SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - --- ACT OF 1934
For the quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - --- EXCHANGE ACT OF 1934
Commission File Number 0-15726
SUMMIT TAX EXEMPT L.P. II
(Exact names of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-3370413
- - -------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organizations (I.R.S. Employer Identification No.)
625 Madison Avenue, New York, New York 10022
---------------------------------------- -------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (212) 421-5333
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Participating first mortgage bonds-at fair value $150,287,679 $150,274,452
Temporary investments 3,675,000 2,800,000
Cash and cash equivalents 639,926 972,889
Interest receivable, net 717,038 899,299
Promissory notes receivable, net 332,263 70,513
Deferred bond selection fees, net 1,897,303 1,989,663
Other assets 0 12,498
------------- -------------
Total assets $157,549,209 $157,019,314
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Deferred income $ 414,137 $ 455,636
Accrued expenses 95,998 132,653
Due to affiliates 400,373 64,061
------------- -------------
Total liabilities 910,508 652,350
------------- -------------
Contingencies
Partners' capital (deficit):
BUC$holders (9,151,620 BUC$
issued and outstanding) 163,208,310 164,412,008
General Partners (131,488) (106,923)
Net unrealized loss on participating
first mortgage bonds (6,438,121) (7,938,121)
------------- -------------
Total partners' capital 156,638,701 156,366,964
------------- -------------
Total liabilities and partners' capital $157,549,209 $157,019,314
============= =============
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Interest income:
Participating first mortgage bonds $3,084,231 $2,776,893 $5,964,784 $5,863,440
Temporary investments 33,638 36,262 63,803 61,269
Promissory notes 4,633 5,765 8,957 13,960
---------- ---------- ---------- ----------
Total revenues 3,122,502 2,818,920 6,037,544 5,938,669
---------- ---------- ---------- ----------
Expenses:
Management fees 202,656 202,656 405,312 405,312
Loan serving fees 100,775 101,051 201,549 200,991
General and administrative 130,875 102,542 210,624 187,608
Amortization of deferred
bond selection fees 46,180 46,180 92,360 92,360
Loss on impairment of assets 1,500,000 0 1,500,000 0
---------- ---------- ---------- ----------
Total expenses 1,980,486 452,429 2,409,845 886,271
---------- ---------- ---------- ----------
Net Income $1,142,016 $2,366,491 $3,627,699 $5,052,398
========== ========== ========== ==========
Allocation of Net Income:
BUC$holders $1,119,176 $2,319,161 $3,555,145 $4,951,350
========== ========== ========== ==========
General Partners: $ 22,840 $ 47,330 $ 72,554 $ 101,048
========== ========== ========== ==========
Net Income per BUC $ .12 $ .25 $ .39 $ .54
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized Gain
General (Loss) on Participating
Total BUC$holders Partners First Mortgage Bonds
------------ ------------ ------------- ---------------------
<S> <C> <C> <C> <C>
Partners' capital (deficit) -
January 1, 1996 $156,366,964 $164,412,008 $(106,923) $(7,938,121)
Net Income 3,627,699 3,555,145 72,554 0
Distributions (4,855,962) (4,758,843) (97,119) 0
Realization of loss on
impairment of assets 1,500,000 0 0 1,500,000
------------- ------------- ------------- -------------
Partners' capital (deficit) -
June 30, 1996 $156,638,701 $163,208,310 $(131,488) $(6,438,121)
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating
activities:
Interest received, net $6,186,699 $5,954,969
Fees and expenses paid (505,330) (483,850)
Cash held in escrow 0 98,390
----------- -----------
Net cash provided by operating activities 5,681,369 5,569,509
----------- -----------
Cash flows from investing activities:
Net purchase of temporary investments (875,000) (1,516,544)
Principal payments received from loans made to properties 16,630 15,354
Loans made to properties (300,000) 0
----------- -----------
Net cash used in investing activities (1,158,370) (1,501,190)
