating expenses 791,891 778,441 856,279
---------------------------------------
NET INCOME $41,329 $31,807 $1,265,944
=======================================
NET INCOME PER LIMITED PARTNERSHIP
UNIT - BASIC
Net income per unit - basic $2.81 $2.17 $86.17
=======================================
LIMITED PARTNERSHIP UNITS
OUTSTANDING - BASIC 14,544 14,544 14,544
=======================================
AMRECORP REALTY FUND II
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1999, 1998 and 1997
General Limited
Partner Partners Total
---------------------------------------------
Balance, January 1, 1997 $(102,565) $1,134,154 $1,031,589
Distributions --- (1,454,400) (1,454,400)
Net income 12,659 1,253,285 1,265,944
---------------------------------------------
Balance, December 31, 1997 (89,906) 933,039 843,133
Distributions --- (509,040) (509,040)
Net income 318 31,489 31,807
---------------------------------------------
Balance, December 31, 1998 (89,588) 455,488 365,900
Net income 413 40,916 41,329
---------------------------------------------
Balance, December 31, 1999 $(89,175) $496,404 $407,229
=============================================
AMRECORP REALTY FUND II
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
--------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $41,329 $31,807 $1,265,944
Adjustments to reconcile net income to
net cash provided by operations:
Gain on sale of assets --- --- (1,287,391)
Depreciation and amortization 199,517 198,212 196,171
Changes in assets and liabilities:
Escrow deposits (5,432) (11,482) 221
Deferred costs --- --- 29,599
Other assets (129) 2,244 9,070
Accrued interest payable (223) (240) (17,203)
Due to affiliates (307) (7,490) 1,920
Accounts payable and accrued expenses 11,032 (2,139) (6,414)
Security deposits 1,701 400 (23,202)
---------------------------------------
Net cash provided by operating
activities 247,488 211,312 168,715
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in real estate (26,991) (30,093) (13,571)
Proceeds from sale of assets, net --- --- 4,149,635
Deposits to reserve for replacements (33,806) (34,649) (35,366)
Disbursements from reserve for
replacements 13,145 21,055 46,534
---------------------------------------
Net cash provided by (used for)
investing activities (47,652) (43,687) 4,147,232
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on mortgages and notes payable (37,105) (33,813) (2,657,381)
Distributions --- (509,040) (1,454,400)
Distributions payable (1,745) (1,000) 27,420
---------------------------------------
Net cash used for financing activities (38,850) (543,853) (4,084,361)
---------------------------------------
Net increase (decrease) in cash and cash
equivalents 160,986 (376,228) 231,586
Cash and cash equivalents at beginning
of period 217,493 593,721 362,135
---------------------------------------
Cash and cash equivalents at end
of period $378,479 $217,493 $593,721
=======================================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $218,779 $222,071 $260,388
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Amrecorp Realty Fund II (the "Partnership"), a Texas limited
partnership, was formed on April 16, 1984, under the laws of
the state of Texas, for the purpose of acquiring,
maintaining, developing, operating, and selling buildings
and improvements. The Partnership owns and operates rental
apartments in Abilene, Texas. During the year ended December
31, 1997, the Partnership owned and operated an additional
apartment complex in Charlotte, North Carolina. In 1997, the
Partnership sold the apartment complex located in Charlotte,
North Carolina and recognized a gain of $1,287,391. Net
proceeds received as a result of this sale amounted to
$4,149,635. The Partnership will be terminated by December
31, 2014, although this date can be extended if certain
events occur. The general partner is Mr. Robert J. Werra.
An aggregate of 25,000 units at $1,000 per unit are
authorized, of which 14,544 were outstanding for each of the
three years ended December 31, 1999. Under the terms of the
offering, no additional units will be offered.
