<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-15726
SUMMIT TAX EXEMPT L.P. II
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(Exact name of Registrant as specified in its charter)
Delaware 13-3370413
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, N.Y. 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
Beneficial Unit Certificates
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(Title of class)
[/TABLE]
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 CK No__
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 this Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [CK]
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Annual Report to BUC$holders for the year ended December 31,
1994 is incorporated by reference to Parts I, II and IV of this Annual Report on
Form 10-K
Agreement of Limited Partnership, dated July 2, 1986, included as part of the
Registration Statement filed with the Securities and Exchange Commission
pursuant to Rule 424(b) under the Securities Act of 1933 is incorporated by
reference into Part IV of this Annual Report on Form 10-K
Index to exhibits can be found on pages 11 through 14.
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
TABLE OF CONTENTS
PART I PAGE
Item 1 Business.......................................... 3
Item 2 Properties........................................ 6
Item 3 Legal Proceedings................................. 6
Item 4 Submission of Matters to a Vote of BUC$holders.... 6
PART II
Item 5 Market for the Registrant's BUC$ and Related
BUC$holder Matters.............................. 6
Item 6 Selected Financial Data........................... 7
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of
Operations...................................... 7
Item 8 Financial Statements and Supplementary Data....... 7
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial
Disclosure...................................... 7
PART III
Item 10 Directors and Executive Officers of the
Registrant...................................... 7
Item 11 Executive Compensation............................ 9
Item 12 Security Ownership of Certain Beneficial Owners
and Management.................................. 9
Item 13 Certain Relationships and Related Transactions.... 10
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K
Financial Statements and Financial Statement
Schedules....................................... 11
Exhibits.......................................... 11
Reports on Form 8-K............................... 14
SIGNATURES....................................................... 17
2
<PAGE>
PART I
Item 1. Business
General
Summit Tax Exempt L.P. II, a Delaware limited partnership (the
``Registrant''), was formed on April 11, 1986 and will terminate on December 31,
2020 unless terminated sooner under the provisions of the Agreement of Limited
Partnership (the ``Partnership Agreement''). The Registrant was formed to invest
in tax-exempt participating first mortgage revenue bonds (``First Mortgage
Bonds'' or ``FMBs'') issued by various state or local governments or their
agencies or authorities. These investments were made with proceeds from the
initial sale of 9,151,620 Beneficial Unit Certificates (``BUC$''). The FMBs are
secured by participating first mortgage loans (``Mortgage Loans'') on
multi-family residential apartment properties (``Properties'') developed by
unaffiliated developers. The Properties are garden apartment projects
diversified nationwide. The Registrant's fiscal year for book and tax purposes
ends on December 31.
The Registrant is engaged solely in the business of investing in FMBs;
therefore, presentation of industry segment information is not applicable.
General Partners
The general partners of the Registrant are Prudential-Bache Properties, Inc.
(``PBP'') and Related Tax Exempt Associates II, Inc. (the ``Related General
Partner'') (collectively, the ``General Partners''). Related BUC$ Associates II,
Inc. (the ``Assignor Limited Partner''), which acquired and holds limited
partnership interests on behalf of those persons who purchase BUC$, has assigned
to those persons substantially all of its rights and interest in and under such
limited partnership interests. The Related General Partner and the Assignor
Limited Partner are under common ownership.
Competition
The General Partners and/or their affiliates have formed, and may continue to
form, various entities to engage in businesses which may be competitive with the
Registrant.
The Registrant's business is affected by competition to the extent that the
underlying Properties from which it derives interest and, ultimately, principal
payments may be subject to competition relating to rental rates and amenities
from comparable neighboring properties.
Structure of First Mortgage Bonds
The principal and interest payments on each FMB are payable only from the
cash flows, including proceeds in the event of a sale, from the Properties
underlying the FMBs. None of these FMBs constitutes a general obligation of any
state or local government, agency or authority. The FMBs are secured by the
Mortgage Loans on the underlying Properties and the structure of each Mortgage
Loan mirrors the structure of the corresponding FMB.
Unless otherwise modified, the principal of the FMBs will not be amortized
during their respective terms (which are generally up to 24 years) and will be
required to be repaid in lump sum ``balloon'' payments at the expiration of the
respective terms or at such earlier times as the Registrant may require pursuant
to the terms of the bond documents. The Registrant has a right to require
redemption of the FMBs approximately twelve years after their issuance. The
Registrant anticipates holding the FMBs for approximately 12 to 15 years from
the date of issuance; however, it can elect to hold to maturity.
In addition to the stated base rates of interest ranging from 4.87% to 8.25%
per annum, each of the FMBs provides for ``contingent interest'' which is equal
to: (a) an amount equal to 50% to 100% of net property cash flow and 75% to 100%
of net sale or refinancing proceeds until the borrower has paid, during the
post-construction period, annually compounded interest at a rate ranging from
9.0% to 9.25% on a cumulative basis and thereafter (b) an amount equal to 25% to
50% of the remaining net property cash flow and 25% to 50% of the remaining net
sale or refinancing proceeds until the borrower has paid a cumulative interest
at a simple annual rate of 16% over the terms of the FMBs. Both the stated and
contingent interest are exempt from federal income taxation.
3
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In order to protect the tax-exempt status of the FMBs, the owners of
Properties are required to enter into certain agreements to own, manage and
operate such Properties in accordance with requirements of the Internal Revenue
Code.
Bond Modifications/Forbearance Agreements
The following table lists the FMBs that the Registrant owns together with the
occupancy and current rental rates of the underlying properties:
<TABLE>
<CAPTION>
Average Minimum Occupancy
Face Final Stated Interest Pay Rate February No.
Closing Amount Completion Interest Rate Paid* December 12, Rental of Rental
Property Date of Bond Date Rate* in 1994 1994 1995 Rates Units
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
Bay Club, Mt. 9/11/86 $ 6,400,000 12/87 8.25% 6.92% 7.00%(A) 98.7% $480-630 160
Pleasant, SC
Loveridge, Contra 11/13/86 8,550,000 3/87 8.00 8.00 8.00 93.9 570-800 148
Costa, Ca
The Lakes, Kansas 12/30/86 13,650,000 1/89 4.87 5.00 4.87 99.0 350-540 400
City, Mo
Crowne Pointe, 12/31/86 5,075,000 6/87 8.00 8.00 8.00 89.9 475-775 160
Olympia, Wa
Orchard Hills, 12/31/86 5,650,000 9/87 8.00 8.00 8.00 90.9 445-720 176
Tacoma, Wa
Highland Ridge, St. 2/2/87 15,000,000 1/89 8.00 8.00 8.00 96.4 645-1,120 228
Paul, Mn
Newport Village, 2/11/87 13,000,000 2/87 8.00 7.27 7.00 91.4 435-595 402
Tacoma, Wa
Sunset Downs, 2/11/87 15,000,000 7/87 8.00 7.40 7.50 89.4 450-650 264
Lancaster, Ca
Pelican Cove, St 2/27/87 18,000,000 11/89 8.00 7.14 7.50(C) 99.2 440-620 402
Louis, Mo
Willow Creek, Ames, 2/27/87 6,100,000 8/88 8.00 8.00 8.00 100.0 475-750 138
Ia
Cedar Pointe, 4/22/87 9,500,000 9/89 8.00 8.00 8.00 95.2 475-810 210
Nashville, Tn
Shannon Lake, 6/26/87 12,000,000 8/88 8.00 6.00 6.00 98.6 430-650 294
Atlanta, Ga
Bristol Village, 7/31/87 17,000,000 9/89 8.00 7.80 7.25 98.2 610-1,029 290
Bloomington, Mn
Suntree, Ft. Myers, 7/31/87 7,500,000 12/85 8.00 7.00 7.00 95.8 435-600 240
Fl
River Run, Miami, Fl 8/7/87 7,200,000 7/87 8.00 8.00 8.00 96.9 609-844 164
Players Club, Ft. 8/14/87 2,500,000 12/85 8.00 6.19 6.00 91.2 425-595 288
Myers, Fl (B)
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$162,125,000
------------
------------
* The rate paid represents the interest recorded by the Partnership while the stated rate represents the coupon rate of the FMB.
(A) The minimum pay rate on the FMB will increase from 7.0% to 8.25%.
(B) Summit Tax Exempt L.P. III, of which the general partners are either the same or affiliates of the General Partners of the
Registrant, acquired the other $7,200,000 of the Player's Club Bond issue.
(C) The minimum pay rate is the current cash flow of the property.
</TABLE>
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Provisions for loss on impairment of assets of $500,000 and $1,000,000 were
recorded during the years ended December 31, 1994 and 1993, respectively, to
record the estimated impairment of FMBs based upon an analysis of estimated cash
flows from the individual properties securing the FMBs.
The FMB for the Bay Club property was modified during 1990 when the equity
interest in the property and the related obligation of the FMB were sold by an
affiliate of the Related General Partner to an unrelated third party. The
modification provides for a new minimum pay rate of interest beginning at 6.0%
per annum for the first year (1990) increasing in annual stages to 7.5% per
annum in the seventh year (1996). The FMB provides for a fluctuation in the
minimum interest rate in any one year to defray certain rehabilitation costs.
Beginning in year eight (1997), the minimum rate of interest due and payable
will be the stated rate of 8.25%. The difference between the minimum interest
rate and the original stated rate is payable out of available future cash flow.
In addition, the contingent interest feature was changed. Under the revised
terms, after the Registrant receives the maximum rate of interest (8.25%), the
borrower will receive all excess cash flow until it receives a 10% simple
cumulative annual return on its initial investment. The Registrant will then
receive all accrued and unpaid contingent interest (0.75% per annum) and then
25% of all remaining cash flow, if any, in excess of the amount necessary to
increase the borrower's return to 12% per annum calculated on a cumulative,
compounded basis.
A forbearance agreement with the owner of the Shannon Lake property made in
1991 was further modified in April 1993 to allow the borrower to pay interest at
6.0% through December 1995. In 1992, forbearance agreements were finalized with
the owners of the Newport Village, Bristol Village, Sunset Downs, Suntree and
Players Club properties. In October 1992, the Newport Village and Bristol
Village properties began paying debt service at 6.0% and are scheduled to
increase in annual increments to the original stated rate of 8.0% in September
1996 and January 1997, respectively. In June 1992, the Sunset Downs property
began paying debt service at 7.0% and is scheduled to increase in annual
increments to the original stated rate of 8.0% in June 1996. During 1992, the
Suntree and Players Club properties began paying debt service at 7.0% which
increased to 7.25% in January 1993. In 1994, the Suntree and Players
4
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<PAGE>
Club forbearance agreements were modified to allow minimum debt service payments
to be made at 6.0% through the end of 1994. Effective January 1, 1995, the
Suntree and Players Club forbearance agreements were further modified to allow
minimum debt service payments to be made at 7.5% and 7.0%, respectively, through
the end of 1995. The difference between the rate paid and the original stated
rate for these FMBs is deferred and is payable out of available future cash flow
or ultimately from sales or refinancing proceeds.
Effective January 24, 1994, The Lakes FMB was modified to allow debt service
payments be made at 4.87% per annum with 100% of the excess property cash flow
paid to the Registrant up to a rate of 5.24% and participation in the net cash
flow thereafter. On August 31, 1994, the equity interest in The Lakes and the
related obligation of the modified FMB were sold by an affiliate of the Related
General Partner to an unrelated third party. The payment terms will continue to
require a base interest rate of 4.87%. The net cash proceeds from the sale of
approximately $487,000 paid to the Registrant as accrued and unpaid interest was
deferred and will be accreted as interest income over the remaining life of the
FMB. All other accrued and unpaid interest as well as an outstanding second
mortgage loan were forgiven.
The original owner of the underlying property and obligor of the Pelican Cove
FMB has been replaced with an affiliate of the Related General Partner who has
not made an equity investment. This entity has assumed the day-to-day
responsibilities and obligations of the underlying property. Buyers are being
sought who would make an equity investment in the underlying property and assume
the nonrecourse obligations for the FMB. Although this property is not producing
sufficient cash flow to fully service the debt, the Registrant has no present
intention to declare a default on the FMB. [This FMB is classified as an asset
held for sale in the financial statements in the Registrant's Annual Report
which is filed as an Exhibit hereto.]
The determination as to whether it is in the best interest of the Registrant
to enter into forbearance agreements on the FMBs, or alternatively, to pursue
its remedies under the loan documents, including foreclosure, is based upon
several factors. These factors include, but are not limited to, property
performance, owner cooperation and projected legal costs.
No single FMB provided interest income which exceeded 15% of the
Registrant's total revenue for any of the years ended December 31, 1994, 1993 or
1992.
Employees
The Registrant has no employees. Management and administrative services for
the Registrant are performed by the General Partners and their affiliates
pursuant to the Partnership Agreement. See Notes B and F to the financial
statements in the Registrant's Annual Report, which is filed as an exhibit
hereto.
Other Information
On October 27, 1994, an affiliate of PBP, Prudential Securities Incorporated
(``PSI''), entered into cooperation and deferred prosecution agreements (the
``Agreements'') with the Office of the United States Attorney for the Southern
District of New York (the ``U.S. Attorney''). The Agreements resolved a grand
jury investigation that had been conducted by the U.S. Attorney into PSI's sale
during the 1980's of the Prudential-Bache Energy Income Fund oil and gas limited
partnerships (the ``Income Funds''). In connection with the Agreements, the U.S.