----------- -----------
Cash flows from financing activities:
Distributions paid (4,855,962) (4,855,962)
----------- -----------
Net decrease in cash and cash equivalents (332,963) (787,643)
Cash and cash equivalents at beginning of period 972,889 872,662
----------- -----------
Cash and cash equivalents at end of period $ 639,926 $ 85,019
=========== ===========
Schedule reconciling net income to net cash provided by operating activities:
Net income $3,627,699 $5,052,398
----------- -----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Loss on impairment of assets 1,500,000 0
Amortization of deferred bond selection fees 92,360 92,360
Accretion of valuation allowance (13,227) (13,227)
Accretion of deferred income (19,879) (19,880)
Changes in:
Cash held in escrow 0 520,677
Interest receivable, net 182,261 49,407
Promissory notes receivable, net 21,620 39,037
Other assets 12,498 (21,690)
Accrued expenses (36,655) 2,472
Deferred income (21,620) (39,037)
Due to affiliates 336,312 329,279
Reserve for disputed claim 0 (422,287)
----------- -----------
Total adjustments 2,053,670 517,111
----------- -----------
Net cash provided by operating activities $5,681,369 $5,569,509
=========== ===========
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 1 - General
These financial statements have been prepared without audit. In
the opinion of management, the financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of Summit Tax Exempt L.P. II (the "Partnership") as of
June 30, 1996, the results of its operations for the three and six months ended
June 30, 1996 and 1995 and its cash flows for the six months ended June 30, 1996
and 1995. However, the operating results for the interim periods may not be
indicative of the results expected for the full year.
Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Partnership's Annual Report on Form 10-K/A-1 filed with
the Securities and Exchange Commission for the year ended December 31, 1995.
NOTE 2 - Participating First Mortgage Bonds ("FMBs")
The Partnership accounts for its investments in the FMBs as debt
securities under the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115").
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 until maturity. As such, SFAS 115 requires the
Partnership to classify these investments as "available for sale." Accordingly,
investments in FMBs are carried at their estimated fair values, with unrealized
gains and losses reported in a separate component of partners' capital.
Unrealized holding gains or losses do not affect the cash flow generated from
property operations, distributions to BUC$holders, the characterization of the
tax-exempt income stream or the financial obligations under the FMBs.
The Partnership periodically evaluates each FMB to determine
whether a decline in fair value below the FMB's cost basis is other than
temporary. Such a decline is considered to be other than temporary if, based on
current information and events, it is probable that the Partnership will be
unable to collect all amounts due according to the existing contractual terms of
the bonds. If the decline is judged to be other than temporary, the cost basis
of the bond is written down to its then estimated fair value, with the amount of
the write-down accounted for as realized loss.
Because the FMBs are not readily marketable, the Partnership
estimates fair value for each bond as the present value of its expected cash
flows using an interest rate for comparable tax-exempt investments. This process
is based upon projections of future economic events affecting the real estate
collateralizing the bonds, such as property occupancy rates, rental rates,
operating cost inflation and market capitalization rates, and upon determination
of an appropriate market rate of interest, all of which are based on good faith
estimates and assumptions developed by the Partnership's management. Changes in
market conditions and circumstances may occur which would cause these estimates
and assumptions to change, therefore, actual results may vary from the estimates
and the variance may be material.