ALLOCATION OF NET INCOME (LOSS) AND CASH
Net income and net operating cash flow, as defined in the
limited partnership agreement, are allocated first to the
limited partners in an amount equal to a distribution
preference (as defined) on capital contributions from the
first day of the month following their capital contribution
and thereafter generally 10% to the general partner and 90%
to the limited partners. Net loss is allocated 1% to the
general partner and 99% to the limited partners.
Net income from the sale of property is allocated first, to
the extent there are cumulative net losses, 1% to the
general partner and 99% to the limited partners; second, to
the limited partners in an amount equal to their
distribution preference as determined on the date of the
partners' entry into the Partnership; and, thereafter, 15%
to the general partner and 85% to the limited partners.
Cash proceeds from the sale of property or refinancing are
allocated first to the limited partners to the extent of
their capital contributions and distribution preference as
determined on the date of the partners' entry into the
Partnership; and, thereafter, 15% to the general partner and
85% to the limited partners.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Basis of Accounting
The Partnership maintains its books on the basis of
accounting used for federal income tax reporting purposes.
Memorandum entries have been made to present the
accompanying financial statements in accordance with
generally accepted accounting principles.
Investments in Real Estate and Depreciation
Buildings, improvements, and furniture and fixtures are
recorded at cost and depreciated using the straight-line
method over the estimated useful lives of the assets ranging
from 5 to 25 years.
Income Taxes
No provision for income taxes has been made since the
partners report their respective share of the results of
operations on their individual income tax return.
Revenue Recognition
The Partnership has leased substantially all of its rental
apartments under cancelable leases for periods generally
less than one year. Rental revenue is recognized on a
monthly basis as earned.
Deferred Financing Costs
Costs incurred to obtain mortgage financing are being
amortized over the life of the mortgage using the straight-
line method.
Syndication Costs
Costs or fees incurred to raise capital for the Partnership
are netted against the respective partners' equity accounts.
Cash and Cash Equivalents
The Partnership considers all highly liquid instruments with
a maturity of three months or less to be cash equivalents.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Long-Lived Assets
In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting For the Impairment
of Long-Lived Assets and For Long-Lived Assets to be
Disposed Of", the Partnership records impairment losses on
long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the
assets' carrying amount. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be
disposed of. Based on current estimates, management does
not believe impairment of operating properties is present.
Computation of Earnings Per Unit
The Partnership has adopted Statement of Financial
Accounting Standards ("SFAS") No.128, "Earnings per Share".
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.
Concentration of Credit Risk
Financial instruments which potentially subject the
Partnership to concentrations of credit risk consist
primarily of cash. The Partnership places its cash with
various financial institutions. The Partnership's exposure
to loss should any of these financial institutions fail
would be limited to any amount in excess of the amount
insured by the Federal Deposit Insurance Corporation.
Management does not believe significant credit risk exists
at December 31, 1999.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during that reporting period. Actual results
could differ from those estimates.
Environmental Remediation Costs
The Partnership accrues for losses associated with
environmental remediation obligations when such losses are
probable and reasonably estimable. Accruals for estimated
losses from environmental remediation obligations generally
are recognized no later than completion of the remedial
feasibility study. Such accruals are adjusted as further
information develops or circumstances change. Costs of
future expenditures for environmental remediation
obligations are not discounted to their present value.
Recoveries of environmental remediation costs from other
parties are recorded as assets when their receipt is deemed
probable. Project management is not aware of any
environmental remediation obligations that would materially
affect the operations, financial position or cash flows of
the Project.
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Comprehensive Income
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, (SFAS 130), requires that
total comprehensive income be reported in the financial
statements. For the years ended December 31, 1999, 1998,
and 1997, the Partnership's comprehensive income was equal
to its net income and the Partnership does not have income
meeting the definition of other comprehensive income.
Segment Information
The Partnership is in one business segment, the real estate
investments business, and follows the requirements of FAS
131, "Disclosures about Segments of an Enterprise and
Related Information."
