UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
(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, 1995
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 name of Registrant as specified in its charter)
Delaware 13-3370413
- - -------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
625 Madison Avenue, New York, New York 10022
- - -------------------------------------- -------
(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
Securities registered pursuant to Section 12(g) of the Act:
Beneficial Unit Certificates
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
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 may be found on page 15
Page 1 of 84
<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 Registrant's 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
interests 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 constitute 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.
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<PAGE>
In addition to the stated base rates of interest ranging from
4.87% to 8.25% per annum, each of the FMBs (which have not been modified)
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 term of the FMB. Both the stated and contingent interest
are exempt from federal income taxation. Only one FMB, The Lakes, paid
contingent interest in 1995. Such amount paid was approximately $68,000.
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.
No single FMB provided interest income which exceeded 15% of the
Registrant's total revenue for any of the years ended December 31, 1995, 1994 or
1993.
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<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
The following table lists the FMBs that the Registrant owns
together with the occupancy and rental rates of the underlying properties:
<TABLE>
<CAPTION>
Carrying Average Minimum
Face Amount Final Interest Stated Pay Rate at
Closing Amount at December Completion Rate Paid Interest December 31,
Property Date of Bond 31, 1995 (G) Date in 1995* Rate* 1995*
- - -------- -------- ----------- ------------- ------------ -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Bay Club,
Mt. Pleasant, SC 9/11/86 $ 6,400,000 $ 6,138,650 12/87 7.50%(A) 8.25% 7.25%(A)
Loveridge,
Contra Costa, CA 11/13/86 8,550,000 7,629,796 3/87 6.80 8.00 (C)
The Lakes,
Kansas City, MO 12/30/86 13,650,000 10,368,077 1/89 5.30 (E) 4.87 4.87
Crowne Pointe,
Olympia, WA 12/31/86 5,075,000 5,290,714 6/87 8.00 8.00 8.00
Orchard Hills,
Tacoma, WA 12/31/86 5,650,000 5,803,112 9/87 8.00 8.00 8.00
Highland Ridge,
St. Paul, MN 2/02/87 15,000,000 12,685,842 1/89 7.80 (F) 8.00 7.00
Newport Village,
Tacoma, WA 2/11/87 13,000,000 13,731,947 2/87 7.80 (D) 8.00 7.00
Sunset Downs,
Lancaster, CA 2/11/87 15,000,000 11,396,727 7/87 5.70 8.00 (C)
Pelican Cove,
St. Louis, MO 2/27/87 18,000,000 16,801,601 11/89 7.50 8.00 (C)
Willow Creek,
Ames, IA 2/27/87 6,100,000 5,563,709 8/88 8.00 8.00 8.00
Cedar Pointe,
Nashville, TN 4/22/87 9,500,000 9,778,309 9/89 8.00 8.00 8.00
Shannon Lake,
Atlanta, GA 6/26/87 12,000,000 10,519,904 8/88 6.00 8.00 6.00
Bristol Village,
Bloomington, MN 7/31/87 17,000,000 16,631,716 9/89 7.90 (D) 8.00 7.50
Suntree,
Ft. Myers, FL 7/31/87 7,500,000 7,876,831 12/85 7.50 8.00 7.50
</TABLE>
Occupancy Rental Rates No. of
February 11, at December Rental
Property 1996 31, 1995 Units
- - -------- ------------ ------------- ---------
Bay Club,
Mt. Pleasant, SC 97.5% $505-655 160
Loveridge,
Contra Costa, CA 95.2 552-691 148
The Lakes,
Kansas City, MO 91.6 380-560 400
Crowne Pointe,
Olympia, WA 95.0 480-775 160
Orchard Hills,
Tacoma, WA 96.0 460-755 176
Highland Ridge,
St. Paul, MN 94.7 675-1,200 228
Newport Village,
Tacoma, WA 90.3 435-590 402
Sunset Downs,
Lancaster, CA 78.5 460-680 264
Pelican Cove,
St. Louis, MO 98.2 465-625 402
Willow Creek,
Ames, IA 100.0 500-825 138
Cedar Pointe,
Nashville, TN 93.7 480-810 210
Shannon Lake,
Atlanta, GA 98.0 385-680 294
Bristol Village,
Bloomington, MN 100.0 610-1,059 290
Suntree,
Ft. Myers, FL 92.4 450-635 240
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<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
<TABLE>
<CAPTION>
Carrying Average Minimum
Face Amount Final Interest Stated Pay Rate at
Closing Amount at December Completion Rate Paid Interest December 31,
Property Date of Bond 31, 1995 (G) Date in 1995* Rate* 1995*
- - -------- -------- ----------- ------------- ------------ -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
River Run,
Miami, FL 8/07/87 7,200,000 7,463,220 7/87 8.00 8.00 8.00
Players Club,
Ft. Myers, FL (B) 8/14/87 2,500,000 2,594,297 12/85 7.00 8.00 7.00
------------ ------------
$162,125,000 $150,274,452
</TABLE>
Occupancy Rental Rates No. of
February 11, at December Rental
Property 1996 31, 1995 Units
- - -------- ------------ ------------- ---------
River Run,
Miami, FL 94.4 609-829 164
Players Club,
Ft. Myers, FL (B) 87.6 450-645 288
*The rate paid represents the interest recorded by the Registrant 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) The minimum pay rate on the FMB increases in increments from 6.0% in 1990
to 8.25% in 1997. The actual pay rate is adjusted as of the property's
fiscal year-end based on audited financial statements to no less than the
minimum pay rate.
(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.
(D) Includes receipt of deferred base interest relating to prior periods.
(E) Includes receipt of primary and supplemental contingent interest.
(F) Reflects payments received in connection with the forbearance effective
with the November 1, 1995 payment.
(G) The FMBs are carried at their estimated fair values at December 31, 1995.
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<PAGE>
Bond Modifications/Forbearance Agreements
Due to a soft market and increases in its real estate taxes, in
April, 1996, the obligor of the Highland Ridge FMB entered into a forbearance
agreement with the Partnership effective retroactive to October 10, 1995. In
accordance with the terms and conditions of this agreement, the obligor will
make minimum monthly debt service payments beginning at a 7% annual rate and
increasing in annual increments over a period of four years. The difference
between the actual pay rate and the stated rate of the FMB is deferred and
payable from future available cash flow or sale or refinancing proceeds. In
addition, delinquent taxes will be paid in installments by the developer over an
18 month period. The obligations under the forbearance agreement are further
secured by the general partner of the Highland Ridge partnership to guarantee
this obligation with a personal guarantee.
In June 1992, under a forbearance agreement, the Sunset Downs
property began paying debt service at 7.0% and was scheduled to increase in
annual increments to the original stated rate of 8.0% in June 1996. Effective
with the May 1, 1995 payment date, the Sunset Downs FMB has made payments based
on the monthly net cash flow generated by the operations of its underlying
property in accordance with the terms of the agreement outlined below. Effective
as of August 1, 1995, the obligor of the Sunset Downs FMB entered into a
forbearance agreement. In accordance with the terms of this agreement, the
obligor of the FMB is paying debt service of the FMB to the extent of cash flow
generated by the underlying property. In addition, pursuant to the agreement,
the obligor has replaced the present property manager and leasing agent with a
new property manager who is an affiliate of the Related General Partner. Other
terms of the agreement call for the deed to be transferred to the Registrant or
its designee no later that January 30, 1997 should the obligor be unable to
bring the FMB fully current on all interest due and payable (including deferred
base interest) on or before that date. These and other obligations are secured
by a guarantee from an affiliate of the obligor.
Effective with the May 1, 1995 payment date, the Loveridge FMB has
made payments based on the monthly net cash flow generated by the operations of
the underlying properties in accordance with the terms of the agreement outlined
below. Subsequently on August 1, 1995, the original owner and obligor of the
Loveridge FMB transferred the deed to the underlying property to an affiliate of
the Related General Partner for limited consideration. Pursuant to the
agreement, the Related General Partner's affiliate, who has not made an equity
investment in the underlying property, assumed the day-to-day responsibilities
and obligations of operating the property. The Registrant receives the monthly
net cash generated by the property as payment toward debt service.
On May 13, 1993, the Registrant, 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 judgement rendered
against LPI. In July, 1994, the appeal was rejected and the judgement affirmed.
However, at that time LPI petitioned the court for a rehearing. On January 23,
1995, in settlement of this case, LPI and the plaintiff agreed that
approximately $422,000 of the current escrow balance be paid to the plaintiff.
The balance of funds (approximately $99,000) remaining in escrow was returned to
LPI and thence to the Registrant as payment towards previously accrued and
unpaid interest. Previously, the Registrant had reserved fully for the appeal.
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
Registrant's $13,650,000 FMB, to an unrelated third party for $200,000. The
Lakes FMB was modified to allow debt service payments 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. Pursuant to the terms
of the option and assumption of the FMB, the option was exercised on August 31,
1994. The net cash proceeds of approximately $487,000 (net of an escrow for
certain repairs and closing costs), paid to the Registrant to reduce previously
accrued and unpaid interest, was recorded as deferred income and is being
accreted as interest income from participating first mortgage bonds over the
remaining life of The Lakes FMB. The balance of the deferred income relating to
The Lakes FMB was approximately $434,000 at December 31, 1995 and $474,000 at
December 31, 1994.
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<PAGE>
In 1992, forbearance agreements were finalized with the owners of
the Newport Village, Bristol Village, 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. 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 further
modified to allow debt service payments to be made at 6.0% per annum through the
end of 1994. Effective January 1, 1995, and again extended effective January 1,
1996 the Suntree and Players Club forbearance agreements were again modified to
allow minimum debt service payments to be made at 7.5% and 7.0% per annum,
respectively, through the end of 1996.
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. These
agreements have been subsequently extended through December 15, 1997. In
addition, the Registrant 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. In
June 1996, the second mortgage was extended and increased by an additional
$300,000 for certain capital repairs. The note now amortizes at a rate of 8% for
a term of 48 months beginning July 1, 1996. Due to the forbearance agreement, an
allowance for possible loss was established for the entire loan amount
($138,000) during 1993. Interest payments on both the FMB and the second
mortgage are current at June 30, 1996.
The Registrant also 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. The current balance outstanding as of December
31,1995 is approximately $49,000. Payments on this loan are current at June 30,
1996.
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. As part of this modification, the
Registrant 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 promissory note was recorded in the statements of financial condition. As a
result of this transaction, income is recognized only as and when the Registrant
receives payments on the promissory note. The balances of both the promissory
note and deferred income were approximately $22,000 and $95,000 at December 31,
1995 and 1994, respectively. A loss of $264,547 was recorded on this transaction
in 1990 to reflect the concessions granted.
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.
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 contractual interest income
was approximately $704,000, $931,000 and $2,377,000 for the years ended December
31, 1995, 1994 and 1993, respectively.
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<PAGE>
The determination as to whether it is in the best interest of the
Registrant to enter into forbearance agreements on the FMBs, or alternatively,
to pursue its remedies under the loan documents, including foreclosure, is based
upon several factors. These factors include, but are not limited to, property
performance, owner cooperation and projected legal costs.
Employees
The Registrant has no employees. Management and administrative
services for the Registrant are performed by the General partners and their
affiliates pursuant to the Partnership Agreement. See Note 5 to the financial
statements in Item 8.
Item 2. Properties
The Registrant does not own or lease any property.
Item 3. Legal Proceedings
This information is incorporated by reference to Note 6 to the
financial statements in Item 8.
Item 4. Submission of Matters to a Vote of BUC$holders
None
PART II
Item 5. Market for the Registrant's BUC$ and Related BUC$holder Matters.
As of March 1, 1996 there were 9,255 holders of record owning
9,151,620 BUC$. 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$holder to transfer their BUC$.
Consequently, BUC$holders may not be able to liquidate their investments in the
event of 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.
Quarter Ended 1995 1994
------------- -------- -------
March 31 $0.26 $0.26
June 30 0.26 0.26
September 30 0.26 0.26
December 31 0.26 0.26
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. Approximately $514,000 of the $9,518,000 and $87,000 of
the $9,518,000 paid to the BUC$holders in 1995 and 1994, respectively represents
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 current and previously
undistributed cash flow from operations. For a 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 in Item 7.
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<PAGE>
Item 6. Selected Financial Data.
The information set forth below presents selected financial data
of the Registrant. Additional financial information is set forth in the
financial statements and notes thereto contained in Item 8 hereof.
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Interest income from
participating first
mortgage bonds $ 11,895,439 $ 11,765,112 $ 11,543,922 $ 11,132,119 $ 11,541,532
============ ============ ============ ============ ============
Provision for loss on
impairment of assets $ 1,000,000 $ 500,000 $ 1,000,000 $ 0 $ 0
============ ============ ============ ============ ============
Net income $ 9,187,803 $ 9,623,049 $ 8,285,673 $ 9,214,047 $ 9,876,279
============ ============ ============ ============ ============
Net income per BUC $ 0.98 $ 1.03 $ 0.89 $ 0.99 $ 1.06
============ ============ ============ ============ ============
Total assets $157,019,314 $157,436,945 $165,778,624 $166,738,439 $167,337,238
============ ============ ============ ============ ============
Distributions to
BUC$holders $ 9,517,685 $ 9,517,685 $ 9,517,685 $ 9,536,926 $ 9,563,489
============ ============ ============ ============ ============
Distributions per BUC $ 1.0400 $ 1.0400 $ 1.0400 $ 1.0421 $ 1.0450
============ ============ ============ ============ ============
</TABLE>
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
Summit Tax Exempt L.P. II ("the Registrant") 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 end of 1995, the Registrant had cash and temporary
investments of approximately $3,773,000. The fourth quarter distribution of
approximately $2,379,000 ($.26 per BUC) was paid to BUC$holders in February 1996
from cash flow from operations.