Attorney filed a complaint charging PSI with a criminal violation of the
securities laws. In its request for a deferred prosecution, PSI acknowledged to
having made certain misstatements in connection with the sale of the Income
Funds. Pursuant to the Agreements, the U.S. Attorney will defer any prosecution
of the charge in the complaint for a period of three years, provided that PSI
complies with certain conditions during the three-year period. These include
conditions that PSI not violate any criminal laws; that PSI contribute an
additional $330 million to a pre-existing settlement fund; that PSI cooperate
with the government in any future inquiries; and that PSI comply with various
compliance-related provisions. If, at the end of the three-year period, PSI has
complied with the terms of the Agreements, the U.S. Attorney will be barred from
prosecuting PSI on the charges set forth in the complaint. If, on the other
hand, during the course of the three-year period, PSI violates the terms of the
Agreements, the U.S. Attorney can elect to pursue such charges.
5
<PAGE>
Item 2. Properties
The Registrant does not own or lease any property.
Item 3. Legal Proceedings
This information is incorporated by reference to Note G to the financial
statements of the Registrant's Annual Report which is filed as an exhibit
hereto.
Item 4. Submission of Matters to a Vote of BUC$holders
None
PART II
Item 5. Market for the Registrant's BUC$ and Related BUC$holder Matters
As of March 1, 1995, there were 9,286 holders of record owning 9,151,620
BUC$. A significant secondary market for the BUC$ has not developed and it is
not expected that one will develop in the future. There are also certain
restrictions set forth in Sections 12 and 13 of the Partnership Agreement
limiting the ability of a BUC$holder to transfer BUC$. Consequently, BUC$holders
may not be able to liquidate their investments in the event of an emergency or
for any other reason.
Cash distributions per BUC were paid during the following calendar quarters.
Distributions were funded by adjusted cash flow from operations and, in 1993,
previously undistributed cash from operations.
<TABLE>
<CAPTION>
Quarter Ended 1994 1993
------------- ----- -----
<S> <C> <C>
March 31 $.26 $.26
June 30 $.26 $.26
September 30 $.26 $.26
December 31 $.26 $.26
</TABLE>
There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Partnership Agreement. No portion of the distributions paid to BUC$holders in
1994 represents a return of capital on a generally accepted accounting
principles (GAAP) basis; however, approximately $1,398,000 of the $9,518,000
paid to BUC$holders in 1993 represent a return of capital on a GAAP basis (the
return of capital on a GAAP basis is calculated as BUC$holder distributions less
net income allocated to BUC$holders). The Registrant currently expects that cash
distributions will continue to be paid in the foreseeable future from cash
generated by operations. For discussion of other factors that may affect the
amount of future distributions, see Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 13 through 15 of the
Registrant's Annual Report which is filed as an exhibit hereto.
6
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<PAGE>
Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the financial statements of the
Registrant and the notes thereto on pages 2 through 12 of the Registrant's
Annual Report which is filed as an exhibit hereto.
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
------------ ------------ ------------ ------------ ------------
Interest income from partici-
pating first mortgage bonds $ 10,126,040 $ 10,030,502 $ 10,190,048 $ 10,399,532 $ 11,792,354
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Income from assets held
for sale, net $ 1,639,072 $ 1,513,420 $ 942,071 $ 1,142,000 $ --
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Loss on debt restructure $ -- $ -- $ -- $ -- $ 264,547
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Provision for loss on impair-
ment of assets $ 500,000 $ 1,000,000 $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net income $ 9,623,049 $ 8,285,673 $ 9,214,047 $ 9,876,279 $ 9,627,440
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net income per BUC $ 1.03 $ .89 $ .99 $ 1.06 $ 1.03
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Total assets $165,917,943 $165,778,624 $166,738,439 $167,337,238 $167,549,016
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Distributions to BUC$holders $ 9,517,685 $ 9,517,685 $ 9,536,926 $ 9,563,489 $ 9,875,536
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Distributions per BUC $ 1.0400 $ 1.0400 $ 1.0421 $ 1.0450 $ 1.0791
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
Item 7.Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 13 through 15 of the
Registrant's Annual Report, which is filed as an exhibit hereto.
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 12
of the Registrant's Annual Report, which is filed as an exhibit hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The
Registrant is managed by the General Partners.
The Registrant, the General Partners and their directors and executive
officers, and any persons holding more than ten percent of the Registrant's BUC$
are required to report their initial ownership of such BUC$ and any subsequent
changes in that ownership to the Securities and Exchange Commission on Forms 3,
4 and 5. Such executive officers, directors and BUC$holders who own greater than
ten percent of the Registrant's BUC$ are required by Securities and Exchange
Commission regulations to furnish the Registrant with copies of all Forms 3, 4
or 5 they file. All of these filing requirements were satisfied on a timely
basis. In making these disclosures, the Registrant has relied solely on written
representations of the General Partners' directors and executive officers and
BUC$holders who own greater than ten percent of the Registrant's BUC$ or copies
of the reports they have filed with the Securities and Exchange Commission
during and with respect to its most recent fiscal year.
7
<PAGE>
<PAGE>
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP and their positions with regard
to managing the Registrant are as follows:
Name Position
James M. Kelso President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
Barbara J. Brooks Vice President-Finance and Chief Financial
Officer
Robert J. Alexander Vice President and Chief Accounting Officer
Chester A. Piskorowski Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
JAMES M. KELSO, age 40, is the President, Chief Executive Officer, Chairman
of the Board of Directors and a Director of PBP. He is a Senior Vice President
of PSI. Mr. Kelso also serves in various capacities for other affiliated
companies. Mr. Kelso joined PSI in July 1981.
BARBARA J. BROOKS, age 46, is the Vice President-Finance and Chief Financial
Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in
various capacities for other affiliated companies. She has held several
positions within PSI since 1983. Ms. Brooks is a certified public accountant.
ROBERT J. ALEXANDER, age 33, is a Vice President of PBP. He is a First Vice
President of PSI. Mr. Alexander also serves in various capacities for other
affiliated companies. Prior to joining PSI in July 1992, he was with Price
Waterhouse for nine years. Mr. Alexander is a certified public accountant.
CHESTER A. PISKOROWSKI, age 51, is a Vice President of PBP and is a Senior
Vice President of PSI and is the Senior Manager of the Specialty Finance Asset
Management area. Mr. Piskorowski has held several positions with PSI since April
1972. Mr. Piskorowski is a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 52, is a Director of PBP. He is a Senior Vice
President of PSI and General Counsel of Prudential Mutual Fund Management Inc.,
an affiliate of PSI. Mr. Giordano also serves in various capacities for other
affiliated companies. He has been with PSI since July 1967.
NATHALIE P. MAIO, age 44, is a Director of PBP. She is a Senior Vice
President and Deputy General Counsel of PSI and supervises non-litigation legal
work for PSI. She joined PSI's Law Department in 1983; presently, she also
serves in various capacities for other affiliated companies.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and executive officers have
indefinite terms.
Related Tax Exempt Associates II, Inc.
The directors and executive officers of RFI are as follows:
Name Position
J. Michael Fried President and Director
Stuart J. Boesky Vice President
Alan P. Hirmes Vice President
Lawrence J. Lipton Treasurer
Stephen M. Ross Director
Lynn A. McMahon Secretary
J. MICHAEL FRIED, 50, is President and a Director of the Related General
Partner. Mr. Fried is President, a Director and a principal shareholder of
Related Capital Company (``Capital''), a real estate finance and acquisition
affiliate of the Related General Partner. In that capacity, he is the chief
executive officer of Capital, and is responsible for initiating and directing
all of Capital's syndication, finance, acquisition and investor reporting
activities. Mr. Fried practiced corporate law in New York City with the law firm
of
8
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<PAGE>
Proskauer, Rose, Goetz & Mendelsohn from 1974 until he joined Capital in 1979.
Mr. Fried graduated from Brooklyn Law School with a Juris Doctor degree, magna
cum laude; from Long Island University Graduate School with a Master of Science
degree in psychology; and from Michigan State University with a Bachelor of Arts
degree in history.
STUART J. BOESKY, 39, is Vice President of the Related General Partner. Mr.
Boesky practiced real estate and tax law in New York City with the law firm of
Shipley & Rothstein from 1984 until February 1986 when he joined Capital. From
1983 to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow,
Richard & Rothstein and from 1978 to 1980 was a consultant specializing in real
estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from
Michigan State University with a Bachelor of Arts degree and from Wayne State
School of Law with a Juris Doctor degree. He then received a Master of Law
degree in taxation from Boston University School of Law.
ALAN P. HIRMES, 40, is a Vice President of the Related General Partner. Mr.
Hirmes has been a certified public accountant in New York since 1978. Mr. Hirmes
is a Vice President of Capital. Prior to joining Capital in October 1983, Mr.
Hirmes was employed by Weiner & Co., certified public accountants. Mr. Hirmes
graduated from Hofstra University with a Bachelor of Arts degree.
LAWRENCE J. LIPTON, 38, is a Controller of the Related General Partner. Mr.
Lipton has been a certified public accountant in New York since 1989. Prior to
joining Capital. Mr. Lipton was employed by Deloitte & Touche from 1987-1991.
Mr. Lipton graduated from Rutgers College with a Bachelor of Arts degree and
from Baruch College with a Master of Business Administration degree.
STEPHEN M. ROSS, 54, is a Director of the Related General Partner. Mr. Ross
is President of The Related Companies, L.P. He graduated from The University of
Michigan with a Bachelor of Business Administration degree and from Wayne State
University School of Law. Mr. Ross then received a Master of Law degree in
taxation from New York University School of Law. He joined the accounting firm
of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York,
where he worked for two large Wall Street investment banking firms in their real
estate and corporate finance departments. Mr. Ross formed The Related Companies,
Inc. in 1972, to develop, manage, finance and acquire subsidized and
conventional apartment developments. To date, The Related Companies, Inc. has
developed multi-family properties totalling in excess of 25,000 units, all of
which it manages.
LYNN A. McMAHON, 39, is Secretary of the Related General Partner. Since 1983,
she has served as Assistant to the President of Capital. From 1978 to 1983 she
was employed at Sony Corporation of America in the Government Relations
Department.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and executive officers serve
indefinite terms.
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the General Partners for their
services. Certain officers and directors of the General Partners receive
compensation from affiliates of the General Partners, not from the Registrant,
for services performed for various affiliated entities, which may include
services performed for the Registrant; however, the General Partners believe
that any compensation attributable to services performed for the Registrant is
immaterial. See Item 13 Certain Relationships and Related Transactions for
information regarding compensation to the General Partners.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 1, 1995, the directors and officers of the Related General
Partner directly own 99.97% of the voting securities of the Related General
Partner; however, no director or officer of either General Partner owns directly
or beneficially any interest in the voting securities of PBP.
9
<PAGE>
<PAGE>
As of March 1, 1995, directors and officers of the Related General Partner
own directly or beneficially BUC$ issued by the Registrant as follows:
<TABLE>
<CAPTION>
Name of
Title of Directors and Amount and Nature of Percent of
Class Officers Beneficial Ownership Class
---------- -------------------- -------------------- ---------------
<C> <S> <C> <C>
BUC$ J. Michael Fried 6,625 BUC$** *
BUC$ Stuart J. Boesky 6,625 BUC$** *
--------------------
13,250 BUC$
--------------------
--------------------
</TABLE>
* Less than 1% of the outstanding BUC$.
** All BUC$ are owned directly by BF Security Partners (a New York general
partnership) of which Messrs. Fried and Boesky are each 50% partners.
As of March 1, 1995, no director or officer of PBP owns directly or
beneficially any BUC$ issued by the Registrant.
As of March 1, 1995, no BUC$holder beneficially owns more than five percent
(5%) of the BUC$ issued by the Registrant.
Item 13. Certain Relationships and Related Transactions
The Registrant has, and will continue to have, certain relationships with the
General Partners and their affiliates. However, there have been no direct
financial transactions between the Registrant and the directors or officers of
the General Partners.
Reference is made to Notes B and F to the financial statements in the
Registrant's Annual Report which is filed as an exhibit hereto, which identify
the related parties and discuss the services provided by these parties and the
amounts paid or payable for their services.
10
<PAGE>
<PAGE>
PART IV
Page in
Annual
Report
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements and Independent
Auditors' Report-Incorporated by
reference to the Registrant's Annual
Report, which is filed as an exhibit
hereto
Independent Auditors' Report 2
Financial Statements:
Statements of Financial
Condition--December 31, 1994 and 1993 3
Statements of Operations--Three years
ended December 31, 1994 4
Statements of Changes in Partners'
Capital--Three years ended December
31, 1994 4
Statements of Cash Flows--Three years
ended December 31, 1994 5
Notes to Financial Statements 6
2. Financial Statement Schedule and
Independent Auditors' Report on
Schedule
Independent Auditors' Report on
Schedule
Schedule:
II - Valuation and Qualifying
Accounts and Reserves-Three years
ended December 31, 1994
All other schedules have been omitted
because they are not applicable or
the required information is included
in the financial statements and the
notes thereto.