-6-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 2 - Participating First Mortgage Bonds (continued)
Descriptions of the FMBs owned by the Partnership at June 30, 1996
are as follows:
<TABLE>
<CAPTION>
Annualized
Interest Rate
Paid for the
six months Minimum
ended Pay Rate Stated Carrying
June 30, at June Interest Maturity Amount at
Property Location 1996* 30, 1996* Rate* Call Date Date Face Amount June 30, 1996 (G)
- - -------- -------- ----------- --------- ------ ----------- ---------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bay Club Mt. Pleasant, SC 7.88% (D) 7.50% 8.25% Sept. 2000 Sept. 2006 $ 6,400,000 $ 6,151,877
Loveridge Contra Costa, CA 4.62 (B) 8.00 Nov. 1998 Nov. 2006 8,550,000 7,629,796
The Lakes Kansas City, MO 5.65 (F) 4.87 4.87 Dec. 2006 Dec. 2006 13,650,000 10,368,077
Crowne Pointe Olympia, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,075,000 5,290,714
Orchard Hills Tacoma, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,650,000 5,803,112
Highland Ridge St. Paul, MN 7.00 8.00 8.00 Feb. 1999 Feb. 2007 15,000,000 12,685,842
Newport Village Tacoma, WA 7.85 (C) 7.50 8.00 Jan. 1999 Jan. 2007 13,000,000 13,731,947
Sunset Downs Lancaster, CA 4.52 (B) 8.00 May 1999 May 2007 15,000,000 11,396,727
Willow Creek Ames, IA 8.00 8.00 8.00 Oct. 1999 Oct. 2006 6,100,000 5,563,709
Cedar Pointe Nashville, TN 8.00 8.00 8.00 Apr. 1999 Apr. 2007 9,500,000 9,778,309
Shannon Lake Atlanta, GA 6.00 6.00 8.00 Jun. 1999 Jun. 2007 12,000,000 10,519,904
Bristol Village Bloomington, MN 9.37 (C) 7.75 8.00 Jun. 1999 Jun. 2005 17,000,000 16,631,716
Suntree Ft. Myers, FL 7.50 7.50 8.00 Jul. 1999 Jul. 2007 7,500,000 7,876,831
River Run Miami, FL 11.35 (E) 8.00 8.00 Aug. 1999 Aug. 2007 7,200,000 7,463,220
Pelican Cove St. Louis, MO 7.50 (B) 8.00 Feb. 1999 Feb. 2007 18,000,000 16,801,601
Players Club (A) Ft. Myers, FL 7.00 7.00 8.00 Aug. 1999 Aug. 2007 2,500,000 2,594,297
------------ ------------
$162,125,000 $150,287,679
============ ============
</TABLE>
*The rate paid represents the interest recorded by the Partnership while the
stated rate represents the coupon rate of the FMB and the minimum pay rate
represents the minimum rate payable pursuant to the applicable forbearance
agreements, if any.
(A) 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 FMB.
(B) Pay rate is based on net cash flow generated by operations of the underlying
property.
(C) Includes receipt of deferred base interest related to prior periods.
(D) The actual annual pay rate is adjusted annually as of the property's fiscal
year end based on cash flow pursuant to audited financial statements to no
less than the minimum pay rate.
(E) Includes primary contingent interest related to prior periods.
(F) Includes primary and supplemental contingent interest related to prior
periods.
(G) The FMBs are carried at their estimated fair value at June 30, 1996.
-7-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 2 - Participating First Mortgage Bonds (continued)
With respect to the FMBs which are subject to forbearance
agreements with the respective obligors, the difference between the stated
interest rates and the rates paid (whether deferred and payable out of available
future cash flow or, ultimately, from sale or refinancing proceeds) on FMBs is
not accrued for financial statement 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. Unrecorded conractual interest income was
approximately $309,000 and $401,000 for the six months ended June 30, 1996 and
1995, respectively.
The cost basis of the FMBs at June 30, 1996 and December 31, 1995
was $156,725,800 and $158,212,573, respectively. The net unrealized loss on FMBs
consists of gross unrealized gains and losses of $2,113,430 and $8,551,551
respectively, at June 30, 1996, and of $2,113,430 and $10,051,551, respectively,
at December 31, 1995.