Interest payments from FMBs are anticipated to provide sufficient
liquidity to meet the operating expenditures of the Registrant in future years
and to fund distributions.
Management is not aware of any trends or events, commitments or
uncertainties that will impact liquidity in a material way. Management believes
the only impact would be from laws that have not been adopted. The Registrant's
investments in mortgage loans are secured by a Registrant interest in properties
which are diversified by location so that if one area of the country is
experiencing downturns in the economy, the remaining properties may be
experiencing upswings.
Results of Operations
Pursuant to a review of the Registrant's financial statements by
the SEC staff in 1996 and in accordance with others in the industry, the
Registrant agreed that it will account for its investments in the FMBs as debt
securities under the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115") effective January 1, 1994, and has restated its 1995 and 1994
financial statements to reflect this change in accounting treatment.
The change in accounting treatment does not affect cash flow or
payments received by the Partnership from the properties, level of distributions
to BUC$Holders, the tax-exempt nature of the Partnership's net income or the
obligation under the FMBs.
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. As such, SFAS 115 requires the
Registrant to classify these investments as "available for sale." Accordingly,
effective January 1, 1994, investments in FMBs are carried at their estimated
fair values, with unrealized gains and losses reported in a separate component
of partners' capital. The cumulative effect of adopting this accounting was a
decrease in partners' capital at January 1, 1994 of approximately $9,338,000 due
to unrealized holding losses. This accounting also resulted in cumulative net
unrealized losses of approximately $7,938,000 and $8,481,000 at December 31,
1995 and 1994, respectively. Again, unrealized holding gains or losses do not
affect the cash flow generated from property operations, distributions to
BUC$holders, the characterization of the tax-exempt income stream or the
financial obligations under the FMBs.
The Registrant 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 Registrant 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 Registrant
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
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<PAGE>
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 Registrant'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.
Prior to 1994, the Registrant accounted for its investments in
FMBs as loans collateralized by real estate, carried at cost less reserves, if
needed, for possible losses. The Registrant classified FMBs as Assets Held for
Sale when the original owner of the property and obligor of the FMB was replaced
by an affiliate of the Related General Partner, who had not made an equity
investment in the property. Because the Registrant has not declared default and
has no present intention to do so, these assets have been reclassified from
Assets Held for Sale to FMBs upon adoption of SFAS 115. Such FMBs were written
down to the estimated fair value of the underlying properties at the time the
original owners were replaced.
1995 vs. 1994
Net income decreased approximately $435,000 for the year ended
December 31, 1995 as compared to the corresponding period in 1994 primarily due
to the loss on impairment of assets of $1,000,000 and $500,000 recorded in 1995
and 1994, respectively, and for the reasons discussed below.
Interest income from FMBs increased by approximately $130,000 as
compared to the corresponding period in 1994 primarily due to additional
interest received from the Newport Village, Shannon Lake, Bristol Village,
Players Club, Bay Club and Suntree FMBs as required by the terms of their
respective forbearance agreements together with increased cash flow generated by
the Pelican Cove property resulting in an increase of its interest payments to
the Registrant and contingent interest received from The Lakes. The increase is
partially offset by reduced debt service payments received from the Loveridge,
Sunset Downs and Highland Ridge FMBs and nonrecurring contingent interest
received in 1994 from Crowne Pointe and Willow Creek.
Interest income from temporary investments increased
approximately $52,000 for the year ended December 31, 1995 as compared
to the corresponding period in 1994 due to higher interest rates and invested
balances in 1995.
Interest income from promissory notes decreased approximately
$14,000 for the year ended December 31, 1995 as compared to the corresponding
period in 1994 due to the repayment of the Pelican Cove and The Lakes property
tax loans in May 1994.
A $1,000,000 loss on impairment of assets was recorded during the
year ended December 31, 1995 to write down the cost basis of certain FMBs to
recognize other-than-temporary impairment.
General and administrative expenses increased approximately
$126,000 for the year ended December 31, 1995 as compared to the corresponding
period in 1994 primarily due to an increase in administrative expense as well as
legal costs relating to the Kinnes litigation described in Note 6 to the
financial statements.
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 $221,000 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, Bristol Village and The Lakes FMBs pursuant to the terms
of their respective forbearance agreements, and contingent interest received
from the Crowne Pointe and The Lakes FMBs. These increases were partially offset
by reduced rates paid on the Shannon Lake, Suntree and Players Club FMBs
-11-
<PAGE>
resulting from modifications to their respective forbearance agreements in 1993
and 1994. In addition, less interest was paid by Bay Club in 1994 than in 1993.
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.
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.
A $500,000 loss on impairment of assets was recorded during the
year ended December 31, 1994 to write down the cost basis of certain
FMBs to recognize other-than-temporary impairment. A $1,000,000 loss on
impairment of assets was recorded during the year ended December 31, 1993.
During 1994, an additional $22,000 was recorded for the loss on
the mechanics lien judgment relating to the Lakes (see Note 3 to the financial
statements).
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 6 to the financial statements and a general reduction in the
costs associated with the administration of the Registrant.
-12-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
Property Information
The following table lists the Registrant's FMBs together with occupancy
rates of the underlying properties as of February 11, 1996:
<TABLE>
<CAPTION>
Carrying
Amount Average Stated Minimum Pay
Face Amount at December Interest Rate Interest Rate at December
Property Location of Bond 31,1995 (G) Occupancy Paid in 1995* Rate* 31,1995*___
- - -------- -------- ------------- ------------- --------- ------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bay Club Mt. Pleasant, SC $ 6,400,000 $ 6,138,650 97.5% 7.50%(A) 8.25% 7.25%(A)
Loveridge Contra Costa, CA 8,550,000 7,629,796 95.2 6.80 8.00 (C)
The Lakes Kansas City, MO 13,650,000 10,368,077 91.6 5.30 (E) 4.87 4.87
Crowne Pointe Olympia, WA 5,075,000 5,290,714 95.0 8.00 8.00 8.00
Orchard Hills Tacoma, WA 5,650,000 5,803,112 96.0 8.00 8.00 8.00
Highland Ridge St. Paul, MN 15,000,000 12,685,842 94.7 7.80 (F) 8.00 7.00
Newport Village Tacoma, WA 13,000,000 13,731,947 90.3 7.80 (D) 8.00 7.00
Sunset Downs Lancaster, CA 15,000,000 11,396,727 78.5 5.70 8.00 (C)
Pelican Cove St. Louis, MO 18,000,000 16,801,601 98.2 7.50 8.00 (C)
Willow Creek Ames, IA 6,100,000 5,563,709 100.0 8.00 8.00 8.00
Cedar Pointe Nashville, TN 9,500,000 9,778,309 93.7 8.00 8.00 8.00
Shannon Lake Atlanta, GA 12,000,000 10,519,904 98.0 6.00 8.00 6.00
Bristol Village Bloomington, MN 17,000,000 16,631,716 100.0 7.90 (D) 8.00 7.50
Suntree Ft. Myers, FL 7,500,000 7,876,831 92.4 7.50 8.00 7.50
River Run Miami, FL 7,200,000 7,463,220 94.4 8.00 8.00 8.00
Players Club (B) Ft. Myers, FL 2,500,000 2,594,297 87.6 7.00 8.00 7.00
------------ -------------
$162,125,000 $150,274,452
============ =============
</TABLE>
*The rate paid represents the interest recorded by the Registrant 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) The minimum pay rate on the FMB increases in increments from 6.0% in
1990 to 8.25% in 1997. The actual pay rate is adjusted as of the
property's fiscal year-end based on audited financials to no less than the
minimum pay rate.
(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 required pay rate is the current cash flow. See Note 3 to the
financial statements.
(D) Includes receipt of deferred base interest relating to prior periods.
(E) Includes receipt of primary and supplemental contingent interest.
(F) Reflects payments received in connection with the forbearance effective with
the November 1, 1995 payment.
(G) The FMBs are carried at their estimated fair values at December 31, 1995.
-13-
<PAGE>
General
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 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 $704,000, $931,000 and $2,377,000 was not recognized for the
years ended December 31, 1995, 1994 and 1993, 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
continue to 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. No property owner
made supplementary payments in 1995.
-14-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>
(a) 1. Financial Statements Page
-------------------- ----
<S> <C> <C>
Independent Auditors' Report 16
Statements of Financial Condition as of December 31, 1995 and 1994 17
Statements of Income for the years ended December 31, 1995, 1994 and
1993 18
Statements of Changes in Partners' Capital (Deficit) for the years
ended December 31, 1995, 1994 and 1993 19
Statements of Cash Flows for the years ended December 31, 1995, 1994
and 1993 20
Notes to Financial Statements 21
</TABLE>
-15-
<PAGE>
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, 1995 and 1994, and the related statements of income, changes in
partners' capital (deficit) and cash flows for each of the three years in the
period ended December 31, 1995. Our audits also included the financial statement
schedule listed in the Index at Item 14. These financial statements and
financial statement schedule are the responsibility of the General Partners. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by 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, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 2, the accompanying financial statements and
the financial statement schedule have been restated to account for the
Partnership's investments in tax-exempt participating first mortgage revenue
bonds as debt securities.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
March 20, 1996 (August 12, 1996 as to Notes 2 and 3 and the financial
statement schedule)
-16-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
ASSETS
December 31,
--------------------------------
1995 1994
------------- -------------
<S> <C> <C>
Participating first mortgage bonds-at fair value $150,274,452 $150,705,121
Temporary investments 2,800,000 2,175,490
Cash and cash equivalents 972,889 872,662
Cash held in escrow 0 520,677
Interest receivable, net 899,299 797,401
Promissory notes receivable, net 70,513 175,405
Deferred bond selection fees, net 1,989,663 2,174,386
Other assets 12,498 15,803
------------ ------------
Total assets $157,019,314 $157,436,945
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Deferred income $ 455,636 $ 568,953
Reserve for disputed claim 0 422,287
Accrued expenses 132,653 67,017
Due to affiliates 64,061 30,481
------------ ------------
Total liabilities 652,350 1,088,738
------------ ------------
Contingencies
Partners' capital (deficit):
BUC$holders (9,151,620 BUC$
issued and outstanding) 164,412,008 164,925,646
General partners (106,923) (96,441)
Net unrealized loss on
participating first mortgage bonds (7,938,121) (8,480,998)
------------ ------------
Total partners' capital 156,366,964 156,348,207
------------ ------------
Total liabilities and partners' capital $157,019,314 $157,436,945
============ ============
</TABLE>
See accompanying notes to financial statements
-17-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Interest income:
Participating first mortgage loans $11,895,439 $11,765,112 $11,543,922
Temporary investments 120,370 68,017 49,147
Promissory notes 23,478 37,361 60,719
----------- ----------- -----------
Total revenues 12,039,287 11,870,490 11,653,788
----------- ----------- -----------
Expenses:
Management fees 810,625 810,625 810,625
Loan servicing fees 405,313 405,313 405,313
General and administrative 450,823 324,496 429,457
Amortization of deferred bond selection fees 184,723 184,720 184,720
Provision for disputed claim 0 22,287 400,000
Provision for uncollectible receivables 0 0 138,000
Loss on impairment of assets 1,000,000 500,000 1,000,000
----------- ----------- -----------
Total expenses 2,851,484 2,247,441 3,368,115
----------- ----------- -----------
Net income $9,187,803 $9,623,049 $8,285,673
=========== =========== ===========
Allocation of Net Income:
BUC$holders $9,004,047 $9,430,588 $8,119,960
=========== =========== ===========
General Partners $ 183,756 $ 192,461 $ 165,713
=========== =========== ===========
Net income per BUC $ 0.98 $ 1.03 $ 0.89
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
-18-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) on
Participating First
Total BUC$holders General Partners Mortgage Bonds
------------ ------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Partners' capital (deficit) -
December 31, 1992 $166,344,329 $166,410,468 $(66,139)
Net income 8,285,673 8,119,960 165,713
Distributions (9,711,923) (9,517,685) (194,238)
------------ ------------ ----------
Partners' capital (deficit) -
December 31, 1993 164,918,079 165,012,743 (94,664)
Cumulative effect through
January 1, 1994 of
accounting change (Note 2) (9,337,668) 0 0 $ (9,337,668)
Net income 9,623,049 9,430,588 192,461 0
Distributions (9,711,923) (9,517,685) (194,238) 0
Net change in fair value of
participating first mortgage bonds 856,670 0 0 856,670
------------ ------------ ----------- ------------
Partners' capital (deficit) -
December 31, 1994 156,348,207 164,925,646 (96,441) (8,480,998)
Net income 9,187,803 9,004,047 183,756 0
Distributions (9,711,923) (9,517,685) (194,238) 0
Net change in fair value of
participating first mortgage bonds 542,877 0 0 542,877
------------ ------------ ----------- ------------
Partners' capital (deficit) -
December 31, 1995 $156,366,964 $164,412,008 $ (106,923) $ (7,938,121)
============ ============ =========== ============
</TABLE>
See accompanying notes to financial statements
-19-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1995 1994 1993
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 11,871,177 $11,839,187 $ 11,571,579
Fees and expenses paid (1,564,240) (1,741,023) (1,479,839)
Cash held in escrow 98,390 (12,654) (508,023)
------------ ----------- ------------
Net cash provided by operating activities 10,405,327 10,085,510 9,583,717
------------ ----------- ------------
Cash flows from investing activities:
Net (purchase) sale of temporary investments (624,510) (319,710) 449,722
Loans made to properties 0 0 (263,000)
Principal payments received from loans made to
properties 31,333 28,934 15,841
Income deferred upon assumption of bond by new
debtor 0 487,025 0
------------ ----------- ------------
Net cash (used in) provided by investing activities (593,177) 196,249 202,563
------------ ----------- ------------
Cash flows from financing activities:
Distributions paid (9,711,923) (9,711,923) (9,711,923)
------------ ----------- ------------
Net increase in cash and cash equivalents 100,227 569,836 74,357
Cash and cash equivalents at the beginning of year 872,662 302,826 228,469
------------ ----------- ------------
Cash and cash equivalents at the end of the year $ 972,889 $ 872,662 $ 302,826
============ =========== ============
Schedule reconciling net income to net cash
provided by operating activities
Net income $9,187,803 $ 9,623,049 $ 8,285,673
------------ ----------- ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on impairment of assets 1,000,000 500,000 1,000,000
Provision for disputed claim 0 22,287 400,000
Amortization of deferred bond selection fees 184,723 184,720 184,720
Provision for uncollectible receivables 0 0 138,000
Accretion of valuation allowance (26,455) (26,455) (26,455)
Accretion of deferred income (39,757) (13,252) 0
Changes in:
Cash held in escrow 520,677 (12,654) (508,023)
Interest receivable, net (101,898) 8,404 (55,754)
Promissory notes receivable, net 73,560 65,334 62,969
Other assets 3,305 1,944 (2,472)
Reserve for disputed claim (422,287) 0 0
Accrued expenses 65,636 (74,852) 43,444
Deferred income (73,560) (65,334) (62,969)
Due to affiliates 33,580 (127,681) 124,584
------------ ----------- ------------
Total adjustments 1, 217,524 462,461 1,298,044
------------ ----------- ------------
Net cash provided by operating activities $10,405,327 $10,085,510 $ 9,583,717
============ =========== ============
</TABLE>
See accompanying notes to financial statements
-20-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 - 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$"), has assigned to those persons
substantially all of its rights and interest in and under such limited
partnership interests. The Related General Partner and the Assignor Limited
Partner are under common ownership. As of December 31, 1995, the Partnership had
invested in a total of sixteen FMBs.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting
The books and records of the Partnership are maintained on the
accrual basis of accounting in accordance with generally accepted accounting
principles.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the General Partners to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
b) Participating First Mortgage Bonds and Promissory Notes
Receivable
Pursuant to a review of the Partnership's financial statements
by the SEC staff in 1996 and in accordance with others in the industry, the
Partnership agreed that it will account for its investments in the FMBs as debt
securities under the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115") effective January 1, 1994, and has restated its 1995 and 1994
financial statements to reflect this change in accounting treatment.