3. Exhibits
Description:
3(a) and 4(a) Partnership Agreement, incorporated
by reference to Exhibit A to the Pro-
spectus of Registrant, dated July 2,
1986, filed pursuant to Rule 424(b)
under the Securities Act of 1933,
File No. 33-5213
3(b) and 4(b) Certificate of Limited Partnership
(incorporated by reference to Exhibit
4 to Amendment No.1 to Registration
Statement on Form S-11, File No.
33-5213)
10(a) First Mortgage Bond, dated September
11, 1986, with respect to the Bay
Club project, in the principal amount
of $6,400,000 (incorporated by refer-
ence to exhibit 10(a) in Registrant's
Current Report on Form 8-K dated
September 11, 1986)
10(b) First Mortgage Bond, dated November
13, 1986, with respect to the Love-
ridge project, in the principal
amount of $8,550,000 (incorporated by
reference to exhibit 10(d) in
Registrant's Form 8 Amendment No.1 to
Current Report on Form 8-K, dated
February 10, 1987)
10(c) First Mortgage Bond, dated December
30, 1986 with respect to The Lakes
project, in the principal amount of
$13,650,000 (incorporated by
reference to exhibit 10(a) in
Registrant's Current Report on Form
8-K dated December 30, 1986)
10(d) First Mortgage Bond, dated December
31, 1986, with respect to the Crowne
Pointe project, in the principal
amount of $5,075,000 (incorporated by
reference to exhibit 10(b) in
Registrant's Current Report on Form
8-K dated December 31, 1986)
11
<PAGE>
10(e) First Mortgage Bond, dated December
31, 1986, with respect to the Orchard
Hills project, in the principal
amount of $5,650,000 (incorporated by
reference to exhibit 10(c) in
Registrant's Current Report on Form
8-K dated December 31, 1986)
10(f) First Mortgage Bond, dated February
2, 1987, with respect to the Highland
Ridge project, in the principal
amount of $15,000,000 (incorporated
by reference to exhibit 10(a) in
Registrant's Current Report on Form
8-K dated February 2, 1987)
10(g) First Mortgage Bond, dated February
11, 1987, with respect to the Newport
Village project, in the principal
amount of $13,000,000 (incorporated
by reference to exhibit 10(a) in
Registrant's Current Report on Form
8-K dated February 11, 1987)
10(h) First Mortgage Bond, dated February
11, 1987,with respect to the Sunset
Downs project, in the principal
amount of $15,000,000 (incorporated
by reference to exhibit 10(b) in
Registrant's Current Report on Form
8-K dated February 11, 1987)
10(i) First Mortgage Bond, dated February
27, 1987, with respect to the Pelican
Cove project, in the principal amount
of $18,000,000 (incorporated by
reference to exhibit 10(a) in
Registrant's Current Report on Form
8-K dated February 27, 1987)
10(j) First Mortgage Bond, dated February
27, 1987, with respect to the Willow
Creek project, in the principal
amount of $6,100,000 (incorporated by
reference to exhibit 10(c) in
Registrant's Current Report on Form
8-K dated February 27, 1987)
10(k) First Mortgage Bond, dated April 22,
1987, with respect to the Cedar
Pointe project, in the principal
amount of $9,500,000 (incorporated by
reference to exhibit 10(a) in
Registrant's Current Report on Form
8-K dated April 22, 1987)
10(l) First Mortgage Bond, dated June 26,
1987, with respect to the Shannon
Lake project, in the principal amount
of $12,000,000 (incorporated by
reference to exhibit 10(a) in
Registrant's Current Report on Form
8-K dated June 26, 1987)
10(m) First Mortgage Bond, dated July 31,
1987, with respect to the Bristol
Village project, in the principal
amount of $17,000,000 (incorporated
by reference to exhibit 10(a) in
Registrant's Current Report on Form
8-K dated July 31, 1987)
10(n) First Mortgage Bond, dated July 31,
1987, with respect to the Suntree
project, in the principal amount of
$7,500,000 (incorporated by reference
to exhibit 10(b) in Registrant's
Current Report on Form 8-K dated July
31, 1987)
10(o) First Mortgage Bond, dated August 7,
1987, with respect to the River Run
project, in the principal amount of
$6,700,000 (incorporated by reference
to exhibit 10(b) in Registrant's
Current Report on Form 8-K dated
August 7, 1987)
10(p) First Mortgage Bond, dated August
14,1987, with respect to the Players
Club project, in the principal amount
of $2,500,000 (incorporated by refer-
ence to exhibit 10(a) in Registrant's
Current Report on Form 8-K dated
August 14, 1987)
12
<PAGE>
10(q) Settlement Agreement for the Shannon
Lake First Mortgage Bond dated
December 3, 1990 (incorporated by
reference to Exhibit 10(q) in Regis-
trant's 1991 Annual Report on Form
10K)
10(r) Settlement Agreement for the Newport
Village First Mortgage Bond dated
October 9, 1992 (incorporated by
reference to Exhibit 10(r) in
Registrant's 1992 Annual Report on
Form 10K)
10(s) Settlement Agreement for the Sunset
Downs First Mortgage Bond dated July
10, 1992 (incorporated by reference
to Exhibit 10(s) in Registrant's 1992
Annual Report on Form 10K)
10(t) Settlement Agreement for the Suntree
First Mortgage Bond dated February 1,
1992 (incorporated by reference to
Exhibit 10(t) in Registrant's 1992
Annual Report on Form 10K)
10(w) Settlement Agreement for the Players
Club First Mortgage Bond dated
February 1, 1992 (incorporated by
reference to Exhibit 10(w) in
Registrant's 1992 Annual Report on
Form 10K)
10(x) Settlement Agreement for the Bristol
Village First Mortgage Bond dated
March 2, 1993 (incorporated by
reference to Exhibit 10(x) in
Registrant's 1992 Annual Report on
Form 10K)
10(y) Amended Settlement Agreement for the
Shannon Lake First Mortgage Bond
dated June 1, 1993 (incorporated by
reference to Exhibit 10(y) in
Registrant's 1993 Annual Report on
Form 10K)
10(z) Amended Settlement Agreement for the
Player's Club First Mortgage Bond
dated December 1, 1993 (incorporated
by reference to Exhibit 10(z) in
Registrant's 1993 Annual Report on
Form 10K)
(10aa) Amended Settlement Agreement for the
Suntree First Mortgage Bond dated
December 1, 1993 (incorporated by
reference to Exhibit 10(aa) in Regis-
trant's 1993 Annual Report on Form
10K)
(10ab) First Supplemental Indenture between
The Industrial Development Authority
of the City of Kansas City, Missouri
and Boatmen's First National Bank of
Kansas City dated January 24, 1994
(incorporated by reference to Exhibit
10(ab) in the Registrant's Quarterly
Report on Form 10Q dated March 31,
1994)
(10ac) Option Agreement between The Lakes
Project Investors, Inc., Seller, and
ZIPCO, Inc., Purchaser, dated January
27, 1994 (incorporated by reference
to Exhibit 10(ac) in the Registrant's
Quarterly Report on Form 10Q dated
September 30, 1994)
(10ad) Assignment and Assumption Agreements
between The Lakes Apartments, Inc.,
Seller, and ZIPCO, Inc., Purchaser,
dated August 31, 1994 (incorporated
by reference to Exhibit 10(ad) in the
Registrant's Quarterly Report on Form
10Q dated September 30, 1994)
(10ae) Sale-Purchase Agreement between The
Lakes Project Investors, Inc., Sell-
er, and ZIPCO, Inc., Purchaser, dated
August 31, 1994 (incorporated by
reference to Exhibit 10(ae) in the
Registrant's Quarterly Report on Form
10Q dated September 30, 1994)
(10af) Amended Settlement Agreement for the
Player's Club First Mortgage Bond
dated December 1, 1994 (filed
herewith)
(10ag) Amended Settlement Agreement for the
Suntree First Mortgage Bond dated
December 1, 1994 (filed herewith)
13
<PAGE>
13 Registrant's 1994 Annual Report (with
the exception of the information and
data incorporated by reference in
Items 3, 7 and 8 of this Annual
Report on Form 10-K, no other
information or data appearing in the
Registrant's 1994 Annual Report is to
be deemed filed as part of this
report)
27 Financial Data Schedule (filed
herewith)
(b) Reports on Form 8-K
No reports on Form 8-K were filed
during the last quarter of the period
covered by this report.
14
<PAGE>
(LOGO)
Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Summit Tax Exempt L.P. II
New York, New York
We have audited the financial statements of Summit Tax Exempt
L.P. II (a Delaware Limited Partnership) as of December 31, 1994 and 1993,
and for each of the three years in the period ended December 31, 1994, and
have issued our report thereon dated March 14, 1995; such financial
statements and report are included in your 1994 Annual Report to Limited
Partners and are incorporated herein by reference. Our audits also included
the financial statement schedule of Summit Tax Exempt L.P. II, listed in
Item 14(a)2. This financial statement schedule is the responsibility of the
General Partners. Our responsibility is to express an opinion based on our
audits. 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.
/s/ Deloitte & Touche LLP
---------------------------
March 14, 1995
(LOGO)
15
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Valuation allowance for first mortgage bonds
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
------------- ------------ ------------
Balance at Amounts Amounts Amounts Balance at
Year ended beginning reserved recovered reclassified end of
December 31, of year during year during year during year year
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
1994 $ -- $ 500,000 $ -- $1,000,000(A) $ 1,500,000
1993 -- -- -- -- --
1992 -- -- -- -- --
</TABLE>
Valuation allowance for assets held for sale
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
------------- ------------ ------------
Balance at Amounts Amounts Amounts Balance at
Year ended beginning reserved recovered reclassified end of
December 31, of year during year during year during year year
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
1994 $ 1,400,000 $ -- $ -- $ (1,000,000)(A) $ 400,000
1993 400,000 1,000,000 -- -- 1,400,000
1992 400,000 -- -- -- 400,000
</TABLE>
Valuation allowance for uncollectible receivables
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
------------- ------------ ------------
Balance at Amounts Amounts Amounts Balance at
Year ended beginning reserved recovered reclassified end of
December 31, of year during year during year during year year
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
1994 $ 183,918 $ -- $ -- $ -- $ 183,918
1993 183,918 -- -- -- 183,918
1992 -- 183,918 -- -- 183,918
</TABLE>
Valuation allowance for promissory notes
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
------------- ------------ ------------
Balance at Amounts Amounts Amounts Balance at
Year ended beginning reserved recovered reclassified end of
December 31, of year during year during year during year year
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
1994 $ 138,000 $ -- $ -- $ -- $ 138,000
1993 -- 138,000 -- -- 138,000
1992 -- -- -- -- --
</TABLE>
(A) Related asset was reclassified from an asset held for sale to a first
mortgage bond.
16
<PAGE>
<PAGE>
SIGNATURES
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.
Summit Tax Exempt L.P. II
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Robert J. Alexander Date: March 31, 1995
---------------------------------------------
Robert J. Alexander
Vice President and Chief Accounting Officer
By: Related Tax Exempt Associates II, Inc.
A Delaware corporation, General Partner
By: /s/ Alan P. Hirmes Date: March 31, 1995
---------------------------------------------
Alan P. Hirmes
Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partners) and on
the dates indicated.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ James M. Kelso Date: March 31, 1995
---------------------------------------------
James M. Kelso
President, Chief Executive Officer and
Chairman of the Board of Directors
By: /s/ Barbara J. Brooks Date: March 31, 1995
---------------------------------------------
Barbara J. Brooks
Vice President Finance and Chief Financial
Officer
By: /s/ Robert J. Alexander Date: March 31, 1995
---------------------------------------------
Robert J. Alexander
Vice President
By: /s/ Frank W. Giordano Date: March 31, 1995
---------------------------------------------
Frank W. Giordano
Director
By: /s/ Nathalie P. Maio Date: March 31, 1995
---------------------------------------------
Nathalie P. Maio
Director
17
<PAGE>
By: Related Tax Exempt Associates II, Inc.
A Delaware corporation, General Partner
By: /s/ J. Michael Fried Date: March 31, 1995
---------------------------------------------
J. Michael Fried
President and Director
(Principal Executive Officer)
By: /s/ Alan P. Hirmes Date: March 31, 1995
---------------------------------------------
Alan P. Hirmes
Vice President
(Principal Financial and Accounting Officer)
By: /s/ Lawrence J. Lipton Date: March 31, 1995
---------------------------------------------
Lawrence J. Lipton
Treasurer
By: Stephen M. Ross Date: March 31, 1995
---------------------------------------------
Stephen M. Ross
Director
18
<PAGE>
<PAGE>
December 1, 1994
Players Club at Fort Myers, Ltd.
c/o H/R Florida Associates, L.P.
625 Madison Avenue
New York, NY 10022
Gentlemen:
Players Club at Fort Myers, Ltd., a California limited partnership
organized and existing in the State of California (the
"Developer"), is the Developer and Owner of a 288-unit multifamily
residential rental housing development known as Players Club
Apartments, located in Lee County, Florida (the "Project"). The
cost of acquiring, constructing, improving and equipping the
Project was financed by the Florida Housing Finance Agency (the
"Issuer"), by the issuance of its Multi-Family Housing Revenue
Bonds, 1987 Series C (Players Club at Fort Myers Project), in the
principal amount of $9,700,000 pursuant to a series of Bond
Resolutions adopted on September 13, 1985; September 17, 1985;
October 15, 1985; and June 26, 1987.