NOTE B - MORTGAGE PAYABLE
Mortgage payable of $2,325,774 and $2,362,879 at December
31, 1999 and 1998, respectively, bears interest at a rate of
9.325% and is payable in monthly installments of principal
and interest of $21,324 through March 2005, at which time a
lump sum payment of approximately $2,089,000 is due. This
mortgage note is secured by real estate with a net book
value of $2,440,537.
At December 31, 1999, required principal payments due under
the stated terms of the Partnership's mortgage note payable
are as follows
2000 $40,717
2001 44,680
2002 49,029
2003 53,082
2004 59,039
Thereafter 2,079,227
--------------
$2,325,774
==============
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE C - RELATED PARTY TRANSACTIONS
The Partnership agreement specifies that certain fees be
paid to the general partner or his designee. An affiliate
of the general partner receives a property management fee
that is 5% of the Partnership's gross receipts.
Additionally, the Partnership reimburses the affiliate for
administrative expenditures. The following fees and
reimbursements earned by an affiliate of the general partner
in 1999, 1998 and 1997:
1999 1998 1997
-----------------------------------------
Property management fee $41,061 $39,184 $40,183
Administrative service fee 5,472 5,472 5,664
Resulting from the above transactions, amounts due an
affiliate of the general partner as of December 31, 1999 and
1998, totaled $977 and $1,284, respectively.
NOTE D - COMMITMENTS
The Partnership will pay a real estate commission to the
general partner or his affiliates in an amount not exceeding
the lessor of 50% of the amounts customarily charged by
others rendering similar services or 3% of the gross sales
price of a property sold by the Partnership. No such fees
were paid to Univesco in connection with the 1997 disposal.
NOTE E - RECONCILIATION OF BOOK TO TAX LOSS (UNAUDITED)
If the accompanying financial statements had been prepared
in accordance with the accrual income tax basis of
accounting rather than generally accepted accounting
principals ("GAAP"), the excess of expenses over revenues
for 1999 would have been as follows:
Net income per accompanying financial statements $41,329
Add - book basis depreciation using
straight-line method 192,675
Deduct - income tax basis depreciation
expense using ACRS method (236,252)
---------------
Excess of expenses over revenues,
accrual income tax basis $(2,248)
AMRECORP REALTY FUND II
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE F - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been
determined using available market information or other
appropriate valuation methodologies that require
considerable judgement in interpreting market data and
developing estimates. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that
the Partnership could realize in a current market exchange.
The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated
fair value amounts.
The fair value of financial instruments that are short-term
or reprice frequently and have a history of negligible
credit losses is considered to approximate their carrying
value. These include cash and cash equivalents, accounts
payable and other liabilities.
Management has reviewed the carrying values of its mortgages
payable and notes payable to related parties in connection
with interest rates currently available to the Partnership
for borrowings with similar characteristics and maturities
and has determined that their estimated fair value would
approximate their carrying value as of December 31, 1999 and
1998.
The fair value information presented herein is based on
pertinent information available to management. Although
management is not aware of any factors that would
significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes
of these financial statements since that date, and
therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
AMRECORP REALTY FUND II
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1999
Initial Cost
to Partnership
------------------------------------
Description Encumb Land Building Total Cost
rances and Subsequent to
Improve Acquisition
ments
A 128-unit
two-story
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 $276,409
============================================================
Gross Amounts at Which
Carried at Close of Year
--------------------------------------
Land Buildings Total Accumulated Date of Date Life on
and (c)(d) Depreciation Construc Acquired Which
Improve tion Deprecia
ments tion is
Computed
Complete
at date
$580,045 $4617,978 $5,198,023 $2,923,170 acquired 11/1/84 (a)
================================================
See notes to Schedule III.
AMRECORP REALTY FUND II
Schedule III - Real Estate and Accumulated Depreciation (Continued)
December 31, 1999
NOTES TO SCHEDULE III:
(a) See Note A to financial statements outlining depreciation methods
and lives.