The change in accounting treatment does not affect cash flow
or payments received by the Partnership from the properties, level of
distributions to BUC$Holders, the tax-exempt nature of the Partnership's net
income or the obligation under the FMBs.
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. As such, SFAS 115 requires the
Partnership to classify these investments as "available for sale." Accordingly,
effective January 1, 1994, investments in FMBs are carried at their estimated
fair values, with unrealized gains and losses reported in a separate component
of partners' capital. The cumulative effect of adopting this accounting was a
decrease in partners' capital at January 1, 1994 of approximately
-21-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 2 - Summary of Significant Accounting Policies (continued)
$9,338,000 due to unrealized holding losses. The accounting also
resulted in cumulative net unrealized losses of approximately $7,938,000 and
$8,481,000 at December 31, 1995 and 1994, respectively. Again, unrealized
holding gains or losses do not affect the cash flow generated from property
operations, distributions to BUC$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.
Prior to 1994, the Partnership accounted for its investments
in FMBs as loans collateralized by real estate, carried at cost less reserves,
if needed, for possible losses. The Partnership classified FMBs as Assets Held
for Sale when the original owner of the property and obligor of the FMB was
replaced by an affiliate of the Related General Partner, who had not made an
equity investment in the property. Because the Partnership has not declared
default and has no present intention to do so, these assets have been
reclassified from Assets Held for Sale to FMBs upon adoption of SFAS 115. Such
FMBs were written down to the estimated fair value of the underlying properties
at the time the original owners were replaced.
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.
c) Temporary Investments
Temporary investments at December 31, 1995 represent
tax-exempt municipal preferred stock which is carried at cost which approximates
market value. Temporary investments at December 31, 1994 represent tax-exempt
floating rate municipal bonds which are carried at cost plus accrued interest
which approximates market value.
d) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks,
and investments in short-term instruments with an original maturity of three
months or less, for which cost approximates market value.
-22-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 2 - Summary of Significant Accounting Policies (continued)
e) Income Taxes
The Partnership is not required to provide for, or pay, any
Federal income taxes. Income tax attributes that arise from its operations are
passed directly to the BUC$holders. The Partnership may be subject to
other state and local taxes in jurisdictions in which it operates.
f) Profit and Loss Allocations and Distributions
Net profits or losses and distributions are allocated 98% to
the BUC$holders and 2% to the General Partners in accordance with the
Partnership Agreement.
g) Deferred 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, 1995 and 1994 was approximately $1,637,000 and
$1,452,000, respectively.
h) Fair Value of Financial Investments
As described in Note 2.b. above, the Partnership's investment in
FMBs are carried at estimated fair values. The Partnership has determined that
the fair value of its remaining financial instruments, including its temporary
investments, cash and cash equivalents and promissory notes receivable
approximates their carrying values.
i) Reclassifications
Certain reclassifications have been made to prior year amounts to
conform to the current year presentation.
NOTE 3 - Participating 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. None of these FMBs constitute 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 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.
-23-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - Participating First Mortgage Bonds (continued)
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. Only one FMB, The
Lakes, paid contingent interest of approximately $68,000 in 1995.
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.
Due to a soft market and increases in its real estate taxes, in
April, 1996, the obligor of the Highland Ridge FMB entered into a forbearance
agreement with the Partnership effective retroactive to October 10, 1995. In
accordance with the terms and conditions of this agreement, the obligor will
make minimum monthly debt service payments beginning at a 7% annual rate and
increasing in annual increments over a period of four years. The difference
between the actual pay rate and the stated rate of the FMB is deferred and
payable from future available cash flow or sale or refinancing proceeds. In
addition, delinquent taxes will be paid in installments by the developer over an
18 month period. The obligations under the forbearance agreement are further
secured by the general partner of the Highland Ridge partnership to guarantee
this obligation with a personal guarantee.
In June 1992, under a forbearance agreement, the Sunset Downs
property began paying debt service at 7.0% and was scheduled to increase in
annual increments to the original stated rate of 8.0% in June 1996. Effective
with the May 1, 1995 payment date, the Sunset Downs FMB has made payments based
on the monthly net cash flow generated by the operations of its underlying
property in accordance with the terms of the agreement outlined below.
Subsequently on August 1, 1995, the obligor of the Sunset Downs FMB entered into
a forbearance agreement. In accordance with the terms of this agreement, the
obligor of the FMB is paying debt service of the FMB to the extent of cash flow
generated by the underlying property. In addition, pursuant to the agreement,
the obligor has replaced the present property manager and leasing agent with a
new property manager who is an affiliate of the Related General Partner. Other
terms of the agreement call for the deed to be transferred to the Partnership or
its designee no later that January 30, 1997 should the obligor be unable to
bring the FMB fully current on all interest due and payable (including deferred
base interest) on or before that date. These and other obligations are secured
by a guarantee from an affiliate of the obligor.
Effective with the May 1, 1995 payment date, the Loveridge FMB has
made payments based on the monthly net cash flow generated by the operations of
the underlying properties in accordance with the terms of the agreement outlined
below. Subsequently on August 1, 1995, the original owner and obligor of the
Loveridge FMB transferred the deed to the underlying property to an affiliate of
the Related General Partner for limited consideration. Pursuant to the
agreement, the Related General Partner's affiliate, who has not made an equity
investment in the underlying property, assumed the day-to-day responsibilities
and obligations of operating the property. The Partnership receives the monthly
net cash generated by the property as payment toward debt service.
On May 13, 1993, the Partnership, on behalf of Lakes Project
Investors, Inc. ("LPI"), 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 judgement rendered against LPI. In
July, 1994, the appeal was
-24-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - Participating First Mortgage Bonds (continued)
rejected and the judgement affirmed. However, at that time LPI
petitioned the court for a rehearing. On January 23, 1995, in settlement of this
case, LPI and the plaintiff agreed that approximately $422,000 of the current
escrow balance be paid to the plaintiff. The balance of funds (approximately
$99,000) remaining in escrow was returned to LPI and thence to the Partnership
as payment toward previously accrued and unpaid interest. Previously, the
Partnership had reserved fully for the appeal.
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. In conjunction with the sale, the Lakes FMB was
modified to allow debt service payments at 4.87% per annum with 100% of the
excess property cash flow paid to the Partnership up to a rate of 5.24% and
participation in the net cash flow thereafter. 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 accreted as interest income from
participating first mortgage bonds over the remaining life of The Lakes FMB. The
balance of the deferred income relating to The Lakes FMB was approximately
$434,000 at December 31, 1995 and $474,000 at December 31, 1994.
In 1992, forbearance agreements were finalized with the owners of
the Newport Village, Bristol Village, 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. 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, and again extended January 1, 1996 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 1996.
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. These
agreements have been subsequently extended through December 15, 1997. 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. In
June 1996, the second mortgage was extended and increased by an additional
$300,000 for certain capital repairs. The note now amortizes at a rate of 8% for
a term of 48 months beginning July 1, 1996. Due to the forbearance agreement, an
allowance for possible loss was established for the entire loan amount
($138,000) during 1993. Interest payments on both the FMB and the second
mortgage are current at June 30, 1996.
The Partnership also 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. The current balance outstanding as of December
31, 1995 is approximately $49,000. Payments on this loan are current at December
31, 1995.
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.
-25-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - Participating First Mortgage Bonds (continued)
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 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 $22,000 and $95,000 at December 31, 1995 and
1994, respectively. A loss of $264,547 was recorded on this transaction in 1990
to reflect the concessions granted.
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.
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.
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 contractual interest income
was approximately $704,000, $931,000 and $2,377,000 for the years ended December
31, 1995, 1994 and 1993, respectively.
The cost basis of the FMBs at December 31, 1995 and 1994 was
$158,212,573 and $159,186,119, respectively. The net unrealized loss on FMBs
consists of gross unrealized gains and losses of $2,113,430 and $10,051,551,
respectively, at December 31, 1995 and $1,609,521 and $10,090,519, respectively,
at December 31, 1994.
-26-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - Participating First Mortgage Bonds
Descriptions of the various FMBs owned by the Partnership at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Minimum
Average Pay Rate Stated
Interest Rate at December Interest
Property Location Paid in 1995* 31,1995* Rate* Call Date Maturity Date
- - -------- -------- -------------- ----------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Bay Club Mt. Pleasant, SC 7.50%(E) 8.25% 7.25%(E) Sep. 2000 Sep. 2006
Loveridge Contra Costa, CA 6.80 8.00 (B) Nov. 1998 Nov. 2006
The Lakes Kansas City, MO 5.30 (D) 4.87 4.87 Dec. 2006 Dec. 2006
Crowne Pointe Olympia, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006
Orchard Hills Tacoma, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006
Highland Ridge St. Paul, MN 7.80 (F) 8.00 7.00 Feb. 1999 Feb. 2007
Newport Village Tacoma, WA 7.80 (C) 8.00 7.00 Jan. 1999 Jan. 2007
Sunset Downs Lancaster, CA 5.70 8.00 (B) May 1999 May 2007
Pelican Cove St Louis, MO 7.50 8.00 (B) Feb. 1999 Feb. 2007
Willow Creek Ames, IA 8.00 8.00 8.00 Oct. 1999 Oct. 2006
Cedar Pointe Nashville, TN 8.00 8.00 8.00 Apr. 1999 Apr. 2007
Shannon Lake Atlanta, GA 6.00 8.00 6.00 Jun. 1999 Jun. 2007
Bristol Village Bloomington, MN 7.90 (C) 8.00 7.50 Jun. 1999 Jun. 2005
Suntree Ft. Myers, FL 7.50 8.00 7.50 Jul. 1999 Jul. 2007
River Run Miami, FL 8.00 8.00 8.00 Aug. 1999 Aug. 2007
Players Club (A) Ft. Myers, FL 7.00 8.00 7.00 Aug. 1999 Aug. 2007
</TABLE>
Carrying
Amount
at December
Property Face Amount 31, 1995 (G)
- - -------- ----------- -------------
Bay Club $ 6,400,000 $ 6,138,650
Loveridge 8,550,000 7,629,796
The Lakes 13,650,000 10,368,077
Crowne Pointe 5,075,000 5,290,714
Orchard Hills 5,650,000 5,803,112
Highland Ridge 15,000,000 12,685,842
Newport Village 13,000,000 13,731,947
Sunset Downs 15,000,000 11,396,727
Pelican Cove 18,000,000 16,801,601
Willow Creek 6,100,000 5,563,709
Cedar Pointe 9,500,000 9,778,309
Shannon Lake 12,000,000 10,519,904
Bristol Village 17,000,000 16,631,716
Suntree 7,500,000 7,876,831
River Run 7,200,000 7,463,220
Players Club (A) 2,500,000 2,594,297
------------ ------------
$162,125,000 $150,274,452
============ ============
*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 of affiliates of the General Partners of the Partnership, acquired the
other $7,200,000 of the Player's Club FMB.