The terms of the Bonds, the security therefor, the rights and
remedies of the holders thereof, and various other matters in
connection therewith were prescribed pursuant to a Trust Indenture
between the Issuer and Southeast Bank, N.A. (the "Trustee"), dated
as of July 1, 1987 (the "Trust Indenture").
Proceeds of the Bonds were loaned to the Developer pursuant to a
Loan Agreement between the Issuer and the Developer dated as of
July 1, 1987 (the "Loan Agreement"), evidenced by the Developer's
Promissory Note (the "Note") in the amount of $9,700,000. The
obligations of the Developer under the Loan Agreement and the Note
are secured by a Mortgage and Security Agreement, dated as of July
1, 1987, and various other loan documents defined in the Loan
Agreement (collectively, the "Loan Documents").
<PAGE>
Players Club at Fort Myers
December 1, 1994
Page Two
All of the Bonds issued pursuant to the Trust Indenture were
purchased and are owned as of this date by Summit Tax Exempt L.P.
II and Summit Tax Exempt L.P. III (collectively referred to as
"Summit"), both of which are limited partnerships organized and
existing under the laws of the State of Delaware.
As of February 1, 1992, the Project's cash flow was inadequate to
provide for certain capital improvements required to be made and
for certain other expenses being incurred; accordingly, the
Developer requested that a portion of the Base Interest on the Note
("Base Interest"), required to be paid monthly in accordance with
the terms of the Trust Indenture and Bonds, be temporarily
deferred. The failure to pay any portion of the required Base
Interest when due would constitute an Event of Default pursuant to
various provisions of the Trust Indenture, Bonds and Loan
Documents. Pursuant to Section 9.02(a) of the Trust Indenture,
Summit, as the single owner of the Bonds, is the designated "Acting
Party" with the sole authority to take actions in respect of any
Event of Default. In response to the Developer's request, the
Developer and Summit entered into a letter agreement dated as of
February 1, 1992 (the "1992 Letter Agreement"), whereby Summit
agreed to forbear from enforcing its remedies under the various
default and remedies provisions of the Trust Indenture, Bonds and
Loan Documents (the "Remedies Provisions") based upon the payment
of Base Interest, and on various other terms and conditions, all as
set forth therein. Pursuant to the 1992 Letter Agreement, certain
portions of the Base Interest which would have been due and payable
between January 1, 1992 and December 31, 1993, were deferred in
accordance with the terms and conditions thereof.
As of December 1, 1993, the Developer requested a continuation of
Summit's agreement to forbear from enforcing its remedies under the
Remedies Provisions upon the occurrence of further defaults for the
non-payment of Base Interest when due, from and after December 31,
1993. In response to the Developer's request, the Developer and
Summit entered into a second letter agreement dated as of December
1, 1993 (the "1993 Letter Agreement") pursuant to which certain
portions of the Base Interest which would have been due and payable
between January 1, 1994 and December 31, 1994, were deferred in
accordance with the terms and conditions thereof.
As of this date, the Developer has requested that Summit agree to
forbear from enforcing its remedies under the Remedies Provisions
upon the occurrence of further defaults for the non-payment of Base
Interest when due, from and after December 31, 1994, again
conditioned on the payment of certain portions of such interest
when due. As consideration for such forbearance, the Developer re-
<PAGE>
Players Club at Fort Myers
December 1, 1994
Page Three
affirms its agreement to the payment of a concession fee to Summit,
to the establishment of a monthly escrow payment to provide for the
future payment of real estate taxes, assessments and insurance
premiums when due, and to certain other matters, all as set forth
hereinafter.
Accordingly, Summit and the Developer hereby agree as follows:
1. Forbearance from the Enforcement of Remedies Pursuant to the
Remedies Provisions.
Summit agrees to forbear from enforcing its remedies under the
Remedies Provisions in connection with any existing Events of
Default resulting from the non-payment of Base Interest due
and payable on or before December 31, 1994; provided, however,
that the Developer shall comply with the various provisions,
terms and conditions of this Agreement as required by
Paragraph 6 hereof.
2. Forbearance from the Enforcement of Remedies Pursuant to the
Remedies Provisions Upon the Future Occurrence of Defaults for
the Non-Payment of Base Interest When Due:
It is anticipated that the Cash Flow of the Project will or
may be inadequate to pay all operating expenses of the
Project, including the payment of full Base Interest, for some
time. Summit agrees to forbear from enforcing its remedies
under the Remedies Provisions upon the occurrence of any
default for the non-payment of Base Interest when due,
provided that:
a. all operating expenses of the Project (as defined in the
Trust Indenture), other than the payment of Base
Interest, are paid when due;
b. all deposits to the Replacement Reserve Fund required by
Section 6.07 of the Trust Indenture are paid when due;
c. all deposits to the Tax and Insurance Escrow required in
accordance with Paragraph 3 hereinafter are paid when
due;
d. monthly installments of Base Interest are paid when due,
in amounts which are equal to minimum monthly amounts
calculated in accordance with the following schedule of
time periods and interest rates (the "Minimum Pay
Rates"):
<PAGE>
Players Club at Fort Myers
December 1, 1994
Page Four
Time Period Minimum Pay Rate
01/01/95 - 12/31/95 7.0% per annum
e. any remaining Cash Flow of the Project, after payment of
the various items set forth in subparagraphs (a) through
(d) above, shall be paid to Summit and applied to Base
Interest which remains unpaid from time to time, together
with interest thereon as provided in Section 7.10 of the
Trust Indenture.
The Developer acknowledges and understands that the Minimum
Pay Rates established herein constitute payment schedules
only, and that the rate for the payment of Base Interest is
and shall remain at eight percent (8%) per annum pursuant to
the Bonds and Trust Indenture. Summit's agreement to forbear
from enforcing its remedies under the Remedies Provisions does
not constitute a forgiveness of amounts past due and unpaid,
and all Base Interest which remains unpaid from time to time,
together with interest thereon, shall be paid from first
available Net Cash Flow, or from Sale or Refinancing Proceeds
as provided in the Trust Indenture and Loan Documents,
together with interest thereon calculate as though such
amounts constituted Primary Deferred Interest in accordance
with Section 3.03(c) of the Trust Indenture, prior to the
payment of any contingent interest.
3. Continuation of Tax and Insurance Escrows.
In accordance with Paragraph 2 of the 1992 Letter Agreement
and Paragraph 3 of the 1993 Letter Agreement, the Developer
agrees to continue to pay to Summit with each monthly
installment of interest, additional amounts calculated by
Summit from time to time to be adequate to pay certain real
estate taxes, assessments and insurance when due.
4. Concession Fee.
In consideration of the concessions granted by Summit herein,
the Developer agrees to pay to Summit a fee or fees (the
"Concession Fee") in accordance with Paragraph 4 of the 1992
and 1993 Letter Agreements.
5. Payment of Fees and Expenses.
Pursuant to the Loan Agreement, the Developer shall pay all
legal fees, costs and other out-of-pocket expenses incurred in
connection with this Agreement within thirty (30) days
<PAGE>
Players Club at Fort Myers
December 1, 1994
Page Five
following receipt of demand from Summit, which demand shall include
supporting materials for any costs or out-of-pocket expenses
incurred.
6. Defaults and Remedies.
The Developer's full and continuing compliance with each and
every provision, term and condition set forth in Paragraphs 1,
2, 3, 4 and 5 of this Agreement shall be an express condition
of the concessions granted by Summit pursuant hereto, and upon
any default hereunder, Summit shall have the right to
terminate and rescind the forbearance and concessions granted
herein, to restore the parties hereto to their respective
former positions and rights under the Bonds, Trust Indenture,
and Loan Documents, and to exercise and enforce any rights or
remedies available thereunder.
7. Non-Waiver of Other Events of Default.
Summit's forbearance of the enforcement of any or all of its
remedies pursuant to the Remedies Provisions upon the
occurrence of a default for the non-payment of Base Interest
as granted herein or hereby is expressly limited to the
provisions, terms and conditions set forth herein, and, in
accordance with the provisions of the Trust Indenture, Bonds
and Loan Documents, no such forbearance shall extend to any
other Event of Default or impair any right consequent thereto.
8. Release of Summit for All Claims, Actions, Rights of Set Off
and Defenses.
The Developer hereby releases, waives, and forever discharges
any and all legal or equitable claims, counterclaims, causes
of action, defenses, affirmative defenses, and rights of set-
off, known or unknown, which the Developer or any of its
partners may have against Summit, the Issuer, or the Trustee,
in connection with the loan evidenced by the Bonds, Trust
Indenture, Loan Documents or this Agreement, and any dealings
related thereto, up to the date hereof.
9. No Revision, Modification, or Amendment.
The various provisions, terms and conditions of this Agreement
are intended merely to supplement, and not to affect any
revision, modification or amendment to the provisions, terms
and conditions of the Bonds, Trust Indenture and Loan
Documents. If any provision, term or condition of this
<PAGE>
Players Club at Fort Myers
December 1, 1994
Page Six
Agreement requires any action, or the forbearance thereof,
which could or will result in a Determination of Taxability
(as defined in the Trust Indenture), then such provision, term
or condition shall be rescinded, void, and of no further force
or effect, and shall be deemed severable from the remaining
provisions, terms and conditions, and in no way shall affect
the validity of the other provisions of this Agreement.
10. Capitalized Terms.
Any capitalized terms not otherwise defined in this Agreement
shall have the meanings attributed to them in the Trust
Indenture.
If the above accurately sets forth the provisions, terms and
conditions on which we have agreed, please return to us five (5)
copies of this letter executed by you in the space provided below,
at which time this letter shall constitute a binding agreement
between us.
Very truly yours,
SUMMIT TAX EXEMPT L.P. II
By: Related Tax Exempt Associates
II, Inc., a general partner
By: /s/ Alan Hirmes
--------------------------------
(Title)
SUMMIT TAX EXEMPT L.P. III
By: Related Tax Exempt Associates
III, Inc., a general partner
By: /s/ Alan Hirmes
--------------------------------
(Title)
<PAGE>
Players Club At Fort Myers
December 1, 1994
Page Seven
Accepted and Agreed to this
5th day of December, 1994:
PLAYERS CLUB AT FORT MYERS, LTD. A
California limited partnership
By: H/R Florida Associates L.P., a
Delaware limited partnership, a
general partner
By: A General Partner: RELATED
RESIDENTIAL ASSOCIATES, INC.,
a Delaware Corporation
By: /s/ Max Schlopy
-----------------------------------
Max Schlopy, Vice President
<PAGE>
December 1, 1994
Suntree at Fort Myers, Ltd.
c/o H/R Florida Associates, L.P.
625 Madison Avenue
New York, NY 10022
Gentlemen:
Suntree at Fort Myers, Ltd., a California limited partnership
organized and existing in the State of California (the
"Developer"), is the Developer and Owner of a 240-unit multifamily
residential rental housing development known as Suntree Apartments,
located in Lee County, Florida (the "Project"). The cost of
acquiring, constructing, improving and equipping the Project was
financed by the Florida Housing Finance Agency (the "Issuer"), by
the issuance of its Multi-Family Housing Revenue Bonds, 1987 Series
D (Suntree at Fort Myers Project), in the principal amount of
$7,500,000 pursuant to a series of Bond Resolutions adopted on
September 13, 1985; September 17, 1985; October 15, 1985; and June
26, 1987.
The terms of the Bonds, the security therefor, the rights and
remedies of the holders thereof, and various other matters in
connection therewith were prescribed pursuant to a Trust Indenture
between the Issuer and Southeast Bank, N.A. (the "Trustee"), dated
as of July 1, 1987 (the "Trust Indenture").
Proceeds of the Bonds were loaned to the Developer pursuant to a
Loan Agreement between the Issuer and the Developer dated as of
July 1, 1987 (the "Loan Agreement"), evidenced by the Developer's
Promissory Note (the "Note") in the amount of $7,500,000. The
obligations of the Developer under the Loan Agreement and the Note
are secured by a Mortgage and Security Agreement, dated as of July
1, 1987, and various other loan documents defined in the Loan
Agreement (collectively, the "Loan Documents").
<PAGE>
Suntree at Fort Myers
December 1, 1994
Page Two
All of the Bonds issued pursuant to the Trust Indenture were
purchased and are owned as of this date by Summit Tax Exempt L.P.
II ("Summit"), a limited partnership organized and existing under
the laws of the State of Delaware.