(b) See description of mortgages and notes payable in Note B to
the financial statements.
(c) The reconciliation of investments in real estate and accumulated
depreciation for the years ended December 31, 1999,
1998 and 1997 is as follows:
Investments Accumulated
in Real Depreciation
Estate
------------------------------------
Balance, January 1, 1997 $9,975,915 $4,336,679
Acquisitions 13,571 ---
Depreciation expense --- 188,749
Sale of real estate (4,848,547) (1,986,303)
------------------------------------
Balance, December 31, 1997 5,140,939 2,539,125
Acquisitions 30,093 ---
Depreciation expense --- 191,370
------------------------------------
Balance, December 31, 1998 5,171,032 2,730,495
Acquisitions 26,991 ---
Depreciation expense --- 192,675
------------------------------------
Balance, December 31, 1999 $5,198,023 $2,923,170
====================================
(d) Aggregate cost for federal income tax purposes is $5,215,616.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
On November 6, 1998, an 8-K was filed to disclose the change in
auditors. No financial statements were issued in conjunction with
this filing. The Registrant has not been involved in any
disagreements on accounting and financial disclosure.
PART III
Item 10. Directors and Executive Officers of the Partnership
The Partnership itself has no officers or directors. Robert J.
Werra is the General Partner of the Partnership.
Robert J. Werra, 60, the General Partner, Mr. Werra joined Loewi &
Co., Incorporated ("Loewi") in 1967 as a Registered Representative.
In 1971, he formed the Loewi real estate department, and was
responsible for its first sales of privately placed real estate
programs. Loewi Realty was incorporated in 1974, as a wholly owned
subsidiary of Loewi & Co., with Mr. Werra as President. In 1980,
Mr. Werra along with three others formed Amrecorp Inc. to purchase
the stock of Loewi Real Estate Inc., and Loewi Realty. In 1991
Univesco, Inc. became the management agent for the Partnership.
Limited Partners have no right to participate in management of the
Partnership.
Item 11. Management Remuneration and Transactions
As stated above, the Partnership has no officers or directors.
Pursuant to the terms of the Limited Partnership Agreement, the
General Partner receives 1% of Partnership income and loss up to
15% of the net proceeds received from sale or refinancing of
Partnership properties (after return of Limited Partner capital
contributions and payments of a 6% Current Distribution Preference
thereon).
Univesco, Inc., an affiliate of the General Partner, is entitled to
receive a management fee with respect to the properties actually
managed of 5% of actual gross receipts from a property or an amount
competitive in price or terms for comparable services available
from a non-affiliated persons. The Partnership is also permitted
to engage in various transactions involving affiliates of the
General Partner as described under the caption "Compensation and
Fees" at pages 6-8, "Management" at page 17 "Allocation of Net
Income and Losses and Cash Distributions" at pages 34-36 of the
Prospectus as supplemented, incorporated in the Form S-11
Registration Statement which was filed with the Securities and
Exchange Commission and made effective on May 2, 1983.
For the Fiscal year ended December 31, 1999, 1998 and 1997,
property management fees earned totaled $41,061,$39,184,and,
$40,183, respectively. An additional administration service fee
was paid to the general partner of $5,472,$5,472, and $5,664, for
the years ended December 31, 1999, 1998 and 1997, respectively.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) No one owns of record, except as noted in Item (b) below, and
the General Partner knows of no one who owns beneficially, more
than five percent of the Interests in the Partnership, the only
class of securities outstanding.
(b) By virtue of its organization as a limited partnership, the
Partnership has no officers or directors. Persons performing
functions similar to those of officers and directors of the
Partnership, beneficially own, the following units of the
Partnership as of March 1, 2000.