(B) Pay rate is based on the net cash flow generated by the property.
(C) Includes receipt of deferred base interest relating to prior periods.
(D) Includes receipt of primary and supplemental contingent interest.
(E) The minimum pay rate on the FMB increases in increments from 6.0% in 1990
to 8.25% in 1997. The actual pay rate is adjusted as of the property's
fiscal year-end based on audited financial statements to no less than the
minimum pay rate.
(F) Reflects payments received in connection with the forbearance effective with
the November 1, 1995 payment.
(G) The FMBs are carried at their estimated fair values at December 31, 1995.
-27-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 4 - 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, 1995, 1994 and 1993, respectively:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- -----------
<S> <C> <C> <C>
Net income per financial statements $ 9,187,803 $9,623,049 $ 8,285,673
Uncollected interest on FMBs and
receivables 704,152 931,251 2,377,175
Loss on impairment of assets 1,000,000 500,000 1,000,000
Property tax loans deferred for tax
reporting purposes, net 0 (116,199) (262,018)
Amortization of bond selection fees 184,723 184,720 184,720
Write-off of accrued and unpaid interest 0 (2,229,178) 0
Loss from debt restructure (26,455) (1,358,312) 0
Reversal of reserve for
disputed claim (422,287) 0 0
Other 0 (78,489) (89,424)
----------- ---------- -----------
Tax basis net income $10,627,936 $7,456,842 $11,456,126
=========== ========== ===========
</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, the recording of distributions and the Partnership's accounting for
the FMBs at fair value for book purposes and cost for tax purposes.
Effective October 1, 1995, the Related General Partner has assumed
from PBP the responsibilities and duties of the Tax Matters Partner as defined
in the Partnership Agreement.
NOTE 5 - 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>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
PBP and affiliates
General and administrative $ 103,839 $ 102,633 $ 111,003
Management fee 405,312 405,312 405,312
------------ ------------ ------------
509,151 507,945 516,315
------------ ------------ ------------
Related General Partner and affiliates
General and administrative 49,073 15,124 55,813
Management fee 405,313 405,313 405,313
Loan servicing fee 405,313 405,313 405,313
------------ ------------ ------------
859,699 825,750 866,439
------------ ------------ ------------
$1,368,850 $1,333,695 $1,382,754
============ ============ ============
</TABLE>
-28-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 5 - Related Parties (continued)
The General Partners are paid, in aggregate, an annual management
fee equal to .5% of the total invested assets (which equals the original face
amount of total FMBs).
An affiliate of the Related General Partner receives loan
servicing fees in an amount of .25% per annum of the principal amount
outstanding on mortgage loans serviced by the affiliate.
A division of Prudential Securities Incorporated ("PSI"), an
affiliate of PBP, received a fee for the purchase, sale and safekeeping of the
Partnership's temporary investments. This account is maintained in accordance
with the Partnership Agreement.
PSI owns 61,265 BUC$ at December 31, 1995.
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 6 - 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, Prudential Securities Incorporated 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 its 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.
-29-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 6 - Contingencies (continued)
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.
The Related General Partner has been engaged in settlement
negotiations with counsel for the plaintiffs. In the event a settlement cannot
be reached, the Related General Partner believes it has meritorious defenses to
the consolidated complaint and intends to vigorously defend this action.
NOTE 7 - Subsequent Event
In February 1996, 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, 1995.
-30-
<PAGE>
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.
The Registrant has no directors or executive officers. The
Registrant's affairs are managed and controlled by the General Partners.
Certain information concerning the directors and officers of the General
Partners are set forth below.
The Related General Partner assumed the responsibilities of the
Tax Matters Partner as of October 1, 1995.
Prudential-Bache Properties, Inc.
PBP and its 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 persons 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 for the
current year. In making these disclosures, the Registrant has relied solely on
written representations of PBP' directors and executive officers and persons 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.
The directors and executive officers of PBP with regard to
managing the Registrant are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Thomas F. Lynch, III President, Chief Executive Officer, Chairman of the
Board of Directors and Director
Barbara J. Brooks Vice President-Finance and Chief Financial Officer
Eugene D. Burak Vice President
Chester A. Piskorowski Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
</TABLE>
THOMAS F. LYNCH, III, age 37, is the President, Chief Executive
Officer, Chairman of the Board of Director, and a Director of PBP. He
is a Senior Vice President of Prudential Securities Incorporated ("PSI"), an
affiliate of PBP. Mr. Lynch also serves in various capacities for other
affiliated companies. Mr. Lynch joined PSI in November 1989.
BARBARA J. BROOKS, age 47, 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.
-31-
<PAGE>
EUGENE D. BURAK, age 50, is a Vice President of PBP. He is a
First Vice President of PSI. Prior to joining PSI in September 1995, he
was a management consultant for three years and was with Equitable Capital
Management Corporation from March 1990 to May 1992. Mr. Burak is a certified
public accountant.
CHESTER A. PISKOROWSKI, age 52, is a Vice President of PBP. He
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 within PSI since April 1972. Mr. Piskorowski is a member of the New
York and Federal Bars.
FRANK W. GIORDANO, age 53, is a Director of PBP. He is a Senior
Vice President of PSI and an Executive Vice President 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 45, is a Director of PBP. Ms. Maio is a
Senior Vice President and Deputy General Counsel of PSI and supervises
non-litigation legal work. She joined the Law Department of PSI in 1983,
presently, she also serves in various capacities for other affiliated companies.
James M. Kelso ceased to serve as President, Chief Executive
Officer, Chairman of the Board of Directors and Director effective June 30,
1995. Effective June 30, 1995, Thomas F. Lynch, III was elected President, Chief
Executive Officer, Chairman of the Board of Directors and Director. Robert J.
Alexander ceased to serve as Vice President effective August 25, 1995. Eugene D.
Burak was elected Vice President effective October 9, 1995.
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.
The Related General Partner
Based on a review of Forms 3 and 4 and amendments thereto
furnished to the Registrant pursuant to Rule 16a-3(e) during its most recent
fiscal year and Form 5 and amendments thereto furnished to the Registrant with
respect to its most recent fiscal year and written representations pursuant to
Item 405(b)(2)(i) of Regulation S-K, neither the Related General Partner nor its
directors or officers, or beneficial owners of more than 10% of the Units,
failed to file, on a timely basis, reports required by Section 16(a) of the
Exchange Act during the most recent fiscal year.
The directors and executive officers of the Related General
Partner with respect to the Registrant and their positions with the Related
General Partner 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
-32-
<PAGE>
J. MICHAEL FRIED, 51, 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 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 a 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 where he presently serves as Managing Director. 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 University
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, 41, is a Vice President of the Related General
Partner. Mr. Hirmes has been a Certified Public Accountant in New York
since 1978. Prior to joining Capital in October 1983, Mr. Hirmes was employed by
Weiner & Co., certified public accountants. Mr. Hirmes is also a Managing
Director of Capital. Mr. Hirmes graduated from Hofstra University with a
Bachelor of Arts degree.
LAWRENCE J. LIPTON, 39, is Treasurer of the Related General
Partner. Mr. Lipton has been a Certified Public Accountant in New York
since 1989. Mr. Lipton is also Controller of The Related Companies, L.P.
("Related"), an affiliate of Capital. Prior to joining Related in 1991, Mr.
Lipton was employed by Deloitte & Touche LLP from 1987-1991. Mr. Lipton
graduated from Rutgers College with a Bachelor of Arts degree and from Baruch
College with a Masters of Business Administration degree.
STEPHEN M. ROSS, 55, 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 totaling in excess of
25,000 units, all of which it manages.
LYNN A. McMAHON, 40, 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 officers. All of the foregoing officers and/or directors have
indefinite terms.
-33-
<PAGE>
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, 1996, the directors and officers of the Related
General Partner directly or indirectly 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.
As of March 1, 1996, directors and officers of the Related General
Partner own directly or beneficially BUC$ issued by the Registrant as follows:
<TABLE>
<CAPTION>
Title of Name of Amount and Nature of
Class Directors and Officers Beneficial Ownership Percent of Class
-------- ---------------------- -------------------- -----------------
<S> <C> <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, 1996 no director or officer of PBP owns directly or
beneficially any BUC$ issued by the Registrant.
In March 1, 1996, 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 Note 5 to the financial statements in Item
8, which identify the related parties and discuss the services provided
by these parties and the amounts paid or payable for their services.
-34-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
<TABLE>
<CAPTION>
Sequential
Page
-----------
<S> <C> <C>
(a) 1. Financial Statements
--------------------
Independent Auditors' Report 16
Statements of Financial Condition of as of
December 31, 1995 and 1994 17
Statements of Income for the years ended
December 31, 1995, 1994 and 1993 18
Statements of Changes in Partners' Capital (Deficit) for the years
ended December 31, 1995, 1994 and 1993 19
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 20
Notes to Financial Statements 21
(a) 2. Financial Statement Schedules
-----------------------------
Schedule II-Valuation and Qualifying Accounts and Reserves for the
years ended December 31, 1995, 1994 and 1993 42
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.
</TABLE>
-35-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
<TABLE>
<CAPTION>
Sequential
Page
-----------
<S> <C> <C>
(a) 3. Exhibits
--------
3(a) and 4(a) Partnership Agreement, incorporated by reference to Exhibit A
to the Prospectus 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)
3(c) and 4(c) Amendment No 1. to the Partnership Agreement, dated October 1,
1995 (incorporated by reference to Exhibit 3(c) and 4(c) in the
Registrant's Annual Report on Form 10-K dated December 31, 1995)
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 reference 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
Loveridge 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)
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)
</TABLE>
-36-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
<TABLE>
<CAPTION>
Sequential
Page
-----------
<S> <C> <C>
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 reference to exhibit 10(a) in Registrant's
Current Report on Form 8-K dated August 14, 1987)
10(q) Settlement Agreement for the Shannon Lake First Mortgage Bond
dated December 3, 1990 (incorporated by reference to Exhibit 10(q)
in Registrant's 1991 Annual Report on Form 10K)
</TABLE>
-37-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
<TABLE>
<CAPTION>
Sequential
Page
-----------
<S> <C> <C>
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 Registrant'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)
</TABLE>
-38-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
<TABLE>
<CAPTION>
Sequential
Page
-----------
<S> <C> <C>
(10ae) Sale-Purchase Agreement between The Lakes Project Investors,
Inc., Seller, 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 (incorporated by reference to Exhibit
10(af) in the Registrant's 1994 Annual Report on Form 10K)
(10ag) Amended Settlement Agreement for the Suntree First Mortgage Bond
dated December 1, 1994 (incorporated by reference to Exhibit
10(ag) in the Registrant's 1994 Annual Report on Form 10K)
(10ah) Amended Settlement Agreement for the Loveridge First Mortgage
Bond dated July 31, 1995 (incorporated by reference to Exhibit
10(ah) in the Registrant's Quarterly Report on Form 10Q dated
September 30, 1995)
(10ai) Amended Settlement and Forbearance Agreement for the Sunset Downs
First Mortgage Bond dated July 31, 1995 (incorporated by
reference to Exhibit 10(ai) in the Registrant's Quarterly Report
on Form 10Q dated September 30, 1995)
(10aj) Amended Settlement Agreement for the Suntree First Mortgage Bond
dated January 26, 1996 (filed herewith) 43
(10ak) Amended Settlement Agreement for the Shannon Lake First Mortgage
Bond dated May 1, 1996 (filed herewith) 48
(10al) Amended Settlement Agreement for the Player's Club First Mortgage
Bond date January 26, 1996 (filed herewith) 51
(10am) Forbearance Agreement for the Highland Ridge First Mortgage Bond
dated May 14, 1996 (filed herewith) 57
27 Financial Data Schedule (filed herewith) 84
(b) Reports on Form 8-K
</TABLE>
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
-39-
<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: Related Tax Exempt Associates II, Inc.
A Delaware corporation, General Partner
By: Alan P. Hirmes Date: August 13, 1996
---------------
Alan P. Hirmes
Vice President
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: Eugene D. Burak Date: August 13, 1996
----------------
Eugene D. Burak
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: Related Tax Exempt Associates II, Inc.