As of February 1, 1992, the Project's cash flow was inadequate to
provide for certain capital improvements required to be made and
for certain other expenses being incurred; accordingly, the
Developer requested that a portion of the Base Interest on the Note
("Base Interest"), required to be paid monthly in accordance with
the terms of the Trust Indenture and Bonds, be temporarily
deferred. The failure to pay any portion of the required Base
Interest when due would constitute an Event of Default pursuant to
various provisions of the Trust Indenture, Bonds and Loan
Documents. Pursuant to Section 9.02(a) of the Trust Indenture,
Summit, as the single owner of the Bonds, is the designated "Acting
Party" with the sole authority to take actions in respect of any
Event of Default. In response to the Developer's request, the
Developer and Summit entered into a letter agreement dated as of
February 1, 1992 (the "1992 Letter Agreement"), whereby Summit
agreed to forbear from enforcing its remedies under the various
default and remedies provisions of the Trust Indenture, Bonds and
Loan Documents (the "Remedies Provisions") based upon the payment
of Base Interest, and on various other terms and conditions, all as
set forth therein. Pursuant to the 1992 Letter Agreement, certain
portions of the Base Interest which would have been due and payable
between January 1, 1992 and December 31, 1993, were deferred in
accordance with the terms and conditions thereof.
As of December 1, 1993, the Developer requested a continuation of
Summit's agreement to forbear from enforcing its remedies under the
Remedies Provisions upon the occurrence of further defaults for the
non-payment of Base Interest when due, from and after December 31,
1993. In response to the Developer's request, the Developer and
Summit entered into a second letter agreement dated as of December
1, 1993 (the "1993 Letter Agreement") pursuant to which certain
portions of the Base Interest which would have been due and payable
between January 1, 1994 and December 31, 1994, were deferred in
accordance with the terms and conditions thereof.
As of this date, the Developer has requested that Summit agree to
forbear from enforcing its remedies under the Remedies Provisions
upon the occurrence of further defaults for the non-payment of Base
Interest when due, from and after December 31, 1994, again
conditioned on the payment of certain portions of such interest
when due. As consideration for such forbearance, the Developer re-
affirms its agreement to the payment of a concession fee to Summit,
<PAGE>
Suntree at Fort Myers
December 1, 1994
Page Three
to the establishment of a monthly escrow payment to provide for the
future payment of real estate taxes, assessments and insurance
premiums when due, and to certain other matters, all as set forth
hereinafter.
Accordingly, Summit and the Developer hereby agree as follows:
1. Forbearance from the Enforcement of Remedies Pursuant to the
Remedies Provisions.
Summit agrees to forbear from enforcing its remedies under the
Remedies Provisions in connection with any existing Events of
Default resulting from the non-payment of Base Interest due
and payable on or before December 31, 1994; provided, however,
that the Developer shall comply with the various provisions,
terms and conditions of this Agreement as required by
Paragraph 6 hereof.
2. Forbearance from the Enforcement of Remedies Pursuant to the
Remedies Provisions Upon the Future Occurrence of Defaults for
the Non-Payment of Base Interest When Due:
It is anticipated that the Cash Flow of the Project will or
may be inadequate to pay all operating expenses of the
Project, including the payment of full Base Interest, for some
time. Summit agrees to forbear from enforcing its remedies
under the Remedies Provisions upon the occurrence of any
default for the non-payment of Base Interest when due,
provided that:
a. all operating expenses of the Project (as defined in the
Trust Indenture), other than the payment of Base
Interest, are paid when due;
b. all deposits to the Replacement Reserve Fund required by
Section 6.07 of the Trust Indenture are paid when due;
c. all deposits to the Tax and Insurance Escrow required in
accordance with Paragraph 3 hereinafter are paid when
due;
d. monthly installments of Base Interest are paid when due,
in amounts which are equal to minimum monthly amounts
calculated in accordance with the following schedule of
time periods and interest rates (the "Minimum Pay
Rates"):
<PAGE>
Suntree at Fort Myers
December 1, 1994
Page Four
Time Period Minimum Pay Rate
01/01/95 - 12/31/95 7.5% per annum
e. any remaining Cash Flow of the Project, after payment of
the various items set forth in subparagraphs (a) through
(d) above, shall be paid to Summit and applied to Base
Interest which remains unpaid from time to time, together
with interest thereon as provided in Section 7.10 of the
Trust Indenture.
The Developer acknowledges and understands that the Minimum
Pay Rates established herein constitute payment schedules
only, and that the rate for the payment of Base Interest is
and shall remain at eight percent (8%) per annum pursuant to
the Bonds and Trust Indenture. Summit's agreement to forbear
from enforcing its remedies under the Remedies Provisions does
not constitute a forgiveness of amounts past due and unpaid,
and all Base Interest which remains unpaid from time to time,
together with interest thereon, shall be paid from first
available Net Cash Flow, or from Sale or Refinancing Proceeds
as provided in the Trust Indenture and Loan Documents,
together with interest thereon calculate as though such
amounts constituted Primary Deferred Interest in accordance
with Section 3.03(c) of the Trust Indenture, prior to the
payment of any contingent interest.
3. Continuation of Tax and Insurance Escrows.
In accordance with Paragraph 2 of the 1992 Letter Agreement
and Paragraph 3 of the 1993 Letter Agreement, the Developer
agrees to continue to pay to Summit with each monthly
installment of interest, additional amounts calculated by
Summit from time to time to be adequate to pay certain real
estate taxes, assessments and insurance when due.
4. Concession Fee.
In consideration of the concessions granted by Summit herein,
the Developer agrees to pay to Summit a fee or fees (the
"Concession Fee") in accordance with Paragraph 4 of the 1992
and 1993 Letter Agreements.
5. Payment of Fees and Expenses.
Pursuant to the Loan Agreement, the Developer shall pay all
legal fees, costs and other out-of-pocket expenses incurred in
connection with this Agreement within thirty (30) days follow-
<PAGE>
Suntree at Fort Myers
December 1, 1994
Page Five
ing receipt of demand from Summit, which demand shall include
supporting materials for any costs or out-of-pocket expenses
incurred.
6. Defaults and Remedies.
The Developer's full and continuing compliance with each and
every provision, term and condition set forth in Paragraphs 1,
2, 3, 4 and 5 of this Agreement shall be an express condition
of the concessions granted by Summit pursuant hereto, and upon
any default hereunder, Summit shall have the right to
terminate and rescind the forbearance and concessions granted
herein, to restore the parties hereto to their respective
former positions and rights under the Bonds, Trust Indenture,
and Loan Documents, and to exercise and enforce any rights or
remedies available thereunder.
7. Non-Waiver of Other Events of Default.
Summit's forbearance of the enforcement of any or all of its
remedies pursuant to the Remedies Provisions upon the
occurrence of a default for the non-payment of Base Interest
as granted herein or hereby is expressly limited to the
provisions, terms and conditions set forth herein, and, in
accordance with the provisions of the Trust Indenture, Bonds
and Loan Documents, no such forbearance shall extend to any
other Event of Default or impair any right consequent thereto.
8. Release of Summit for All Claims, Actions, Rights of Set Off
and Defenses.
The Developer hereby releases, waives, and forever discharges
any and all legal or equitable claims, counterclaims, causes
of action, defenses, affirmative defenses, and rights of set-
off, known or unknown, which the Developer or any of its
partners may have against Summit, the Issuer, or the Trustee,
in connection with the loan evidenced by the Bonds, Trust
Indenture, Loan Documents or this Agreement, and any dealings
related thereto, up to the date hereof.
9. No Revision, Modification, or Amendment.
The various provisions, terms and conditions of this Agreement
are intended merely to supplement, and not to affect any
revision, modification or amendment to the provisions, terms
and conditions of the Bonds, Trust Indenture and Loan
<PAGE>
Suntree at Fort Myers
December 1, 1994
Page Six
Documents. If any provision, term or condition of this
Agreement requires any action, or the forbearance thereof,
which could or will result in a Determination of Taxability
(as defined in the Trust Indenture), then such provision, term
or condition shall be rescinded, void, and of no further force
or effect, and shall be deemed severable from the remaining
provisions, terms and conditions, and in no way shall affect
the validity of the other provisions of this Agreement.
10. Capitalized Terms.
Any capitalized terms not otherwise defined in this Agreement
shall have the meanings attributed to them in the Trust
Indenture.
If the above accurately sets forth the provisions, terms and
conditions on which we have agreed, please return to us five (5)
copies of this letter executed by you in the space provided below,
at which time this letter shall constitute a binding agreement
between us.
Very truly yours,
SUMMIT TAX EXEMPT L.P. II
By: Related Tax Exempt Associates
II, Inc., a general partner
By: /s/ Alan Hirmes
------------------------------
(Title)
Accepted and Agreed to this
5th day of December, 1994:
SUNTREE AT FORT MYERS, LTD. A
California limited partnership
By: H/R Florida Associates L.P., a
Delaware limited partnership, a
general partner
By: A General Partner: RELATED
RESIDENTIAL ASSOCIATES, INC.,
a Delaware Corporation
By: /s/ Max Schlopy
-----------------------------------
Max Schlopy, Vice President
<PAGE>
1994 ANNUAL REPORT
<PAGE>
SUMMIT TAX EXEMPT L.P. II
LETTER TO BUC$HOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1994
1
<PAGE>
<PAGE>
(LOGO)
Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Summit Tax Exempt L.P. II
New York, New York
We have audited the accompanying statements of financial condition of
Summit Tax Exempt L.P. II (a Delaware Limited Partnership) as of
December 31, 1994 and 1993, and the related statements of operations,
changes in partners' capital and cash flows for each of the three years
in the period ended December 31, 1994. These financial statements are
the responsibility of the General Partners. 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 the General Partners, 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 Summit Tax Exempt L.P. II as
of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1994 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
---------------------------
March 14, 1995
(LOGO)
2
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
-----------------------------
<S> <C> <C>
1994 1993
--------------------------------------------------------------------------------------------------
ASSETS
Participating first mortgage bonds, net $141,586,119 $130,309,664
Assets held for sale, net 17,600,000 29,350,000
Temporary investments 2,175,490 1,855,780
Cash 872,662 302,826
Cash held in escrow 520,677 508,023
Interest receivable, net 797,401 805,805
Promissory notes receivable, net 175,405 269,673
Deferred bond selection fees, net 2,174,386 2,359,106
Other assets 15,803 17,747
------------ ------------
Total assets $165,917,943 $165,778,624
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Deferred income $ 568,953 $ 160,514
Reserve for disputed claim 422,287 400,000
Accrued expenses 67,017 141,869
Due to affiliates 30,481 158,162
------------ ------------
Total liabilities 1,088,738 860,545
------------ ------------
Contingencies
Partners' capital
BUC$holders (9,151,620 BUC$ issued and outstanding) 164,925,646 165,012,743
General partners (96,441) (94,664)
------------ ------------
Total partners' capital 164,829,205 164,918,079
------------ ------------
Total liabilities and partners' capital $165,917,943 $165,778,624
------------ ------------
------------ ------------
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
<S> <C> <C> <C>
1994 1993 1992
------------------------------------------------------------------------------------------------------
REVENUES
Interest income from participating first mortgage
bonds $10,126,040 $10,030,502 $10,190,048
Income from assets held for sale, net 1,639,072 1,513,420 942,071
Interest income from temporary investments 68,017 49,147 74,598
Interest income from promissory notes 37,361 60,719 33,026
------------ ------------ ------------
11,870,490 11,653,788 11,239,743
------------ ------------ ------------
EXPENSES
Management fees 810,625 810,625 810,625
Loan servicing fees 405,313 405,313 405,313
General and administrative 324,496 429,457 437,730
Amortization of deferred bond selection fees 184,720 184,720 184,720
Provision for disputed claim 22,287 400,000 --
Provision for uncollectible receivables -- 138,000 183,918
Interest expense -- -- 3,390
Provision for loss on impairment of assets 500,000 1,000,000 --
------------ ------------ ------------
2,247,441 3,368,115 2,025,696
------------ ------------ ------------
Net income $ 9,623,049 $ 8,285,673 $ 9,214,047
------------ ------------ ------------
------------ ------------ ------------
ALLOCATION OF NET INCOME
BUC$holders $ 9,430,588 $ 8,119,960 $ 9,029,766
------------ ------------ ------------
------------ ------------ ------------
General partners $ 192,461 $ 165,713 $ 184,281
------------ ------------ ------------
------------ ------------ ------------
Net income per BUC $ 1.03 $ .89 $ .99
------------ ------------ ------------
------------ ------------ ------------
------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL
BUC$HOLDERS PARTNERS TOTAL
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
Partners' capital (deficit)--December 31, 1991 $166,917,628 $(55,782 ) $166,861,846
Net income 9,029,766 184,281 9,214,047
Distributions (9,536,926) (194,638 ) (9,731,564)
------------ --------- ------------
Partners' capital (deficit)--December 31, 1992 166,410,468 (66,139 ) 166,344,329
Net income 8,119,960 165,713 8,285,673
Distributions (9,517,685) (194,238 ) (9,711,923)
------------ --------- ------------
Partners' capital (deficit)--December 31, 1993 165,012,743 (94,664 ) 164,918,079
Net income 9,430,588 192,461 9,623,049
Distributions (9,517,685) (194,238 ) (9,711,923)
------------ --------- ------------
Partners' capital (deficit)--December 31, 1994 $164,925,646 $(96,441 ) $164,829,205
------------ --------- ------------
------------ --------- ------------
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
<S> <C> <C> <C>
1994 1993 1992
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $10,200,115 $10,058,159 $ 10,482,090
Cash received from assets held for sale, net 1,639,072 1,513,420 942,071
Fees and expenses paid (1,741,023 ) (1,479,839 ) (1,695,455)
Cash held in escrow (12,654 ) (508,023 ) --
------------ ------------ ------------
Net cash provided by operating activities 10,085,510 9,583,717 9,728,706
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (purchase) sale of temporary investments (319,710 ) 449,722 (8,368)
Loans made to properties -- (263,000 ) --
Principal payments received from loans made to
properties 28,934 15,841 --
Income deferred upon assumption of FMB by new debtor 487,025 -- --
------------ ------------ ------------
Net cash provided by (used in) investing activities 196,249 202,563 (8,368)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid (9,711,923 ) (9,711,923 ) (9,731,564)
------------ ------------ ------------
Net increase (decrease) in cash 569,836 74,357 (11,226)
Cash at beginning of year 302,826 228,469 239,695
------------ ------------ ------------
Cash at end of year $ 872,662 $ 302,826 $ 228,469
------------ ------------ ------------
------------ ------------ ------------
------------------------------------------------------------------------------------------------------
SCHEDULE RECONCILING NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 9,623,049 $ 8,285,673 $ 9,214,047
------------ ------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loss on impairment of assets 500,000 1,000,000 --
Provision for disputed claim 22,287 400,000 --
Amortization of deferred bond selection fees 184,720 184,720 184,720
Provision for uncollectible receivables -- 138,000 183,918
Accretion of valuation allowance (26,455 ) (26,455 ) (26,455)
Accretion of deferred income (13,252 ) -- --
Changes in:
Cash held in escrow (12,654 ) (508,023 ) --
Interest receivable, net 8,404 (55,754 ) 210,873
Promissory notes receivable, net 65,334 62,969 55,337
Other assets 1,944 (2,472 ) (15,275)
Due from affiliates -- 38,624 2,823
Accrued expenses (74,852 ) 43,444 31,422
Deferred income (65,334 ) (62,969 ) (55,337)
Due to affiliates (127,681 ) 85,960 (57,367)
------------ ------------ ------------
Total adjustments 462,461 1,298,044 514,659
------------ ------------ ------------
Net cash provided by operating activities $10,085,510 $ 9,583,717 $ 9,728,706
------------ ------------ ------------
------------ ------------ ------------
------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF INVESTING ACTIVITIES
The Partnership transferred $11,750,000 from assets held for sale to participating first mortgage
bonds during 1994. See Note D for further information.