NOTE 3 - Related Parties
Prudential-Bache Properties, Inc. ("PBP") and the Related General
Partner (collectively, 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 Agreement of Limited Partnership (the "Partnership
Agreement"). The costs and expenses were:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
PBP and affiliates:
Management fee $101,328 $101,328 $202,656 $202,656
General and administrative 22,506 41,646 33,678 68,232
-------- -------- -------- --------
123,834 142,974 236,334 270,888
-------- -------- -------- --------
Related General Partner
and affiliates:
Management fee 101,328 101,328 $202,656 202,656
Loan servicing fees 100,775 101,051 201,549 200,991
General and administrative 4,170 5,894 28,170 10,081
-------- -------- -------- --------
206,273 208,273 432,375 413,728
-------- -------- -------- --------
$330,107 $351,247 $668,709 $684,616
======== ======== ======== ========
An affiliate of the Related General Partner receives loan
servicing fees (see above) in an amount of .25% per annum of the principal
amount outstanding on FMBs serviced by the affiliate.
The General Partners are paid, in the aggregate, an annual
management fee equal to .5% of the original amount invested in FMBs.
-8-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 3 - Related Parties (continued)
A division of Prudential Securities Incorporated ("PSI"), an
affiliate of PBP, was responsible for the purchase, sale and safekeeping of the
Partnership's temporary investments in 1995. This account was maintained in
accordance with the Partnership Agreement.
PSI owns 61,265 BUC$ at June 30, 1996.
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.
NOTE 4 - 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 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 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, PSI and a number of other defendants. Subsequently
the Related General Partner exited the Levine litigation by way of settlement.
By order dated April 14, 1994 order, the Judicial Panel on
Multidistrict Litigation transferred the Kinnes case, by order dated May 4,
1994, the Connelly case and by order dated July 13, 1994, the Levine case, 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 was not named a defendant in the consolidated
complaint, but the name of the Partnership was listed as being among the limited
partnerships at issue in the case.
On August 9, 1995 PBP, PSI and other Prudential defendants
entered into a Stipulation and Agreement of Partial Compromise and Settlement
with legal counsel representing plaintiffs in the consolidated actions. The
court preliminarily approved the settlement agreement by order dated August 29,
1995 and, following a hearing held November 17, 1995, found that the agreement
was fair, reasonable, adequate and in the best interests of the plaintiff class.
The court gave final approval to the settlement, certified a class of purchasers
of specific limited partnerships, including the Partnership, released all
settled claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing or
prosecuting any settled claim against the released parties. The full amount due
under the settlement agreement has been paid by PSI. The consolidated action
remains pending against the Related General Partner and certain of its
affiliates.
-9-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 4 - Contingencies (continued)
The Related General Partner has been engaged in settlement
negotiations with counsel for the plaintiffs. In the event a settlement can not
be reached, the Related General Partner believes it has meritorious defenses to
the consolidated complaint and intends to vigorously defend this action.
NOTE 5 - Subsequent Event
In August 1996, distributions of approximately $2,379,000 and
$49,000 were paid to the BUC$holders and General Partners, respectively, for the
quarter ended June 30, 1996.
-10-
<PAGE>
Item 2. 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 projects.
At the beginning of the year, the Partnership had cash and
temporary investments of $3,773,000. After payment of distributions and receipt
of the net cash flow from operations, the Partnership had approximately
$4,315,000 in cash and temporary investments at June 30, 1996. The second
quarter distribution of $2,379,000 ($.26 per BUC) was paid to BUC$holders in
August 1996 from cash flow from operations. As further discussed in Note 2 to
the financial statements, the obligor of one FMB entered into a forbearance
agreement with the Partnership retroactive to October 10, 1995. This transaction
may negatively impact liquidity in future quarters however interest payments
from FMB's are anticipated to provide sufficient liquidity to meet the operating
expenditures of the Partnership in future years and to fund distributions.
Management is not aware of any trends or events, commitments or
uncertainties, which have not otherwise been disclosed that will or are likely
to impact liquidity in a material way. The Partnership's investments in mortgage
loans are secured by a partnership interest in properties which are diversified
by location so that if one area of the country is experiencing downturns in the
economy, the remaining properties may be experiencing upswings. However, the
geographic diversification of the portfolio may not protect against a general
downturn in the national economy.