A Delaware corporation, General Partner
By: J. Michael Fried Date: August 13, 1996
-----------------
J. Michael Fried
President and Director
By: Alan P. Hirmes Date: August 13, 1996
---------------
Alan P. Hirmes
Vice President
By: Lawrence J. Lipton Date: August 13, 1996
-------------------
Lawrence J. Lipton
Treasurer
By: Stephen M. Ross Date: August 13, 1996
----------------
Stephen M. Ross
Director
-42-
<PAGE>
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: Thomas F. Lynch III Date: August 13, 1996
--------------------
Thomas F. Lynch III
President, Chief Executive Officer,
Chairman of the Board of Directors
and Director
By: Barbara J. Brooks Date: August 13, 1996
------------------
Barbara J. Brooks
Vice President-Finance and Chief
Financial Officer
By: Eugene D. Burak Date: August 13, 1996
----------------
Eugene D. Burak
Vice President
By: _________________ Date: August 13, 1996
Frank W. Giordano
Director
By: Nathalie P. Maio Date: August 13, 1996
-----------------
Nathalie P. Maio
Director
-43-
<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
Year ended beginning reserved recovered reclassified Balance at
December 31, of year during year during year during year end of year
- - ------------ ----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1995 $ 0 $ 0 $ 0 $ 0 $ 0
1994 1,000,000 0 0 (1,000,000) 0
1993 0 1,000,000 0 0 1,000,000
</TABLE>
Valuation allowance for uncollectible receivables
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
Balance at Amounts Amounts Amounts
Year ended beginning reserved recovered reclassified Balance at
December 31, of year during year during year during year end of year
- - ------------ ----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1995 $ 183,918 $ 0 $ 0 $ 0 $183,918
1994 183,918 0 0 0 183,918
1993 183,918 0 0 0 183,918
</TABLE>
Valuation allowance for promissory notes
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
Balance at Amounts Amounts Amounts
Year ended beginning reserved recovered reclassified Balance at
December 31, of year during year during year during year end of year
- - ------------ ----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1995 $ 138,000 $ 0 $ 0 $ 0 $138,000
1994 138,000 0 0 0 138,000
1993 0 138,000 0 0 138,000
</TABLE>
[LETTERHEAD]
January 26, 1996
Ms. Lakshmi McGrath
First Union Corporate Trust Department-FL 6065
200 South Biscayne Blvd.-14th Floor
Miami, FL 33131
Re: Suntree Apartments
Fort Myers, Florida
Dear Ms. McGrath:
Suntree Apartments, a 240-unit complex situated in Fort Myers, Florida (the
"Project"), was financed with the proceeds of $7,500,000 in tax-exempt bonds
issued by the Florida Housing Finance Agency (the "Agency") pursuant to its
Multi-Family Housing Revenue Bonds 1987 Series D (Suntree at Fort Myers
Project). First Union and its predecessor (Southeast Bank, N.A.) have functioned
as the Trustee representing the Agency, pursuant to a Trust Indenture between
the Agency and Southeast dated as of July 1, 1987.
At present, the Trust Indenture and bonds require the payment of base interest
on the outstanding principal at the rate of eight percent (8%) per annum,
payable in arrears on the first day of each month, plus contingent interest to
be paid from excess cash flow. The Project's cash flow from real income
continues to be affected by the weak economy in the area, and the developer has
been struggling to meet the required base interest payments. Also, further
capital improvements are needed in order to retain the Project's competitiveness
with newer developments.
All of the bonds are owned by Summit Tax Exempt L.P. II ("Summit"). Last year
the developer and Summit negotiated an arrangement whereby the minimum monthly
payment of base interest required to be paid was at the rate of seven and
one-half percent (7.5%) per annum for the year 1995. As before, the unpaid
amounts of base interest were to accrue and be paid from first available
proceeds from cash flow or proceeds from refinancing or sale. This arrangement,
as set forth in a letter agreement dated as of December 1, 1994 (the "1994
Letter Agreement"), was forwarded to you under cover of our letter to Ms. Terry
Kaufman dated January 13, 1995.
[ADDRESS]
<PAGE>
Ms. Lakshmi McGrath
January 26, 1996
Page Two
At this time we have agreed to extend all the provisions, terms and conditions
of the 1994 Letter Agreement for another year, applicable to all Base Interest
due and payable through December 31, 1996. Attached you will find the new
agreement, as executed by the appropriate parties. The new payment rate takes
effect with the February 1, 1996 payment for January, 1996 interest. Summit
authorizes and requests that you accept monthly interest payments at the
extended minimum pay rate commencing with the February 1, 1996 payment.
Thank you for your cooperation. If you have any questions, please contact Bruce
Brown at (212) 421-5333.
Very truly yours,
SUMMIT TAX EXEMPT L.P. II,
a Delaware limited partnership
By: Related Tax Exempt Associates II, Inc.,
a general partner
By: /s/ Alan Hirmes
----------------------------------
Alan Hirmes, Vice President
MS40/db
cc: Max Schiopy
J. Michael Fried
Noelle Sweeney
<PAGE>
[LETTERHEAD]
December 1, 1995
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 Califomia 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").
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.
[ADDRESS]
<PAGE>
Suntree at Fort Myers
December 1, 1995
Page Two
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 a portion
of the 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 December 1, 1994, the Developer 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. In response to the Developer's request, the Developer and
Summit entered into a third letter agreement dated as of December 1, 1994 (the
"1994 Letter Agreement") pursuant to which certain portions of the Base Interest
which would have been due and payable between January 1, 1995 and December 31,
1995, 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, 1995, again conditioned on the payment of certain portions of
such interest when due.
<PAGE>
Suntree at Fort Myers
December 1, 1995
Page Three
Accordingly, the Developer and Summit hereby agree to extend all the provisions,
terms and conditions of the 1994 Letter Agreement with respect to the payment of
Base Interest due and payable from January 1, 1996 through December 31, 1996.
Except for this extension of the "Time Period" as set forth in paragraph 2
(d) of the 1994 Letter Agreement, the Developer and Summit hereby agree that all
the other provisions, terms and conditions of the 1994 Letter Agreement are
hereby reaffirmed, and shall remain in full force and effect.
If the above accurately sets forth the extension of time 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
first amendment to the 1994 Letter Agreement.
Very truly yours,
SUMMIT TAX EXEMPT L.P. II
By: Related Tax Exempt Associates II, Inc.,
a general partner
By: /s/ Alan Hirmes
____________________________________
Vice President (Title)
Accepted and Agreed to this
5th day of December, 1995:
SUNTREE AT FORT NIYERS, LTD.,
A Califomia 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
[LETTERHEAD]
May 1, 1996
BRA, Ltd.
Attn: Mr. Elliott Lewis
Group Three North - Suite 400
3190 North East Expressway Access Road
Atlanta, Georgia 30341
Dear Mr. Lewis:
BRA, Ltd., a Georgia limited partnership organized and existing in the State of
Georgia (the "Developer"), is the Developer and Owner of a 280-unit multifamily
residential rental housing development known as Shannon Lake Apartments, located
in Fulton County, Georgia (the "Project"). The cost of acquiring, constructing,
improving and equipping the Project was financed by the Union City Housing
Authority (the "Issuer"), by the issuance of its Multifamily Housing Revenue
Bonds (Shannon Lake Apartments Project) Series 1987, in the principal amount of
$12,000,000 (the "Bonds"), pursuant to its Bond Resolution adopted on June 9,
1987 (the "Resolution").
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 Citizens and
Southern Trust Company (Georgia), National Association (the "Trustee"), dated as
of June 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 June 1, 1987 (the "Loan
Agreement"), evidenced by the Developer's promissory note (the "Note") in the
amount of $12,000,000. The obligations of the Developer under the Loan Agreement
and the Note are secured by a Building Loan Deed to Secure Debt and Security
Agreement, dated as of June 1, 1987 (the "Building Loan Mortgage"), and various
other loan documents defined in the Loan Agreement (collectively, the "Loan
Documents").
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.
[ADDRESS]
<PAGE>
Mr. Elliott Lewis
May 1, 1996
Page Two
As of December, 1990, the Developer had failed to pay certain amounts of Base
Interest on the Note ("Base Interest") when due, which constituted an Event of
Default pursuant to various provisions of the Trust Indenture, Bonds and Loan
Documents. Pursuant to Section 7.01(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. The Developer
requested that Summit, in its capacity as Acting Party, agree to forbear from
enforcing its remedies under the various remedies provisions of the Trust
Indenture, Bonds and Loan Documents (collectively, the "Remedies Provisions") in
connection with such defaults resulting from the non-payment of Base Interest
when due, conditioned on the payment of such interest pursuant to a schedule
proposed by the Developer. The Developer also requested that Summit agree to
forbear from enforcing its remedies under the Remedies Provisions upon the
future occurrence of defaults for the non-payment of Base Interest when due,
conditioned on the payment of certain portions of such interest when due.
Accordingly, the Developer and Summit entered into a letter agreement dated as
of December 3, 1990, (the "1990 Letter Agreement"), whereby Summit agreed to
forbear from enforcing its remedies under the Remedies Provisions based upon the
partial payment of Base Interest, and on various other terms and conditions, all
as set forth therein. Pursuant to the 1990 Letter Agreement, certain portions of
the Base Interest which would have been due and payable between December 16,
1990 and December 15, 1992, were deferred in accordance with the terms and
conditions thereof.
As of December, 1992, the Developer 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 15, 1992, again conditioned on the payment of certain portions of such
interest when due. As consideration for such forbearance, the Developer agreed
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.
Accordingly, Summit and the Developer entered into a second letter agreement
dated as of June 1, 1993 (the "1993 Letter Agreement"), whereby certain portions
of the Base Interest which would have been due and payable between December 16,
1992 and December 15, 1995, were deferred in accordance with the terms and
conditions thereof. The 1993 Letter Agreement also provided for the payment of a
concession fee to Summit, to the establishment of a monthly tax and insurance
escrow payment, and for certain other matters all as set forth therein.
As of this date, the Developer has requested that Summit extend its 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
<PAGE>
Mr. Elliott Lewis
May 1, 1996
Page Three
after December 15, 1995, again conditioned on the payment of certain portions of
such interest when due. Accordingly, the Developer and Summit hereby agree to
extend all the provisions, terms and conditions of the 1993 Letter Agreement
with respect to the payment of Base Interest due and payable from December 16,
1995 through December 15, 1997, by deleting "3/16/93 - 12/15/95" under the "Time
Period" heading in paragraph 2(d), and by inserting in lieu thereof "3/16/93 -
12/15/97." Except for this extension of the "Time Period" as set forth in
paragraph 2(d), the Developer and Summit hereby agree that all the other
provisions, terms and conditions of the 1993 Letter Agreement are hereby
ratified and reaffirmed, and shall remain in full force and effect.
If the above accurately sets forth the extension of time 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
first amendment to the 1993 Letter Agreement.
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
31st day of May, 1996:
BRA, Ltd., a Georgia Limited Partnership
By: EALCO, Inc., general partner
By: /s/ Elliott Lewis
_____________________________
Elliott Lewis,
President
MS68/db
[LETTERHEAD]
January 26, 1996
Ms. Lakshmi McGrath
First Union Corporate Trust Department-FL 6065
200 South Biscayne Blvd.-14th Floor
Miami, FL 33131
Re: Players Club Apartments
Lee County, Florida
Dear Ms. McGrath:
Players Club Apartments, a 288-unit complex situated in Lee County, 'Florida
(the "Project"), was financed with the proceeds of $9,700,000 in tax-exempt
bonds issued by the Florida Housing Finance Agency (the "Agency") pursuant to
its Multi-Family Housing Revenue Bonds 1987 Series C (Players Club at Fort Myers
Project). First Union and its predecessor (Southeast Bank, N.A.) have functioned
as the Trustee representing the Agency, pursuant to a Trust Indenture between
the Agency and Southeast dated as of July 1, 1987.
At present, the Trust Indenture and bonds require the payment of base interest
on the outstanding principal at the rate of eight percent (8%) per annum,
payable in arrears on the first day of each month, plus contingent interest to
be paid from excess cash flow. The Project's cash flow from rental income
continues to be affected by the weak economy in the area, and the developer has
been struggling to meet the required base interest payments. Also, further
capital improvements are needed in order to retain the Project's
competitiveness with newer developments.
All of the bonds are owned by Summit Tax Exempt L.P. II and Summit Tax Exempt
L.P. III (collectively "Summit"). The developer and Summit negotiated an
arrangement whereby the minimum monthly payment of base interest required to be
paid was at the rate of seven percent (7%) per annum for the year 1995. As
before, the unpaid amounts of base interest were to accrue and be paid from
first available proceeds from cash flow or proceeds from refinancing or sale.
This arrangement, as set forth in a letter agreement dated as of December 1,
1994 (the "1994 Letter Agreement"), was
[ADDRESS]
<PAGE>
Ms. Lakshmi McGrath
January 26, 1996
Page Two
forwarded to you under cover of our letter to Ms. Terry Kaufman dated
January 13, 1995.