------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
5
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
A. General
Summit Tax Exempt L.P. II, a Delaware limited partnership (the
``Partnership''), was formed on April 11, 1986 and will terminate on December
31, 2020 unless terminated sooner under the provisions of the Agreement of
Limited Partnership (the ``Partnership Agreement''). The Partnership was formed
to invest in tax-exempt participating first mortgage revenue bonds (``FMBs'')
issued by various state or local governments or their agencies or authorities.
The FMBs are secured by participating first mortgage loans on multi-family
residential apartment projects (the ``Properties''). The General Partners of the
Partnership (the ``General Partners'') are Prudential-Bache Properties, Inc.
(``PBP'') (a wholly-owned subsidiary of Prudential Securities Group Inc.) and
Related Tax Exempt Associates II, Inc. (the ``Related General Partner'').
Related BUC$ Associates II, Inc. (the ``Assignor Limited Partner''), which
acquired and holds limited partnership interests on behalf of those persons who
purchased Beneficial Unit Certificates (``BUC$''), has assigned to those persons
substantially all of its rights and interest in and under such limited
partnership interests. The Related General Partner and the Assignor Limited
Partner are under common ownership. As of December 31, 1994, the Partnership had
invested in a total of sixteen FMBs.
B. Summary of Significant Accounting Policies
Basis of accounting
The books and records of the Partnership are maintained on the accrual basis
of accounting in accordance with generally accepted accounting principles.
Participating first mortgage bonds and promissory notes receivable
FMBs and promissory notes receivable are carried at cost less a valuation
allowance where appropriate. A valuation allowance is recorded when the ultimate
collection of an FMB's or note's principal balance is in doubt. This evaluation
is based on an analysis of estimated undiscounted cash flows from the individual
properties securing the FMBs.
Interest income is recognized at the stated rate when collectibility of
future amounts is reasonably assured. Interest income from FMBs with modified
terms where the collectibility of future amounts is uncertain is recognized
based upon expected cash receipts.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (``SFAS'') No. 114, ``Accounting by Creditors for
Impairment of a Loan,'' which will be adopted by the Partnership as of January
1, 1995 for its 1995 financial statements. SFAS No. 114 requires creditors to
evaluate the collectibility of both interest and principal of an FMB when
determining whether it is impaired. An FMB is considered to be impaired when,
based on current information and events, it is probable the creditor will be
unable to collect all amounts due according to the existing contractual terms.
When an FMB is considered to be impaired, the amount of the loss accrual is
determined by discounting the expected future cash flows of the FMB at its
effective interest rate or, for practical purposes, from the estimated fair
value of the collateral. To the extent that the owners of properties underlying
the FMBs may require modifications to their existing forbearance agreements or
the FMBs may otherwise become impaired in 1995, the Partnership may be required
to record additional valuation allowances which could have a material effect on
the Partnership's financial statements. The amount of such allowances, if any,
resulting from the adoption of SFAS No. 114 cannot presently be determined.
Assets held for sale
The original owner of certain underlying properties and obligors of FMBs were
replaced by affiliates of the Related General Partner who have not made equity
investments. These entities have assumed the day-to-day responsibilities and
obligations of the underlying properties. The FMBs are reported in the financial
statements as ``Assets Held for Sale'' because buyers are being sought to make
equity investments in the underlying properties and assume the nonrecourse
obligations for the FMBs. Although these properties may not be producing
sufficient cash flow to fully service the debt, the Partnership has no present
intention to declare defaults on these FMBs.
6
<PAGE>
<PAGE>
Prior to an FMB being classified as an Asset Held for Sale, an allowance is
established to record it at the fair value of the underlying property at the
time the original owner was replaced. If any further diminution in the fair
value of the underlying property occurs, an additional valuation allowance for
the Asset Held for Sale will be established. Fair value is based on estimates of
the value of the underlying property using the discounted cash flow method which
includes the discounted value of the favorable tax-exempt bond financing. A
significant assumption is that a buyer will utilize the tax-exempt financing
currently available in purchasing such property.
When a substantial equity investment in the underlying property is made, the
carrying amount of the Asset Held for Sale will be reclassified to an FMB, and
the probable estimated future cash receipts specified by the new terms
(including interest and principal) in excess of the carrying amount of the FMB
will be accreted as interest income over the remaining life of the FMB.
Income is recognized when cash is received and is recorded net of
disbursements made by the Partnership for expenses of the properties, if any.
Temporary investments
Temporary investments represent tax-exempt floating rate municipal bonds
which are carried at cost plus accrued interest which approximates market.
Income taxes
The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the BUC$holders. The Partnership may be subject to other state and
local taxes in jurisdictions in which it operates.
Profit and loss allocations and distributions
Net profits or losses and distributions are allocated 98% to the BUC$holders
and 2% to the General Partners in accordance with the Partnership Agreement.
Bond selection fees
The General Partners were paid bond selection fees (equal to 2% of the gross
proceeds from the initial offering) for evaluating and selecting FMBs,
negotiating the terms of mortgage loans and coordinating the development effort
with property developers and government agencies. These fees have been
capitalized and are being amortized over the terms of the FMBs. The accumulated
amortization as of December 31, 1994 and 1993 was approximately $1,452,000 and
$1,268,000, respectively.
C. Participating First Mortgage Bonds
Descriptions of the various FMBs owned by the Partnership at December 31,
1994 are as follows:
<TABLE>
<CAPTION>
Average
Interest Stated
Rate Paid* Minimum Interest Call Maturity Face
Property Location in 1994 Pay Rate* Rate* Date Date Amount
<S> <C> <C> <C> <C> <C> <C> <C>
---------------- ----------------- ---------- ------------ -------- ---------- ---------- ------------
Bay Club Mt. Pleasant, SC 6.92% 7.00%(A) 8.25% Sep. 2000 Sep. 2006 $ 6,400,000
Loveridge Contra Costa, CA 8.00 8.00 8.00 Nov. 1998 Nov. 2006 8,550,000
The Lakes Kansas City, MO 5.00 4.87 4.87 Dec. 2006 Dec. 2006 13,650,000
Crowne Pointe Olympia, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,075,000
Orchard Hills Tacoma, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,650,000
Highland Ridge St. Paul, MN 8.00 8.00 8.00 Feb. 1999 Feb. 2007 15,000,000
Newport Village Tacoma, WA 7.27 7.00 8.00 Jan. 1999 Jan. 2007 13,000,000
Sunset Downs Lancaster, CA 7.40 7.50 8.00 May 1999 May 2007 15,000,000
Willow Creek Ames, IA 8.00 8.00 8.00 Oct. 1999 Oct. 2006 6,100,000
Cedar Pointe Nashville, TN 8.00 8.00 8.00 Apr. 1999 Apr. 2007 9,500,000
Shannon Lake Atlanta, GA 6.00 6.00 8.00 Jun. 1999 Jun. 2007 12,000,000
Bristol Village Bloomington, MN 7.80 7.25 8.00 Jun. 1999 Jun. 2005 17,000,000
Suntree Ft. Myers, FL 7.00 7.00 8.00 Jul. 1999 Jul. 2007 7,500,000
River Run Miami, FL 8.00 8.00 8.00 Aug. 1999 Aug. 2007 7,200,000
Players Club(B) Ft. Myers, FL 6.19 6.00 8.00 Aug. 1999 Aug. 2007 2,500,000
------------
$144,125,000
------------
------------
Less: Allowance for impairment
Carrying Amount
* The rate paid represents the interest recorded by the Partnership while the stated rate represents the interest rate of the
FMB.
(A) The minimum pay rate on the FMB increases from 7.0% to 8.25%.
(B) Summit tax Exempt L.P. III, of which the general partners are either the same of affiliates of the General Partners of the
Partnership, acquired the other $7,200,000 of the Players Club Bond issue.
<CAPTION>
Carrying
Property Amount
<S> <C>
---------------- ------------
Bay Club $ 6,261,119
Loveridge 8,550,000
The Lakes 12,750,000
Crowne Pointe 5,075,000
Orchard Hills 5,650,000
Highland Ridge 15,000,000
Newport Village 13,000,000
Sunset Downs 15,000,000
Willow Creek 6,100,000
Cedar Pointe 9,500,000
Shannon Lake 12,000,000
Bristol Village 17,000,000
Suntree 7,500,000
River Run 7,200,000
Players Club(B) 2,500,000
------------
143,086,119
Less: Allowance (1,500,000)
------------
Carrying Amount $141,586,119
------------
------------
</TABLE>
7
<PAGE>
The principal and interest payments on each FMB are payable only from the
cash flows, including proceeds in the event of a sale, from the Properties
underlying the FMBs. None of these FMBs constitutes a general obligation of any
state or local government, agency or authority. The FMBs are secured by the
mortgage loans on the underlying Properties and the structure of each mortgage
loan mirrors the structure of the corresponding FMB.
Unless otherwise modified, the principal of the FMBs will not be amortized
during their respective terms (which are up to 24 years) and will be required to
be repaid in lump sum ``balloon'' payments at the expiration of the respective
terms or at such earlier times as the Partnership may require. The Partnership
has a right to require redemption of the FMBs approximately twelve years after
their issuance. The Partnership anticipates holding the FMBs for approximately
12 to 15 years from the date of issuance; however, it can elect to hold to
maturity.
In addition to the stated rates of interest ranging from 4.87% to 8.25% per
annum, each of the FMBs provides for ``contingent interest'' which is equal to:
(a) an amount equal to 50% to 100% of net property cash flow and 75% to 100% of
net sale or refinancing proceeds until the borrower has paid, during the
post-construction period, annually compounded interest at a rate ranging from
9.0% to 9.25% on a cumulative basis, and thereafter (b) an amount equal to 25%
to 50% of the remaining net property cash flow and 25% to 50% of the remaining
net sale or refinancing proceeds until the borrower has paid interest at a
simple annual rate of 16% over the terms of the FMBs. Both the stated and
contingent interest are exempt from federal income taxation.
In order to protect the tax-exempt status of the FMBs, the owners of the
Properties are required to enter into certain agreements to own, manage and
operate such Properties in accordance with requirements of the Internal Revenue
Code.
In 1992, forbearance agreements were finalized with the owners of the Newport
Village, Bristol Village, Sunset Downs, Suntree and Players Club properties. In
October 1992, the Newport Village property began paying debt service at 6.0% per
annum and is scheduled to increase in annual increments to the original stated
rate of 8.0% in September 1996. In October 1992, the Bristol Village property
began paying debt service at 6.0% per annum and is scheduled to increase in
annual increments to the stated rate of 8.0% in January 1997. In June 1992, the
Sunset Downs property began paying debt service at 7.0% per annum and is
scheduled to increase in annual increments to the original stated rate of 8.0%
in June 1996. During 1992, the Suntree and Players Club properties began paying
debt service at 7.0% per annum. In 1994, the Suntree and Players Club
forbearance agreements were modified to allow debt service payments to be made
at 6.0% per annum through the end of 1994. Effective January 1, 1995, the
Suntree and Players Club forbearance agreements were further modified to allow
minimum debt service payments to be made at 7.5% and 7.0% per annum,
respectively, through the end of 1995. The difference between the rate paid and
the original stated rate for these FMBs is payable from available future cash
flow or ultimately from sales or refinancing proceeds.