Results of Operations
The Partnership accounts for its investments in the FMBs as debt
securities under the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115").
The Partnership has a right to require redemption of the FMBs
approximately twelve years after their issuance. The Partnership anticipates
holding the FMBs for approximately 12 to 15 years from the date of issuance;
however, it can elect to hold until maturity. As such, SFAS 115 requires the
Partnership to classify these investments as "available for sale." Accordingly,
investments in FMBs are carried at their estimated fair values, with unrealized
gains and losses reported in a separate component of partners' capital.
Unrealized holding gains or losses do not affect the cash flow generated from
property operations, distributions to BUC$holders, the characterization of the
tax-exempt income stream or the financial obligations under the FMBs.
The Partnership periodically evaluates each FMB to determine
whether a decline in fair value below the FMB's cost basis is other than
temporary. Such a decline is considered to be other than temporary if, based on
current information and events, it is probable that the Partnership will be
unable to collect all amounts due according to the existing contractual terms of
the bonds. If the decline is judged to be other than temporary, the cost basis
of the bond is written down to its then estimated fair value, with the amount of
the write-down accounted for as realized loss.
Because the FMBs are not readily marketable, the Partnership
estimates fair value for each bond as the present value of its expected cash
flows using an interest rate for comparable tax-exempt investments. This process
is based upon projections of future economic events affecting the real estate
collateralizing the bonds, such as property occupancy rates, rental rates,
operating cost inflation and market capitalization rates, and upon determination
of an appropriate market rate of interest, all of which are based on good faith
estimates and assumptions developed by the Partnership's management. Changes in
market conditions and circumstances may occur which would cause these estimates
and assumptions to change, therefore, actual results may vary from the estimates
and the variance may be material.
-11-
<PAGE>
Net income decreased by approximately $1,224,000 and $1,425,000
for the three and six months ended June 30, 1996 as compared to 1995 primarily
due to a loss on impairment of assets and for the reasons discussed below.
Interest income from FMBs increased by approximately $307,000 for
the three months ended June 30, 1996 as compared to 1995. This increase was
primarily due to an underaccrual of interest income relating to Sunset Downs at
June 30, 1995 which was corrected in the third quarter and the receipt of
contingent interest by River Run and an increase in deferred base interest
received by Bristol Village in the second quarter of 1996.
Interest income from promissory notes decreased by approximately
$1,000 and $5,000 for the three and six months ended June 30, 1996,
respectively, as compared to 1995 primarily due to the repayment of the Bay Club
property tax loan in January 1996.
General and administrative expenses increased by approximately
$28,000 and $23,000 for the three and six months ended June 30, 1996,
respectively, as compared to 1995, primarily due to increases in non-recurring
legal expenses.
A $1,500,000 loss on impairment of assets was recorded during the
six months ended June 30, 1996 to recognize other-than-temporary impairment of
one FMB based upon continuing operating difficulties being experienced at the
property securing the FMB.