At this time we have agreed to extend all the provisions, terms and conditions
of the 1994 Letter Agreement for another year, applicable to all Base Interest
due and payable through December 31, 1996. Attached you will find the new
agreement, as executed by the appropriate parties. The new payment rate takes
effect with the February 1, 1996 payment for January, 1996 interest. Summit
authorizes and requests that you accept monthly interest payments at the
extended minimum pay rate commencing with the February 1, 1996 payment.
Thank you for your cooperation. If you have any questions, please contact Bruce
Brown at (212) 421-5333.
Very truly yours,
SUMMIT TAX EXEMPT L.P. II,
a Delaware limited partnership
By: Related Tax Exempt Associates II, Inc.,
a general partner
By: /s/ Alan Hirmes
_____________________________________
Alan Hirmes, Vice President
SUMMIT TAX EXEMPT L.P. III,
a Delaware limited partnership
By: Related Tax Exempt Associates III, Inc.,
a general partner
By: ______________________________________
Alan Hirmes, Vice President
MS40/db
cc: Max Schlopy
J. Michael Fried
Noelle Sweeney
<PAGE>
[LETTERHEAD]
December 1, 1995
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").
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.
[ADDRESS]
<PAGE>
Players Club at Fort Myers
December 1, 1995
Page Two
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 portions of
the 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 December 1, 1994, the Developer 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. In response to the Developer's request, the Developer and
Summit entered into a third letter agreement dated as of December 1, 1994 (the
"1994 Letter Agreement") pursuant to which certain portions of the Base Interest
which would have been due and payable between January 1, 1995 and December 31,
1995, 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, 1995, again conditioned on the payment of certain portions of such
interest when due.
<PAGE>
Players Club at Fort Myers
December 1, 1995
Page Three
Accordingly, the Developer and Summit hereby agree to extend all the provisions,
terms and conditions of the 1994 Letter Agreement with respect to the payment of
Base Interest due and payable from January 1, 1996 through December 31, 1996.
Except for this extension of the "Time Period" as set forth in paragraph 2 (d)
of the 1994 Letter Agreement, the Developer and Summit hereby agree that all the
other provisions, terms and conditions of the 1994 Letter Agreement are hereby
reaffirmed, and shall remain in full force and effect.
If the above accurately sets forth the extension of time 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
first amendment to the 1994 Letter Agreement.
Very truly yours,
SUMMIT TAX EXEMPT L.P. II
By: Related Tax Exempt Associates II, Inc.,
a general partner
By: /s/ Alan Hirmes
____________________________________
VICE PRESIDENT (Title)
SUMMIT TAX EXEMPT L.P. III
By: Related Tax Exempt Associates III, Inc.,
a general partner
By: /s/ Alan Hirmes
____________________________________
VICE PRESIDENT (Title)
<PAGE>
Players Club at Fort Myers
December 1, 1995
Page Four
Accepted and Agreed to this
5th day of December, 1995:
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:
FORBEARANCE AGREEMENT
This Agreement, dated effective as of May 14, 1996 (the "Effective Date"), is
by and between Highland Ridge Limited Partnership, a Minnesota limited
partnership ("Developer"), and Summit Tax Exempt L.P. II, a Delaware limited
partnership ("Bondholder"), and is made with reference to the following:
RECITALS
A. Developer is the owner of a 228-unit multifamily residential rental
housing development known as Highland Ridge Apartments, located in the City of
St. Paul, Ramsey County, Minnesota (the "Project"). The cost of acquiring,
constructing, improving and equipping the Project was financed by the Housing
and Redevelopment Authority of the City of St. Paul (the "Issuer"), by the
issuance of this Multifamily Housing Revenue Bond, Series 1987 (Highland Ridge
Project), in the principal amount of $15,000,000 (the "Bond"), pursuant to a
Resolution adopted as of January 28, 1987 (the "Resolution").
B. The terms of the Bond, the security therefor, the rights and remedies of
the holders thereof, and various other matters in connection therewith were
prescribed pursuant to an Indenture of Trust dated as of February 1, 1987 (the
"Indenture"), between Issuer and First Trust National Association, formerly
known as First Trust Company, Inc., a Minnesota corporation, as Trustee.
C. Proceeds of the Bond were loaned to Developer by Issuer pursuant to a Loan
Agreement between Issuer and Developer dated as of February 1, 1987 (the "Loan
Agreement"), which evidenced the indebtedness of Developer in the amount of
$15,000,000. The obligations of Developer under the Loan Agreement are secured
by a Building Loan Mortgage and Security Agreement to the Trustee, dated as of
February 1, 1987 (the "Mortgage"), recorded on March 11, 1987 as Document No.
2366715 in the Office of the County Recorder, Ramsey County, Minnesota (the
"Recorder's Office"), and as Document No. 828971 in the Office of the Registrar
of Titles, Ramsey County, Minnesota (the "Registrar's Office"); an Assignment of
Leases, Rents and Other Income to the Trustee, dated as of February 1, 1987 (the
"Assignment"), recorded on March 11, 1987 as Document No. 2366716 in the
Recorder's Office, and as Document No. 828972 in the Registrar's Office; and
various other loan documents defined in the Loan Agreement (collectively, the
Bond, Indenture, Loan Agreement, Mortgage, Assignment and such other documents
are called the "Loan Documents", and all other capitalized terms used herein and
not otherwise defined shall have the meaning given in the Indenture).
D. The Bond issue pursuant to the Indenture was purchased and is owned as
of the date hereof by Bondholder.
E. Developer has failed to pay when due certain amounts of Base Interest
as defined in the Indenture, which constitutes an Event of default pursuant
to various provisions of the Loan Documents. Additionally, Developer has
failed to pay certain real property taxes and
<PAGE>
assessments when due, which also constitutes and Event of Default pursuant to
various provisions of the Loan Documents.
F. Pursuant to Section 8-2(a) of the Indenture, Bondholder, as the sole owner
of the Bond, is the designated "Acting Party" with the sole authority to take
actions with respect to any Event of Default. Developer has requested that
Bondholder, in its capacity as Acting Party, agree to forebear from enforcing
its remedies as a result of certain defaults with respect to the non-payment of
Base Interest, taxes, assessments and insurance when due.
In consideration of the mutual promises herein made, Bondholder and Developer
hereby agree as follows:
AGREEMENT
1. Existing Defaults
Developer's failure to pay before the date hereof one-eighth of the Base
Interest Payments due on November 15 and December 15, 1995 and January 15, 1996,
and the Base Interest Payments due on February 15, March 15 and April 15,
1996, is called the "Interest Default." Developer's failure to pay before the
date hereof real property taxes and installments of special assessments due with
respect to the Project before delinquency on October 15, 1994, May 15, 1995, and
October 15, 1995, is called the "Tax Default." Provided that and so long as
Developer satisfies all conditions of and performs all of its obligations under
this Agreement and the Loan Documents as modified hereby, Bondholder agrees to
forebear from enforcing any of its remedies available under the Loan Documents
for the Interest Default or Tax Default.
Bondholder's agreement to forebear from enforcing its remedies under the Loan
Documents does not constitute a foregiveness of amounts past due as a result of
the Interest Default or the Tax Default. Rather, such amounts shall be deferred
and paid in accordance with this Agreement so long as all of the conditions
required for such forbearance are met.
2. Conditions for Forbearance.
As a condition of Bondholder's continuing forbearance as described in Section
1 above, Developer shall timely fulfill the following obligations:
A. Time is of the essence of this Agreement. Developer shall on or before
noon New York time on the Effective Date, make payment of all accrued but
unpaid Base Interest at the rates as provided in Section 3, below, for the
period from and including October 16, 1995 through the fifteenth day of
the month in which the Effective Date occurs;
B. Beginning with the Base Interest payment due on the Interest Payment
Date next following the Effective Date, and on each Interest Payment
Date
-2-
<PAGE>
thereafter, Developer shall pay Base Interest as provided in Section 3,
below;
C. On or before the Effective Date, Developer shall pay one-third of the
delinquent real property taxes and installments of special assessments due
to the Project; on or before nine months after the Effective Date,
Developer shall pay one-half of the then balance of the delinquent real
property taxes and installments of special assessments due for the
Project; and on or before October 15, 1997, Developer shall pay the entire
remaining balance of all delinquent real property taxes and installments
of special assessments due for the Project;
D. Beginning on the first Interest Payment date after the Effective Date, and
on each Interest Payment Date thereafter, Developer shall deposit in the
escrow account established pursuant to Section 4 hereof amounts to be
estimated and calculated by Bondholder sufficient to pay all future
payments of property taxes and installments of special assessments for the
Project as they become due and payable and before they become delinquent;
E. On or before the date hereof, Stuart H. Nolan ("Principal"), one of the
general partners of Developer, in his individual capacity, personally
gives to Bondholder the Vanishing Guaranty in the form attached hereto as
Exhibit A, and hereby made a part hereof, and from and after the date
hereof Principal continues to meet the Minimum Net Worth Requirement as
defined in the Vanishing Guaranty;
F. From and after the date hereof, Principal and Nolan Properties, Inc., a
Minnesota corporation ("NPI"), shall be the only general partners of
Developer and NPI shall be under the control of Principal, unless:
i. otherwise agreed in writing by Bondholder; or
ii. if Principal ceases to be a general partner of Developer for any
reason other than incapacity or death, he is simultaneously replaced
by a general partner reasonably acceptable to Bondholder and a new
guaranty in the form of the Vanishing Guaranty is simultaneously
provided to Bondholder from a guarantor reasonably acceptable to
Bondholder; or
iii. if Principal ceases to be a general partner of Developer by reason of
the death or incapacity of Principal, he is replaced within six
months after the date of death of final court determination of
incapacity by a general partner
-3-
<PAGE>
reasonably acceptable to Bondholder and a new guaranty in the form
of the Vanishing Guaranty is provided to Bondholder within six months
after the date of death from a guarantor reasonably acceptable to
Bondholder and no other Forbearance Termination Event (as hereafter
defined) occurs which remains uncured after the expiration of the
Cure Period (as hereafter defined).
G. All legal fees, costs and other out-of-pocket expenses incurred by
Bondholder in connection with or related to this Agreement ("Forbearance
Expenses") are paid by Developer. To the extent that there is Cash Flow
remaining on an annualized basis after all payments due under the Loan
Documents and this Forbearance Agreement other than the Forbearance
Expenses and Bond Expenses as defined in Section 11, below, have been made
("Excess Annualized Cash Flow"), Developer may, at its option, apply the
Excess Annualized Cash Flow to the payment of Forbearance Expenses and
Bond Expenses.
3. Future Base Interest Payments.
As required by Section 2.B above, one condition of Bondholder's forbearance
is that Developer make certain payments as provided in this Section 3. The
parties anticipate that the Cash Flow of the Project may be inadequate to pay
Base Interest for some time. Bondholder agrees to forbear from enforcing its
remedies under the Loan Documents as to such future defaults for the nonpayment
of Base Interest when due, so long as the following terms and conditions are
satisfied:
A. All Operating Expenses of the Project, as defined in the Indenture and as
specified in annual budgets to be approved by Bondholder (including any
fees owned to the Issuer and Trustee) (other than the payment of Base
Interest), are paid when due pursuant to the Loan Documents;
B. All deposits to the Replacement Reserve Funds are made when due pursuant
to the Loan Documents and Section 3(e)(iii), below;
C. All deposits to the Tax Escrow established pursuant to section 4 below are
made when due;
D. Monthly installments of Base Interest, calculated by multiplying the
outstanding principal balance of the Bond by the "Minimum Pay Rates" set
forth below for the applicable time period are paid when due on each
Interest Payment Date. The Minimum Pay Rates used to calculate the monthly
installments of Base Interest shall be calculated in accordance with the
following schedule of time periods and interest rates:
-4-
<PAGE>
Time Periods Minimum Pay Rated
------------ -----------------
10/16/95 - 10/15/96 7.00% per annum
10/16/96 - 10/15/97 7.25% per annum
10/16/97 - 10/15/98 7.50% per annum
10/16/98 - 10/15/99 7.75% per annum
10/16/99 - Maturity 8.00% per annum
Developer acknowledges and understands that the Minimum Pay Rates established
herein are for purposes of payment schedules only, and that the rate for the
accrual of Base Interest is and shall remain at eight (8.0%) percent per
annum pursuant to the Loan Documents. All Base Interest that remains unpaid
from time to time, together with interest thereon as provided in the Bond,
shall accrue, and be paid as provided in subsections E and G, below.
E. Beginning as of January 1, 1996, all remaining Cash Flow of the Project
(if any), after making the payments and deposits required by subparagraphs
(A), (B), (C), and (D), above, shall be applied quarterly at the end of
each calendar quarter and adjusted annually at the end of each calendar
year as follows:
i. One-third (1/3) to the payment of accrued but unpaid Base Interest,
Primary Contingent Interest and Supplemental Contingent Interest, and
interest thereon, as provided in the Bond, Loan Agreement and
Indenture.
ii. One-third (1/3) shall be deposited in a working capital escrow account
to be held by Bondholder (or its designee) to be used for month to month
working capital or operating deficits requirements of the Project. At
any time that the balance in this account exceeds $150,000.00, this
one-third shall be applied as provided in subparagraph (E)(i), above.
iii. One-third (1/3) shall be deposited in a replacement reserve escrow
account to be held by Bondholder (or its designee) to be used for
replacement reserve items or capital repairs of the Project. At any time
that the balance in this account exceeds $150,000.00, this one-third
shall be applied as provided in subparagraph (E)(i), above.