A forbearance agreement with the owner of the Shannon Lake property made in
1991 was further modified in April 1993 to allow the borrower to pay monthly
interest at 6.0% per annum through December 1995. In addition, the Partnership
made a $138,000 loan in April 1993 to the owner of the property underlying the
Shannon Lake FMB for the payment of past due property taxes. The loan requires
interest only payments at 8.5% per annum, payable monthly, commencing on May 1,
1993, with the principal due on April 30, 1996. Due to the forbearance
agreement, an allowance for possible loss was established for this loan during
1993. Interest payments on both the FMB and the tax loan are current.
The Partnership made a $125,000 loan in April 1993 to the owner of the
property underlying the Bristol Village FMB for payment of past due property
taxes. This loan is self-amortizing over four years with interest at 8.0% per
annum payable monthly. Payments on this loan are current.
In 1990, the terms of the Bay Club FMB were modified when the equity interest
in the property and the related obligation of the FMB were sold by an affiliate
of the Related General Partner to an unrelated third party. As part of this
transaction, the minimum annual pay rate increases in annual increments from
6.0% in 1990 to 8.25% in 1997. The difference between the rate paid and the
original stated rate is payable from available future cash flow or ultimately
from sale or refinancing proceeds. The Partnership received $360,000 in a 13%
second mortgage note with interest and principal payments due monthly through
December 1996. This note is also partially secured by a letter of credit.
Deferred income equal to the amount of the
8
<PAGE>
<PAGE>
promissory note was recorded in the statements of financial condition. As a
result of this transaction, income is realized only as and when the Partnership
receives payments on the promissory note. The balances of both the promissory
note and deferred income were approximately $95,000 and $161,000 at December 31,
1994 and 1993, respectively. A loss of $264,547 was recorded on this transaction
to reflect the concessions granted. The total probable estimated future cash
receipts from the FMB (the FMB principal, the $360,000 note, and all future
interest) in excess of the carrying amount is being accreted as interest income
over the remaining life of the FMB because the fair value of the underlying
property is in excess of the carrying value.
The difference between the stated interest rates and the rates paid on the
FMBs has not been accrued for financial statement purposes and was approximately
$660,000, $781,000 and $444,000 for the years ended December 31, 1994, 1993 and
1992, respectively.
The estimated fair value of the FMBs at December 31, 1994 and 1993 was
approximately $123.2 million and $126.5 million, respectively.
D. Assets Held for Sale
Assets Held for Sale and the related income thereon are as follows:
<TABLE>
<CAPTION>
Net cash received
for the year
ended
December 31,
Call Maturity Face Amount ------------------------------------
Date Date Carrying Value of FMB 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
The Lakes,
Kansas City, MO* Dec. 2006 Dec. 2006 $ -- $ 13,650,000 $ 354,620 $ 516,742 $493,831
Pelican Cove,
St. Louis, MO Feb. 1999 Feb. 2007 17,600,000 18,000,000 1,284,452 996,678 448,240
--------------- ------------ ---------- ---------- --------
$17,600,000 $ 31,650,000 $1,639,072 $1,513,420 $942,071
--------------- ------------ ---------- ---------- --------
--------------- ------------ ---------- ---------- --------
</TABLE>
* Reinstated as an FMB as of August 31, 1994. As such, the net cash received
for the year ended December 31, 1994 reflects cash flow through August 31, 1994.
Subsequent cash flow is recorded as interest income from participating first
mortgage bonds.
--------------------------------------------------------------------------------
In June and December 1992, the Partnership made loans totalling approximately
$410,000 to the owners of The Lakes and Pelican Cove for payment of 1991 past
due property taxes. The loans were self-amortizing over two years with interest
at 8.5% per annum. The loans were recorded in operating results as a reduction
of income from assets held for sale in 1992 because the properties were paying
on a cash flow basis. Subsequent principal payments relating to these loans were
recorded as income from assets held for sale. These loans were fully amortized
during 1994. Interest income recognized on these loans was approximately $2,300,
$21,000 and $9,000 for the years ended December 31, 1994, 1993 and 1992,
respectively.
On May 13, 1993, the Partnership, on behalf of Lakes Project Investors, Inc.
(``LPI''), an affiliate of the Related General Partner who replaced the original
developer, deposited a cash escrow of $500,000 in connection with the filing of
an appeal of a mechanics lien judgment rendered against The Lakes. In July 1994,
the appeal was rejected and the judgment affirmed. LPI petitioned the court to
grant a rehearing or, in the alternative, a transfer of the case to the Missouri
Supreme Court. On January 23, 1995, in settlement of the appeal, approximately
$422,000 of the balance of the escrow was paid to the plaintiff. This settlement
had been fully reserved. Approximately $99,000 of the cash escrow balance
($531,000 including accrued interest) was returned to LPI and thence to the
Partnership.
On January 27, 1994, LPI sold an option to purchase the ownership interest in
The Lakes, subject to the assumption of the obligation under the Partnership's
$13,650,000 FMB, to an unrelated third party for $200,000. Pursuant to the terms
of the option and assumption of the FMB, the option was exercised on August 31,
1994.
As a result of the cash equity investment, The Lakes bond was reinstated as
an FMB. The net cash proceeds of approximately $487,000 (net of an escrow for
certain repairs and closing costs), paid to the Partnership to reduce previously
accrued and unpaid interest, was recorded as deferred income and is being
amortized as interest income over the remaining life of The Lakes FMB. The
balance of the deferred income relating to The Lakes FMB was approximately
$474,000 at December 31, 1994. All other accrued
9
<PAGE>
<PAGE>
and unpaid interest as well as a $310,700 second mortgage loan, all of which
previously had been reserved, was forgiven.
E. Income Taxes
The following is a reconciliation of net income for financial reporting
purposes with net income for tax reporting for the years ended December 31,
1994, 1993 and 1992, respectively:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------
Net income per financial statements $ 9,623,049 $ 8,285,673 $ 9,214,047
Uncollected interest income from assets held for sale 271,584 1,018,580 1,258,085
Uncollected interest on FMBs and receivables 659,667 1,318,595 628,238
Provision for loss on impairment of assets 500,000 1,000,000 --
Property tax loans deferred for tax reporting purposes, (116,199) (262,018) 338,781
net
Amortization of bond selection fees 184,720 184,720 184,720
Write-off of accrued and unpaid interest (2,229,178) -- --
Loss from debt restructure (1,358,312) -- --
Other (78,489) (89,424) (81,791)
----------- ----------- -----------
$ 7,456,842 $11,456,126 $11,542,080
----------- ----------- -----------
----------- ----------- -----------
Tax basis net income
</TABLE>
Net income for tax purposes is generally exempt from Federal income tax.
The differences between the tax and book bases of partners' capital are
primarily attributable to the cumulative effect of the book to tax income
adjustments and the recording of distributions.
F. Related Parties
The General Partners and their affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; asset management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Partnership Agreement. The costs and expenses were:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1994 1993 1992
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------
PBP and affiliates
General and administrative $ 102,633 $ 111,003 $ 106,543
Management fee 405,312 405,312 405,312
---------- ---------- ----------
507,945 516,315 511,855
---------- ---------- ----------
Related General Partner and affiliates
General and administrative 15,124 55,813 57,677
Management fee 405,313 405,313 405,313
Loan servicing fees 405,313 405,313 405,313
---------- ---------- ----------
825,750 866,439 868,303
---------- ---------- ----------
$1,333,695 $1,382,754 $1,380,158
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The General Partners are paid, in aggregate, an annual management fee equal
to .5% of the total invested assets (which equals the original face amount of
total FMBs).
An affiliate of the Related General Partner receives loan servicing fees in
an amount of .25% per annum of the principal amount outstanding on mortgage
loans serviced by the affiliate.
A division of Prudential Securities Incorporated (``PSI''), an affiliate of
PBP, receives a fee for the purchase, sale, and safekeeping of the Partnership's
temporary investments. This account is maintained in accordance with the
Partnership Agreement.
PSI owns 56,825 BUC$ at December 31, 1994.
10
<PAGE>
<PAGE>
The Players Club property (securing a $2,500,000 FMB in this Partnership)
also secures an FMB for $7,200,000 owned by Summit Tax Exempt L.P. III, of which
the general partners are either the same or affiliates of the General Partners
of this Partnership.
The original obligors of the Suntree, Players Club and River Run FMBs are
affiliates of the Related General Partner.
G. Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes et
al. v. Prudential Securities Group Inc. et al. (93 Civ. 654), was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership against the Partnership, PBP, PSI and a number
of other defendants. On or about November 16, 1993, a putative class action
captioned Connelly et al. v. Prudential-Bache Securities Inc. et al. (93 Civ.
713), was filed in the United States District Court for the District of Arizona,
purportedly on behalf of investors in the Partnership against the Partnership,
PBP, PSI and a number of other defendants. On or about January 3, 1992, a
putative class action, captioned Levine v. Prudential-Bache Properties Inc. et
al. (92 Civ. 52), was filed in the United States District Court for the Northern
District of Illinois purportedly on behalf of investors in the Partnership
against the General Partners, Prudential Securities Incorporated and a number of
other defendants. Subsequently the Related General Partner exited the litigation
by way of settlement. On April 14, 1994, the Judicial Panel on Multidistrict
Litigation (the ``Panel'') deferred transfer of the case to the Southern
District of New York (discussed more fully below) until after the Illinois court
decided a pending motion to dismiss the complaint. On June 3, 1994, that court
granted the motion of PBP and PSI and dismissed the first amended complaint
without prejudice. On June 30, 1994, plaintiffs filed a second amended
complaint. By order dated July 13, 1994, the Panel unconditionally transferred
the Levine case for for inclusion in the consolidated proceedings in the
Southern District of New York described below.
By its April 14, 1994 order, the Panel transferred (in addition to Levine as
discussed above) the Kinnes case, and by order dated May 4, 1994, the Connelly
case, together with a number of other actions, on each occasion not involving
the Partnership, to a single judge of the United States District Court for the
Southern District of New York and consolidated them for pretrial proceedings
under the caption In re Prudential Securities Incorporated Limited Partnerships
Litigation (MDL Docket No. 1005). On June 8, 1994, plaintiffs in the transferred
cases filed a complaint that consolidated the previously filed complaints and
named as defendants, among others, PSI, certain of its present and former
employees and the General Partners. The Partnership is not named a defendant in
the consolidated complaint, but the name of the Partnership is listed as being
among the limited partnerships at issue in the case. The consolidated complaint
alleges violations of the federal and New Jersey Racketeer Influenced and
Corrupt Organizations Act (``RICO'') statutes, fraud, negligent
misrepresentation, breach of fiduciary duties, breach of third-party beneficiary
contracts and breach of implied covenants in connection with the marketing and
sales of limited partnership interests. Plaintiffs request relief in the nature
of rescission of the purchase of securities, and recovery of all consideration
and expenses in connection therewith, as well as compensation for lost use of
money invested, less cash distributions; compensatory damages; consequential
damages; treble damages for defendants' RICO violations (both federal and New
Jersey); general damages for all injuries resulting from negligence, fraud,
breaches of contract, and breaches of duty in an amount to be determined at
trial; disgorgement and restitution of all earnings, profits, benefits and
compensation received by defendants as a result of their unlawful acts; costs
and disbursements of the action; reasonable attorneys' fees; and such other and
further relief as the court deems just and proper.
On November 28, 1994 the transferee court deemed each of the complaints in
the constituent actions (including Kinnes) amended to conform to the allegations
of the consolidated complaint. PSI and PBP, along with various other defendants,
filed a motion to dismiss the consolidated complaint on December 20, 1994. That
motion is pending.
In July 1991 a putative class action entitled Schaffer v. Summit Tax Exempt
L.P. II, et al., No. 12176 Del. Cn Ct., was filed in Delaware Chancery Court.
Plaintiff is an individual investor who has brought suit allegedly on behalf of
himself and others similarly situated who purchased Partnership interests.
Defendants include, among others, the Partnership, its General Partners, and its
Assignor Limited Partner. The complaint alleges breach of contract to list the
Partnership on an exchange. Plaintiff seeks an injunction, rescission,
compensatory damages and attorneys' fees. Defendants have moved to dismiss the
complaint.
11
<PAGE>
<PAGE>
By order dated March 2, 1995 the court approved plaintiff's voluntary of
dismissal of the action without prejudice.
The General Partners and PSI believe they have meritorious defenses to the
complaints and intend to vigorously defend against these actions.
H. Subsequent Event
In February 1995, distributions of approximately $2,379,000 and $49,000 were
paid to the BUC$holders and General Partners, respectively, for the quarter
ended December 31, 1994.
12
<PAGE>
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Summit Tax Exempt L.P. II (``The Partnership'') has invested in sixteen
tax-exempt participating first mortgage bonds (``FMBs'') issued by various state
or local governments or their agencies or authorities. The FMBs are secured by
participating first mortgage loans on multi-family residential apartment
properties.