Title Name of Amount and Nature Percent of
of Class Beneficial Owner of Beneficial Interest
Ownership
- ------------------------------------------------------------------------------
Limited Robert J. Werra 86 units 0.59%
Partnership 6210 Campbell Rd. #140
Interests Dallas, Texas 75248
Limited 74-Mackenzie Patterson Fund 732 units 5.033%
Partnership 1640 School St #100
Interests Morgana, CA 94556
Limited Mackenzie Patterson Special 441 units 3.032%
Partnership Fund 4 L.L.C.
Interests 1640 School St #100
Morgana, CA 94556
(c)There is no arrangement, known to the Partnership, which may, at
a subsequent date, result in a change in control of the
Partnership.
Item 13. Certain Relationships and Related Transactions
As stated Item 11, the Partnership has no officers or directors.
Pursuant to the terms of the Limited Partnership Agreement, the
General Partner receives 1% of Partnership income and loss up to
15% of the net proceeds received from sale or refinancing of
Partnership properties (after return of Limited Partner capital
contributions and payments of a 6% Current Distribution Preference
thereon).
Univesco, Inc., an affiliate of the General Partner, is entitled to
receive a management fee with respect to the properties actually
managed by the corporate general partner. For nonresidential
properties (including all leasing and releasing fees and fees for
leasing related services) the management fee is lessor of 6% of
gross receipts from the Partnership from such properties or an
amount which is competitive in price and terms with other non-
affiliated persons rendering comparable services which would
reasonably be made available to the Partnership. For residential
properties ( including all leasing and releasing fees and fees for
leasing related services), the lessor of 5% of gross receipts of
the Partnership from such properties or an amount which is
competitive in price or terms with other non-affiliated persons
rendering comparable services which could reasonably be made
available to the Partnership. The Partnership is also permitted to
engage in various transactions involving affiliates of the General
Partner as described under the caption "Compensation and Fees" at
pages 6-8, "Management" at page 17 "Allocation of Net Income and
Losses and Cash Distributions" at pages 34-36 of the Prospectus as
supplemented, incorporated in the Form S-11 Registration Statement
which was filed with the Securities and Exchange Commission and
made effective on July 6,1984 and incorporated herein by reference.
See Note C to the Financial Statements for detailed information
concerning fees paid to Univesco, Inc. (an affiliate of the General
Partner).
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K
(A) 1. See accompanying Financial Statements Index
2. Additional financial information required to be furnished:
Schedule III- Real Estate and Accumulate Depreciation.
3. Exhibits
None.
(B) Reports on Forms 8-K for the quarter ended December 31, 1999.
November 6, 1998, an 8-K was filed to disclose the change
in auditors. No financial statements were issued in conjunction
with this filing.
(C) Exhibits
3. Certificate of Limited Partnership, incorporated by reference
to Registration Statement No. 2-90654 effective July 6, 1984.
4. Limited Partnership Agreement, incorporated by reference to
Registration Statement No. 2-90654 effective July 6, 1984.
9. Not Applicable
10. Not Applicable
11. Not Applicable
12. Not Applicable
13. Not Applicable
18. Not Applicable
19. Not Applicable
22. Not Applicable
23. Not Applicable
24. Not Applicable
25. Power of Attorney, incorporated by reference to Registration
Statement No. 2-90654 effective July 5, 1984.
28. None
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMRECORP REALTY FUND II
ROBERT J. WERRA, GENERAL PARTNER
/s/ Robert J. Werra
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH
THE DECEMBER 31, 1999 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-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 378,479
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,198,023
<DEPRECIATION> 2,923,170
<TOTAL-ASSETS> 2,901,215
<CURRENT-LIABILITIES> 0
<BONDS> 2,325,774
0
0
<COMMON> 0
<OTHER-SE> 407,229
<TOTAL-LIABILITY-AND-EQUITY> 2,901,215
<SALES> 0
<TOTAL-REVENUES> 833,220
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 573,335
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218,556
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,329
<EPS-BASIC> 2.81
<EPS-DILUTED> 0
</TABLE>