F. After the payment of all accrued and unpaid Base Interest and Contingent
Interest, and interest thereon (if any), when and as due, all remaining
Cash Flow of the Project shall be distributed in accordance with the terms
of the Bond and Indenture.
-5-
<PAGE>
payable and form demanding payment thereof in the manner set forth herein
shall in no event or under any circumstance be construed as a waiver by
Bondholder, in whole or in part, of the existing events of default under
the Loan Documents.
F. Notwithstanding anything contained herein to the contrary, Developer shall
have and shall retain, through and including the date of any transfer of
the Project by means of a Title Transfer or prior to the conducting of the
foreclosure sale in a Foreclosure, the right to reinstate the loan and
the Loan Documents by paying to Bondholder the full amount of all
principal, interest (including, without limitation, Base Interest (as
defined in the Loan Documents), accrued interest, deferred interest,
contingent interest and any other type or kind of interest payable under
the Loan Documents), fees, costs and expenses of Bondholder and any other
amounts payable under the Loan Documents due and payable through the time
of such reinstatement as provided under Minnesota law, without any offsets
or counterclaims of any kind; and thereupon the Loan Documents, shall
remain in full force and effect, any Receivership shall be terminated, and
this Forbearance Agreement shall terminate, all as if no Forbearance
Termination Event had occurred. After the occurrence of a foreclosure
sale, Developer shall have the six month right of redemption as provided
by Minnesota law.
6. Defaults and Remedies.
The Developer's full and continuing compliance with every provision of this
Agreement shall be an express condition of the forbearance by Bondholder
pursuant to this Agreement. In particular, the failure to pay when due any
amount required to be paid or deposited by this Agreement shall constitute a
default hereunder. Upon the occurrence of a Forbearance Termination Event which
is not cured within the Cure Period, without further notice to the Developer and
Bondholder shall have the right to exercise any rights or remedies available to
it under the Loan Documents or this Agreement. In addition, the Assignment is
amended hereby to include specifically the right of the Trustee to obtain the
appointment of a receiver for the Project as Provided in Minn. Stat. 559.17,
Subd, 2, upon the occurrence of a Forbearance Termination Event which is not
cured within the Cure Period.
7. Non-Waiver of Other Defaults.
Bondholder's agreement to forbear as provided herein is expressly limited to
the provisions, terms and conditions set forth herein, and, in accordance with
various provisions of the Loan Documents, no such agreement shall extend to any
other Event of Default or impair any right or remedy consequent thereto; except
that defaults in payments to the Replacement Reserve prior to the Effective Date
("Replacement Reserve Defaults") are waived so long as all Replacement Reserve
payments due on and after the Effective Date are made when due as provided in
the Loan Documents and this Forbearance Agreement.
-8-
<PAGE>
8. Redemption of Bond Prior to Maturity.
The Maturity Date of the Bond is February 1, 2007, pursuant to the Bond and
Indenture. Upon the occurrence of certain events, the Bond is subject to
mandatory redemption after the first day of the Reference Month in 1999 prior to
maturity in accordance with Section 3-1 of the Indenture. Provided that as of
the first day of the Reference Month in 1999 there has not occurred a
Forbearance Terminatin Event which has not otherwise been cured wtihin the
applicable Cure Period, and from time to time thereafter subject to the
expiration of the relevant Cure Period(s) afer the occurrence of any subsequent
Forbearance Termination Event(s), Bondholder agrees that is will forbear its
rights to elect and require redemption of the Bond on any date prior to the
earlier of December 1, 2005, or the expiration of the relevant Cure Period(s)
related to Forbearance Termination Event(s).
9. Concession Fees.
In consideration of the agreements of Bondholder contined herein, Developer
agrees to pay to Bondholder from time to time a fee equal to thirteen and
thirty-three one hundredths percent (13.33%) of all Net Cash Flow and Net Sales
or Refinancing Proceeds payable and distributable to Developer, specifically
excluding any such distributions which are applied to payment of deferred Base
Interest, Primary Deferred Contingent Interest, or are subject to the payment of
Contingent Interest; and an additional fee equal to thirty-five percent (35%) of
the first $931,180.00 of all Net Sales or Refinancing Proceeds payable and
distributable to Developer, specifically excluding any such distributions which
are applied to payment of deferred Base Interest, Primary Deferred Contingent
Interest, or are subject to the payment of Contingent Interest (the "Concession
Fees"). The Concession Fees shall be paid to Bondholder simultaneously with the
payment of Contingent Interest as provided in the Bond and Indenture.
10. Payment of Fees and Expenses.
In accordance with Section 9.05 of the Loan Agreement, Develper shall pay all
legal fees, title insurance, Issuer fees, costs and other out-of-pocket expenses
incurred in conection with this Agreement within thirty (30) days following
receipt of demand from Bondholder, which demand shall include supporting
materials for any costs or other out-of-pocket expenses incurred. An estimate of
these costs as of the Effective Date is attached as Schedule B hereto.
11. Tax-Exempt Status.
In order to maintain the tax-exempt status of the Bond, the Issuer may be
taking certain actions to approve the terms of this Agreement. Developer will
cooperate with any requirements now or in the future to ensure the Bond remains
tax-exempt. Developer will pay all costs and fees of the Issuer, Bondholder, and
their respective counsel in connection therewith ("Bond Expenses"). The parties
acknowledge that the only action they have requested of the Issuer is the
adoption of a resolution approving this Agreement.
-9-
<PAGE>
12. Estoppel.
The parties agree that the principal amount necessary to satisfy the Bond as
of the Effective Date is $15,000,000 plus accrued interest and fees as provided
in the Loan Documents. Developer certifies to Bondholder that is has and claims
no offset or defense against the obligations evidenced by the Loan Documents of
this Agreement.
13. Reaffirmation of Warranties.
Developer affirms to Bondholder each of the representations, warranties,
covenants and agreements of Developer set forth in the Loan Documents with the
same force and effect as if each were separately stated herein and made as of
the Effective Date.
14. No Default.
Developer ratifies, affirms, acknowledges, and agrees that the Loan Documents
represent the valid, enforceable and collectible obligation of Developer, and
hereby acknowledge that there are no existing claims, defenses (personal or
otherwise) or rights of set-off whatsoever with respect to any of the Loan
Documents or this Agreement, and further acknowledges and represents that no
event has occurred and no condition exists which would constitute a default
under the Loan Documents or this Agreement except for the Replacement Reserve
Defaults, the Interest Default and the Tax Default.
15. Validity.
Developer agrees that except as modified herein or in any other written
agreement between Bondholder and Developer all of the terms and provisions of
the Loan Documents remain in full force and effect and are hereby ratified and
reaffirmed.
16. Liens.
Developer agrees that this Agreement in no way acts as a release or
relinquishment of any liens, security interest or rights (collectively called
the "Liens") securing payment of the Bond, including without limitation, the
Liens created by the Mortgage or any of the other Loan Documents. The Liens are
hereby renewed, extended, ratified and confirmed by Developer in all respects.
17. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Minnesota.
-10-
<PAGE>
18. Release of Bondholder From All Claims, Actions, Rights of Setoff and
Defenses.
Developer hereby releases, waives and forever discharges any and all legal or
equitable claims, counterclaims, causes of action, defenses, affirmative
defenses, rights of set-off, known or unknown, which Developer may have against
Bondholder, the Issuer, and the Trustee in connection with the loan evidenced by
the Loan Documents and this Agreement and any dealings related thereto, as
provided in the Release Agreement of even date herewith from Developer to
Bondholder in the form attached hereto as Exhibit B, and hereby made a part
hereof. Developer shall obtain and provide to Bondholder, Issuer and Trustee, a
release, waiver and discharge from each of its partners, of any and all legal or
equitable claims, counterclaims, causes of action, defenses, affirmative
defenses, rights of set-off, known or unknown, which the partners may have
against Bondholder, the Issuer, and the Trustee in connection with the loan
evidenced by the Loan Documents and this Agreement and any dealings related
thereto, substantially in the form of the Release Agreement attached hereto as
Exhibit B.
19. Time of the Essence.
Time is of the essence as to all of the obligations of Developer under this
Agreement and under the Loan Documents. Developer understands and agrees that
any failure to perform strictly in accordance with the terms of this Agreement
or the Loan Documents, including any applicable grace or cure periods, shall
constitute a Forbearance Termination Event.
20. No Election of Remedies.
Developer acknowledges and agrees that nothing under this Agreement
constitutes an irrevocable election of Bondholder's remedies under the terms of
the Loan Documents.
21. Entire Agreement,
This Agreement contains the entire understanding between the parties and, to
the extent any prior agreements and understandings are in conflict with this
Agreement, supersedes any prior understandings and agreements between them
respecting the subject matter hereof. With the exception of the Loan Documents,
there are no other representations, agreements, arrangements or understandings,
oral or written, between and among the parties hereto or any of them, relating
to the subject matter of this Agreement. No amendment of or supplement to this
Agreement shall be valid or effective unless made in writing and executed by the
parties hereto.
22. Counterparts.
This Agreement may be signed by the parties in counterpart, each of which
shall be effective as an original.
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<PAGE>
23. Issuer Approval.
This Agreement shall be conditioned on the approval of the terms hereof by
the Issuer.
"The approval by the Issuer of this Agreement shall not give rise to any
pecuniary liability of the Issuer or a charge upon its general credit or
taxing powers. Neither the Board of Commissioners of the Issuer nor any
officer, employee or agent of the Issuer approving or executing the
Forbearance Agreement shall be subject to any personal liability by the
reason of the approval thereof."
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
[The remainder of this page is intentionally blank]
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<PAGE>
SUMMIT TAX EXEMPT L.P. II, by Related Tax
Exempt Associates II, Inc., a Delaware
corporation, its authorized General Partner
/s/ Alan Hirmes
By: __________________________________
Vice President
Its: __________________________________
STATE OF NEW YORK }ss.
COUNTY OF NEW YORK }
The foregoing instrument was acknowledged before me this 26 day of April,
1996, by Alan Hirmes the Vice President of Related Tax Exempt Associates II,
Inc., a Delaware corporation, as general parter of Summit Tax Exempt L.P. II, a
Delaware limited partnership, on behalf of the corporation and limited
partnership.
/s/ Noelle Gilkinson
---------------------------------------
Notary Public
NOELLE GILKINSON
Notary Public, State of New York
No. 3O-4729331
Qualified in Nassau County
Certificate Filed in New York County
Commission Expires 2/28/97
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<PAGE>
HIGHLAND RIDGE LIMITED PARTNERSHIP
By: /s/ Stuart H. Nolan
---------------------------------------
Stuart H. Nolan, Its General Partner
and by Nolan Properties, Inc., its General Partner
By: /s/ Stuart H. Nolan,
----------------------------------------
Stuart H. Nolan, Its President
STATE OF MINNESOTA }ss.
COUNTY OF HENNEPIN }
The foregoing instrument was acknowledged before me this 21st day of
March, 1996, by Stuart H. Nolan, as general partner of Highland Ridge Limited
Partnership, a Minnesota limited partnership, on behalf of the partnership.
/s/ Anita M. Spading
---------------------------------------
Notary Public
ANITA M. SPADING
[STAMP] NOTARY PUBLIC -- MINNESOTA
HENNEPIN COUNTY
My Comm. Expires Jan. 31, 2000
STATE OF MINNESOTA }ss.
COUNTY OF HENNEPIN }
The foregoing instrument was acknowledged before me this 21st day of
March, 1996, by Stuart H. Nolan, President of Nolan Properties, Inc., as
general partner of Highland Ridge Limited Partnership, a Minnesota limited
partnership, on behalf of the corporation and partnership.
/s/ Anita M. Spading
---------------------------------------
Notary Public
ANITA M. SPADING
[STAMP] NOTARY PUBLIC -- MINNESOTA
HENNEPIN COUNTY
My Comm. Expires Jan. 31, 2000
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<PAGE>
Approved:
FIRST TRUST NATIONAL ASSOCIATION,
formerly known as FIRST TRUST COMPANY,
INC., Trustee
By: /s/
---------------------------------------
Its: Vice President
---------------------------------------
By: /s/
---------------------------------------
Its: Vice President
---------------------------------------
STATE OF MINNESOTA}
COUNTY OF DAKOTA } ss.
The foregoing instrument was acknowledged before me this 1st day of May,
1996, by David H. Bluhm and Jackie ??? the Vice President and Vice President
of First Trust National Association, formerly known as First Trust Company,
Inc., a Minnesota corporation, as Trustee, on behalf of the corporation.
Georgine J. Koessl
--------------------------------------
Notary Public
GEORGINE J. KOESSL
[STAMP] NOTARY PUBLIC - MINNESOTA
DAKOTA COUNTRY
My Commission Expires Jan. 31, 2000
-15-
<PAGE>
APPROVED:
Approved as to form: HOUSING AND REDEVELOPMENT
AUTHORITY OF THE CITY OF SAINT PAUL
/s/ _________________________ By: /s/ Dave Thune
Assistant City Attorney --------------------------------------
Dave Thune, its Chiarman
By: /s/Dan B. Bostrom
--------------------------------------
Dan B. Bostrom, its Secretary
By: /s/ Larry Buegler
--------------------------------------
Larry Buegler,
its Executive Director
By: /s/ Martha Larson
--------------------------------------
Martha Larson, its Director
Finance and Management Services
STATE OF MINNESOTA}
COUNTRY OF RAMSEY} ss.