At the beginning of the year, the Partnership had cash and temporary
investments of approximately $2,159,000. On August 31, 1994, the equity interest
in The Lakes and the related obligation of the FMB were sold by an affiliate of
Related Tax Exempt Associates II, Inc. (the ``Related General Partner'') to an
unrelated third party resulting in a cash receipt of approximately $487,000 to
the Partnership for previously accrued and unpaid interest. After payment of
distributions and receipt of the net cash flow from operations, the Partnership
ended the quarter with approximately $3,048,000 in cash and temporary
investments. The fourth quarter distribution of approximately $2,379,000 ($.26
per BUC) was paid to BUC$holders in February 1995 from cash flow from
operations.
Interest payments from FMBs are anticipated to provide sufficient liquidity
to meet the operating expenditures of the Partnership in future years and to
fund distributions.
Results of Operations
1994 vs 1993
Net income increased by approximately $1,337,000 for the year ended December
31, 1994 as compared to the corresponding period in 1993 for the reasons
discussed below.
Interest income from FMBs increased by approximately $96,000 for the year
ended December 31, 1994 as compared to the corresponding period in 1993. This
increase was primarily due to increased interest paid on the Newport Village,
Sunset Downs, and Bristol Village FMBs pursuant to the terms of their respective
forbearance agreements, interest received from The Lakes property being
classified as interest income from FMBs as of August 31, 1994 and contingent
interest received from the Crowne Pointe and The Lakes FMBs of approximately
$12,700 and $60,000, respectively. These increases were partially offset by
reduced rates paid on the Shannon Lake, Suntree, Players Club FMBs resulting
from modifications to their respective forbearance agreements in 1993 and 1994.
In addition, less interest was paid by Bay Club in 1994 than 1993.
Income received from FMBs that are classified as ``Assets Held for Sale''
(see Note D to the financial statements) increased by approximately $126,000 for
the year ended December 31, 1994 as compared to the corresponding period in 1993
due to higher cash flow generated by the Pelican Cove property partially offset
by reclassification of The Lakes bond as an FMB.
Interest income from promissory notes decreased by approximately $23,000 for
the year ended December 31, 1994 as compared to the corresponding period in 1993
primarily due to the repayment of the Pelican Cove and The Lakes property tax
loans.
Interest income from temporary investments increased by approximately $19,000
for the year ended December 31, 1994 as compared to the corresponding period in
1993 primarily due to higher interest rates and invested balances.
A $500,000 provision for loss on impairment of assets was recorded during the
year ended December 31, 1994 to record the estimated impairment of the FMBs
based upon an analysis of estimated cash flows from the individual properties
securing the FMBs. A $1,000,000 provision for loss on impairment of assets was
recorded during the year ended December 31, 1993. The provision was based on
estimates of the value of the underlying properties using the discounted cash
flow method which includes the discounted value of the favorable tax-exempt bond
financing.
During 1994, an additional $22,000 was recorded for the loss on the mechanics
lien judgment relating to the Lakes (see Note D to the financial statements).
13
<PAGE>
<PAGE>
General and administrative expenses decreased by approximately $105,000 for
the year ended December 31, 1994 as compared to the corresponding period in 1993
reflecting lower legal costs related to the Levine litigation described in Note
G to the financial statements and a general reduction in the costs associated
with the administration of the Partnership.
1993 vs 1992
Net income decreased by approximately $928,000 for the year ended December
31, 1993 as compared to the corresponding period in 1992 primarily due to the
provision for impairment of assets of $1,000,000 recorded in 1993.
Interest income from FMBs decreased by approximately $160,000 for the year
ended December 31, 1993 as compared to the corresponding period in 1992. The
decrease is primarily due to reduced debt service payments on the Newport
Village, Sunset Downs, Shannon Lake and Bristol Village FMBs as a result of
forbearance agreements finalized during 1992. These decreases were partially
offset by an increase in the rates paid relating to the Suntree and Players Club
FMBs, deferred base interest received on the Bay Club FMB and contingent
interest received from the Crowne Pointe FMB.
Income received from FMBs that are classified as Assets Held for Sale (see
Note D to the financial statements) increased by approximately $571,000 for the
year ended December 31, 1993 as compared to the corresponding period in 1992.
Cash flow payments from The Lakes and Pelican Cove increased by approximately
$23,000 and $548,000 for the year ended December 31, 1993 as compared to the
corresponding period in 1992, respectively, due primarily to tax loans made to
the properties in 1992 for $128,000 and $282,000, respectively, which were
recorded as a reduction of income from Assets Held for Sale. The Partnership
received three additional cash flow payments from Pelican Cove in 1993 as
compared to 1992.
Interest income from promissory notes increased by approximately $28,000 for
the year December 31, 1993 as compared to the corresponding period in 1992 due
to interest received from tax loans made to The Lakes and Pelican Cove in 1992
and to Shannon Lake and Bristol Village in May 1993.
Interest income from temporary investments decreased by approximately $25,000
for the year December 31, 1993 as compared to the corresponding period in 1992
primarily due to a lower cash balance available for investment.
During 1993, a $400,000 contingent liability was recorded to estimate the
amount of probable loss if the appeal of the mechanics lien judgment relating to
The Lakes were unsuccessful (see Note D to the financial statements).
During 1993, the Partnership established a reserve for the Shannon Lake tax
loan in the amount of $138,000 due to the uncertainty of collection.
Property Information
The following table lists the Partnership's FMBs together with occupancy
rates of the underlying properties as of February 12, 1995:
<TABLE>
<CAPTION>
Average
Interest Minimum
Stated Rate Pay Rate*
Face Interest Paid* December
Property Location Amount of FMB Occupancy Rate* in 1994 1994
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Bay Club Mt. Pleasant, SC $ 6,400,000 98.7% 8.25% 6.92% 7.00%(A)
Loveridge Contra Costa, Ca 8,550,000 93.9 8.00 8.00 8.00
The Lakes Kansas City, Mo 13,650,000 99.0 4.87 5.00 4.87
Crowne Pointe Olympia, Wa 5,075,000 89.9 8.00 8.00 8.00
Orchard Hills Tacoma, Wa 5,650,000 90.9 8.00 8.00 8.00
Highland Ridge St. Paul, Mn 15,000,000 96.4 8.00 8.00 8.00
Newport Village Tacoma, Wa 13,000,000 91.4 8.00 7.27 7.00
Sunset Downs Lancaster, Ca 15,000,000 89.4 8.00 7.40 7.50
Pelican Cove St. Louis, Mo 18,000,000 99.2 8.00 7.14 7.50(C)
Willow Creek Ames, Ia 6,100,000 100.0 8.00 8.00 8.00
Cedar Pointe Nashville, Tn 9,500,000 95.2 8.00 8.00 8.00
Shannon Lake Atlanta, Ga 12,000,000 98.6 8.00 6.00 6.00
Bristol Village Bloomington, Mn 17,000,000 98.2 8.00 7.80 7.25
Suntree Ft. Myers, Fl 7,500,000 95.8 8.00 7.00 7.00
</TABLE>
14
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Average
Interest Minimum
Stated Rate Pay Rate*
Face Interest Paid* December
Property Location Amount of FMB Occupancy Rate* in 1994 1994
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
River Run Miami, Fl $ 7,200,000 96.9% 8.00% 8.00% 8.00%
Players Club(B) Ft. Myers, Fl 2,500,000 91.2 8.00 6.19 6.00
-------------
$162,125,000
-------------
-------------
---------------------------------------------------------------------------------------------------------------------
* The rate paid represents the interest recorded by the Partnership while the stated rate represents the coupon
rate of the FMB. See Note C to the financial statements as to the differences between stated interest rates and
interest rates paid for FMBs.
(A) The minimum pay rate on the FMB increases from 7.0% to 8.25%.
(B) Summit Tax Exempt L.P. III, of which the general partners are either the same or affiliates of the General
Partners of the Partnership, acquired the other $7,200,000 of the Players Club Bond issue.
(C) The minimum required pay rate is the current cash flow. See Note D to the financial statements.
</TABLE>
General
The developer of the River Run property has expressed an interest in repaying
its FMB obligation, at its option, as permitted by the bond agreement. There is
no assurance that the prepayment will take place.
The determination as to whether it is in the best interest of the Partnership
to enter into forbearance agreements on the FMBs or, alternatively, to pursue
its remedies under the loan documents, including foreclosures, is based upon
several factors. These factors include, but are not limited to, property
performance, owner cooperation and projected legal costs.
The difference between the stated interest rates and the rates paid by FMBs
is not accrued as interest income for financial reporting purposes. The accrual
of interest at the stated interest rate will resume once a property's ability to
pay the stated rate has been adequately demonstrated. Interest income of
approximately $660,000, $781,000 and $444,000 was not recognized for the years
ended December 31, 1994, 1993 and 1992, respectively.
From time to time, certain property owners have elected to supplement the
cash flow generated by the properties to meet the required FMB interest
payments. There can be no assurance that in the future any property owner will
elect to supplement property cash flow to satisfy bond interest requirements if
necessary. The owners of the Sunset Downs, Highland Ridge and Loveridge
properties supplemented the cash flow generated by the respective properties to
meet the required interest payments in 1994.
Other
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (``SFAS'') No. 114, ``Accounting by Creditors for
Impairment of a Loan'', which will be adopted by the Partnership as of January
1, 1995 for its 1995 financial statements. SFAS No. 114 requires creditors to
evaluate the collectibility of both interest and principal of an FMB when
determining whether it is impaired. An FMB is considered to be impaired when,
based on current information and events, it is probable the creditor will be
unable to collect all amounts due according to the existing contractual terms.
When an FMB is considered to be impaired, the amount of the loss accrual is
determined by discounting the expected future cash flows of the FMB at its
effective interest rate or, for practical purposes, from the fair value of the
collateral. To the extent that the owners of properties underlying the FMBs may
require modifications to their existing forbearance agreements or the FMBs may
otherwise become impaired in 1995, the Partnership may be required to record
additional valuation allowances which could have a material effect on the
Partnership's financial statements. The amount of such allowances, if any,
resulting from the adoption of SFAS No. 114 cannot presently be determined.
Inflation has had no material impact on operations or on the financial
condition of the Partnership from inception through December 31, 1994.
15
<PAGE>
<PAGE>
OTHER INFORMATION
The following cash distributions per BUC were paid during the following
calendar quarters:
<TABLE>
<CAPTION>
Quarter Ended 1994 1993
<S> <C> <C>
------------- ------ -----
March 31 $ .26 $.26
June 30 $ .26 $.26
September 30 $ .26 $.26
December 31 $ .26 $.26
</TABLE>
On October 27, 1994, an affiliate of Prudential-Bache Properties, Inc.,
Prudential Securities Incorporated (``PSI''), entered into cooperation and
deferred prosecution agreements (the ``Agreements'') with the Office of the
United States Attorney for the Southern District of New York (the ``U.S.
Attorney''). The Agreements resolved a grand jury investigation that had been
conducted by the U.S. Attorney into PSI's sale during the 1980's of the
Prudential-Bache Energy Income Fund oil and gas limited partnerships (the
``Income Funds''). In connection with the Agreements, the U.S. Attorney filed a
complaint charging PSI with a criminal violation of the securities laws. In its
request for a deferred prosecution, PSI acknowledged to having made certain
misstatements in connection with the sale of the Income Funds. Pursuant to the
Agreements, the U.S. Attorney will defer any prosecution of the charge in the
complaint for a period of three years, provided that PSI complies with certain
conditions during the three year period. These include conditions that PSI not
violate any criminal laws; that PSI contribute an additional $330 million to a
pre-existing settlement fund; that PSI cooperate with the government in any
future inquiries; and that PSI comply with various compliance-related
provisions. If, at the end of the three-year period, PSI has complied with the
terms of the Agreements, the U.S. Attorney will be barred from prosecuting PSI
on the charges set forth in the complaint. If, on the other hand, during the
course of the three-year period, PSI violates the terms of the Agreements, the
U.S. Attorney can elect to pursue such charges.
The Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission is available to limited partners without charge upon written
request to:
Summit Tax Exempt L.P. II
P.O. Box 2016
Peck Slip Station
New York, New York 10272-2016
16
<PAGE>
1994
Summit Tax Exempt L.P. II Annual
Report
<PAGE>
Prudential Securities Incorporated BULK RATE
Peck Slip Station U.S. POSTAGE
P.O. Box 2016 PAID
New York, NY 10272 Automatic Mail
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Summit Tax Exempt L.P. II
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000792924
<NAME> Summit Tax Exempt Bond L.P. II
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-1-1994
<PERIOD-END> Dec-31-1994
<PERIOD-TYPE> 12-Mos
<CASH> 1,393,339
<SECURITIES> 161,361,609
<RECEIVABLES> 3,162,995
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 165,917,943
<CURRENT-LIABILITIES> 1,088,738
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 164,829,205
<TOTAL-LIABILITY-AND-EQUITY> 165,917,943
<SALES> 11,870,490
<TOTAL-REVENUES> 11,870,490
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,747,441
<LOSS-PROVISION> 500,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,623,049
<INCOME-TAX> 9,623,049
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,623,049
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 0
</TABLE>