Property Information
The following table lists the FMBs the Partnership owns together
with occupancy rates of the underlying properties as of June 30, 1996:
<TABLE>
<CAPTION>
Annualized
Interest Minimum
Rate Paid Annual
for the six Pay Rate
Stated months ended at
Face Amount Interest June 30, June 30,
Property Location of FMB Occupancy Rate* 1996* 1996*
- - -------- -------- ------------ --------- ------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Bay Club Mt. Pleasant, SC $ 6,400,000 100% 8.25% 7.88% (D) 7.50%
Loveridge Contra Costa, CA 8,550,000 94.6 8.00 4.62 (B)
The Lakes Kansas City, MO 13,650,000 95.4 4.87 5.65 (F) 4.87
Crowne Pointe Olympia, WA 5,075,000 91.9 8.00 8.00 8.00
Orchard Hills Tacoma, WA 5,650,000 94.3 8.00 8.00 8.00
Highland Ridge St. Paul, MN 15,000,000 89.4 8.00 7.00 8.00
Newport Village Tacoma, WA 13,000,000 90.1 8.00 7.85 (C) 7.50
Sunset Downs Lancaster, CA 15,000,000 82.1 8.00 4.52 (B)
Willow Creek Ames, IA 6,100,000 100.0 8.00 8.00 8.00
Cedar Pointe Nashville, TN 9,500,000 98.1 8.00 8.00 8.00
Shannon Lake Atlanta, GA 12,000,000 90.1 8.00 6.00 6.00
Bristol Village Bloomington, MN 17,000,000 92.6 8.00 9.37 (C) 7.75
Suntree Ft. Myers, FL 7,500,000 83.9 8.00 7.50 7.50
River Run Miami, FL 7,200,000 94.4 8.00 11.35 (E) 8.00
Pelican Cove St. Louis, MO 18,000,000 98.0 8.00 7.50 (B)
Players Club (A) Ft. Myers, FL 2,500,000 80.9 8.00 7.00 7.00
------------
$162,125,000
============
</TABLE>
-12-
<PAGE>
*The rate paid represents the interest recorded by the Partnership while the
stated rate represents the coupon rate of the FMB and the minimum pay rate
represents the minimum rate payable pursuant to the applicable forbearance
agreement, if any.
(A) 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 FMB.
(B) Pay rate is based on the net cash flow generated by operations of the
underlying property.
(C) Includes receipt of deferred base interest related to prior periods.
(D) The actual annual pay rate is adjusted annually as of the property's fiscal
year end based on cash flow pursuant to audited financial statements to no
less than the minimum pay rate.
(E) Includes primary contingent interest related to prior periods.
(F) Includes primary and supplemental contingent interest related to prior
periods.
General
The determination as to whether it is 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 foreclosure, is based
upon several factors including, but not limited to, property performance, owner
cooperation and projected legal costs.
Certain property owners have, at times, supplemented 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 owner of the Highland Ridge property supplemented cash flow
generated by the property to meet its interest payments during the three months
ended March 31, 1995. The owner of the Sunset Downs and Loveridge properties
supplemented the cash flow generated by the respective properties to meet their
interest payments during the first two months of 1995. No property owner made
supplementary payments during the six months ended June 30, 1996.
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Incorporated by reference to Note 4 to the
financial statements filed herewith in Item 1 of Part 1 of the
Registrant's Quarterly Report.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
4(a) Partnership Agreement, incorporated by reference to
Exhibit A to the Prospectus of Registrant, dated July
7, 1986, filed pursuant to Rule 424(b) under the
Securities Act of 1933, File No. 33-5213.
4(b) Certificate of Limited Partnership, incorporated by
reference to Exhibit 4 to the Amendment No. 1 to
Registration Statement on Form S-11, File No. 33-5213.
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SUMMIT TAX EXEMPT L.P. II
By: Related Tax Exempt Associates II, Inc.
A Delaware corporation, General Partner
Date: August 13, 1996 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Vice President
Date: August 13, 1996 By: /s/ Lawrence J. Lipton
----------------------
Lawrence J. Lipton
Treasurer
(Principal Financial and Accounting Officer)
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
Date: August 13, 1996 By: /s/ Eugene D. Burak
-------------------
Eugene D. Burak
Vice President
-16-
<TABLE> <S> <C>
<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>
<CIK> 0000792924
<NAME> SUMMIT TAX EXEMPT L.P.II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 639,926
<SECURITIES> 153,962,679
<RECEIVABLES> 2,946,604
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 157,549,209
<CURRENT-LIABILITIES> 910,508
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 156,638,701
<TOTAL-LIABILITY-AND-EQUITY> 157,549,209
<SALES> 0
<TOTAL-REVENUES> 6,037,544
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 909,845
<LOSS-PROVISION> 1,500,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,627,699
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,627,699
<EPS-PRIMARY> .39
<EPS-DILUTED> 0
</TABLE>