The foregoing instrument was acknowledged before me this 29th day of April,
1996 by Dave Thune, Dan B. Bostrom, Larry Buegler, and Martha Larson
respectively the Chairman, Secretary, Executive Director and Director of Finance
and Management Services of the Housing and Redevelopment Authority of the City
of Saint Paul, on behalf of the authority.
/s/ Rosemary Fredette
-------------------------------------
Notary Public
ROSEMARY FREDETTE
[STAMP] NOTARY PUBLIC -- MINNESOTA
RAMSEY COUNTY
My Comm. Expires Jan. 31, 2000
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<PAGE>
EXHIBIT A
TO
FORBEARANCE AGREEMENT
GUARANTY OF PAYMENT
This Guaranty is given effective as of , 1996.
RECITALS
A. Highland Ridge Limited Partnership, a Minnesota limited partnership
("Developer") is the owner and holder of fee title in certain premises located
in the City of Saint Paul, Ramsey County, Minnesota, which premises are commonly
known as Highland Ridge Apartments (Such premises, together with the
improvements located thereon, are hereinafter referred to as the "Property").
B. Pursuant to an Indenture of Trust (the "Indenture") dated as of February
1, 1987 from the Housing and Redevelopment Authority of the City of St. Paul,
Minnesota ("Issuer") to the First Trust Company,Inc., as trustee ("Trustee"),
Issuer issued a Multifamily Housing Revenue Bond, Series 1987 (Highland Ridge
Project) in the principal amount of $15,000,000 (the "Bond"), the proceeds of
which were used to fund a certain mortgage loan (the "Loan"), in the original
principal amount of $15,000,000, made by Issuer as of February 1, 1987 to
Developer.
C. The Loan was made pursuant to a Loan Agreement dated as of February 1,
1987 between Developer and Issuer (the "Loan Agreement"), and is secured by a
Building Loan Mortgage and Security Agreement dated as of February 1, 1987 (the
"Mortgage") covering the Property, and various other loan documents described in
the Loan Agreement (collectively, the "Loan Documents". Capitalized terms used
herein which are not otherwise defined herein shall have the meanings as defined
in the Loan Documents).
D. Pursuant to the Indenture, and with the consent of Developer, the Loan
Agreement, the Note, the Mortgage, certain other documents and property and all
payments to be made by Developer under the Loan Agreement (except certain
specified payments) were assigned by Issuer to the Trustee as security for the
Bond.
E. The Bond is owned and held by Summit Tax Exempt L.P. II, a Delaware
limited partnership ("Summit").
F. In accordance with Section 8-2 of the Indenture, as the single owner of
the Bond, Summit is the "Acting Party", and has the sole authority to take
actions in respect of any "Event of Default" under the Indenture and has the
right to exercise certain remedies under the Loan Agreement.
<PAGE>
G. Stuart H. Nolan, a general partner of Developer, acknowledges and agrees
on behalf of himself and Developer, that an Event of Default has occurred and is
continuing under the Loan Documents by reason of the failure of Developer to pay
the full amount of Base Interest (the "Interest Default"), and real estate taxes
when due (the "Tax Default", and the Interest Default and the Tax Default are
referred to together as the "Defaults").
H. As a result of the Defaults, Summit is entitled to declare the
obligations of Developer under the Loan Documents to be immediately due and
payable.
I. Developer has requested that Summit forbear from exercising its right
to commence foreclosure of the Mortgage.
J. Developer has also requested that Summit indicate its willingness to
resolve the existing defaults with respect to the Loan in the context of a
settlement and forbearance agreement and to enter into a certain Forbearance
Agreement by and among Developer, and Summit of even date herewith (the
"Forbearance Agreement").
K. Summit is willing to forbear from exercising its rights to commence an
action to foreclose the Mortgage, and to enter into the Forbearance Agreement,
only if, inter alia, Stuart H. Nolan ("Guarantor") as guarantor, executes and
delivers this Guaranty.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt of which is hereby acknowledged, and in order to
induce Summit, in its capacity as the Acting Party, to so acknowledge and
consent, Guarantor hereby guarantees, covenants and agrees with Summit as
follows:
1. As used herein, the following terms shall have the following meanings:
Asset Transfer: The term "Asset Transfer" shall mean the transfer of an asset
by Guarantor other than in exchange for an asset with a value at the time of the
transfer at least equal to the fair market value of the asset transferred.
Cure Period: The term "Cure Period" shall have the meaning given in the
Forbearance Agreement.
Debt: The term "Debt" shall mean all principal, interest, additional
interest, deferred interest, contingent interest and other sums of any nature
whatsoever which may or shall become due and payable pursuant to the provisions
of the Loan Documents and the Forbearance Agreement.
Forbearance Termination Event: The term "Forbearance Termination Event"
shall have the meaning given in the Forbearance Agreement.
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<PAGE>
Guaranteed Portion of the Debt: The term "Guaranteed Portion of the Debt"
shall mean three million ($3,000,000) dollars.
Guarantor: The term "Guarantor" shall mean Stuart H. Nolan.
Manager: The term "Manager" shall mean StuartShelard Management.
Net Worth: The term "Net Worth" shall mean the net worth of Guarantor as
determined by valuing his assets and liabilities at fair market value, and as
substantiated by the Required Financial Statements.
Required Financial Statements: The term "Required Financial Statements" shall
mean financial statements of Guarantor in form and substance reasonably
satisfactory to Summit covering each calendar year occurring during the term of
this Guaranty, which financial statements shall be certified by Guarantor and
shall be delivered to Summit within 60 days after the end of each such calendar
year.
2. So long as Guarantor is a general partner of Developer or is otherwise in
control of Developer Guarantor hereby absolutely and unconditionally guarantees
to Summit the payment of the Guaranteed Portion of the Debt if a Forbearance
Termination Event has occurred which has not been cured within the applicable
Cure Period and thereafter there is a default under the provisions of paragraph
5B of the Forbearance Agreement, and thereupon Summit shall have the absolute
and unconditional right to make immediate demand for payment on this Guaranty
and to immediately pursue all rights and remedies of any nature whatsoever
available to Summit to enforce the obligations of Guarantor under this Guaranty.
3. Subject to the limitations of liability contained in this Guaranty and
subject only to the matters, items and transactions contemplated under and
effectuated by the Forbearance Agreement, other documents and instruments
relating thereto and this Guaranty (the "Transaction"), and only so long as
Guarantor is a general partner of Developer or is otherwise in control of
Developer, Guarantor shall indemnify and hold Summit, its affiliates and its
agents harmless from and against any lender liability or lender liability-type
claim, suit, judgment or action (including related costs and expenses) arising
out of the Transaction brought by Developer, Guarantor, Manager or any other
entity under the direct control of Guarantor. The aggregate liability of
Guarantor under this paragraph and for the Guaranteed Portion of the Debt under
this Guaranty shall not exceed the sum of $3,000,000.00.
4. Guarantor further hereby absolutely and unconditionally guarantees to
Summit the immediate payment of the Guaranteed Portion of the Debt if Guarantor
voluntarily ceases to be in control of Developer directly or indirectly, or
voluntarily ceases to be a general partner of Developer, unless Guarantor is
simultaneously replaced in control of Developer by a person or entity reasonably
acceptable to Summit and a new guaranty in the form of this Guaranty is
simultaneously provided to Summit from a guarantor reasonably acceptable to
Bondholder, and thereupon Summit shall have the absolute and unconditional right
to make immediate demand
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<PAGE>
for payment on this Guaranty and to immediately pursue all rights and remedies
of any nature whatsoever available to Summit to enforce the obligations of
Guarantor under this Guaranty.
5. All moneys available to Summit for application in payment or reduction of
the Debt may be applied by Summit in such manner and in such amounts and at
such time or times and in such order, priority and proportions as provided in
the Forbearance Agreement. Guarantor agrees that no portion of any sums applied,
from time to time, in reduction of the Debt (other than sums paid by guarantor
pursuant to the provisions of this Guaranty) shall be deemed to have been
applied in reduction of the Guaranteed Portion of the Debt until such time as
the portion of the Debt (other than the Guaranteed Portion of the Debt) has been
paid in full, it being the intention hereof that the Guaranteed Portion of the
Debt shall be the last portion of the Debt to be paid. This Guaranty shall
remain in full force and effect and shall not be deemed discharged until the
earlier to occur of (a) the date upon which the entire Debt has been paid in
full, or (b) the date upon which all of the obligations and liabilities of
Guarantor hereunder have been performed and discharged by Guarantor in
accordance with the provisions of this Guaranty, or (c) the date upon which
Guarantor has no further liabilities under this Guaranty.
6. Guarantor hereby consents that from time to time, before or after the
occurrence of any Forbearance Termination Event or the expiration of any Cure
Period, with or without further notice to or assent from Guarantor, any security
at any time held by or available to Summit for any obligation of Developer, or
any security at any time held by or available to Summit for any obligation of
any other person or party secondarily or otherwise liable for all or any portion
of the Debt may be exchanged, surrendered or released and any obligation of
Developer, or of any such other person or party, may be changed, altered,
renewed, extended, continued, surrendered, compromised, waived or released in
whole or in part, or any default with respect thereto waived, and Summit may
fail to set off and may release, in whole or in part, any balance of any deposit
account or credit on its books in favor of Developer, or of any such other
person or party, and may extend further credit in any manner whatsoever to
Developer, and generally deal with Developer or any such security or other
person or party as Summit may see fit; and Guarantor shall remain bound under
this Guaranty notwithstanding any such exchange, surrender, release, change,
alteration, renewal, extension, continuance, compromise, waiver, inaction,
extension of further credit or other dealing.
7. Guarantor hereby waives (a) notice of acceptance of this Guaranty, and the
execution and delivery of the Forbearance Agreement; (b) presentment and demand
for payment of the Debt or any portion thereof; and (c) protest and notice of
dishonor or default to Guarantor or to any other person or party with respect to
the Debt or any portion thereof.
8. This Guaranty is a guaranty of payment and not of collection and Guarantor
further waives any right to require that any action other than a Foreclosure or
Receivership as defined in the Forbearance Agreement be brought against
Developer or any other person or party or to require that resort be had to any
security or to any balance of any deposit account or credit on the books of
Summit in favor of Developer or any other person or party, as a condition
precedent to either Summit seeking recovery under this Guaranty. Notwithstanding
any payments made by Guarantor pursuant to the provisions of this Guaranty,
Guarantor shall not
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<PAGE>
seek to enforce or collect upon any rights which Guarantor now has or may
acquire against Developer either by way of subrogation, indemnity, reimbursement
or contribution for any amount paid under this Guaranty, nor shall Guarantor
file, assert or receive payment on any claim, whether now existing or hereafter
arising, against Developer subsequent to the commencement of a case by or
against Developer under the Bankruptcy Code or under any other applicable
federal or state bankruptcy, insolvency or similar law.
9. Each reference herein to Summit shall be deemed to include its successors
and assigns, in whose favor the provisions of this Guaranty shall also inure.
10. No delay on the part of Summit in exercising any right or remedy under
this Guaranty or failure to exercise the same shall operate as a waiver in whole
or in part of any such right or remedy. No notice to or demand on Guarantor
shall be deemed to be a waiver of the obligation of Guarantor or of the right of
Summit to take further action without notice or demand as provided in this
Guaranty.
11. This Guaranty may only be modified, amended or changed by an agreement in
writing signed by Summit and Guarantor, and shall in no event be terminated
except in accordance with the provisions of this Guaranty. No waiver of any
term, covenant or provision of this Guaranty shall be effective unless given in
writing by Summit and if so given by Summit shall only be effective in the
specific instance in which given.
12. Guarantor acknowledges that this Guaranty and Guarantor's obligations
under this Guaranty are and shall at all times be absolute and unconditional in
all respects, and are and shall at all times be valid and enforceable
irrespective of (a) any other agreements or circumstances of any nature
whatsoever which might otherwise constitute a defense to this Guaranty and the
obligations of Guarantor under this Guaranty or the obligations of any other
person or party (including, without limitation, Developer) relating to this
Guaranty or the obligations or Guarantor hereunder or otherwise with respect to
the Debt or (b) any modification, impairment, abatement, reduction, release or
limitation, in whole or part, of interest payable by Developer under the Note,
Forbearance Agreement and the other Loan Documents pursuant to an order by a
bankruptcy court or other court of competent jurisdiction in any proceeding
brought under the Bankruptcy Code or under any other applicable federal or state
bankruptcy, preference or fraudulent conveyance law or similar law, it being
expressly acknowledged and agreed by Guarantor that if any such modification,
impairment, abatement, reduction, release or limitation, in whole or part, is so
ordered in any such proceeding, Guarantor's obligations under this Guaranty will
nevertheless continue to be determined as if such order had not been issued
(i.e., as if Developer were still obligated to pay interest under the Note and
the other Loan Documents to Summit at the interest rate provided for thereunder
on the entire outstanding principal balance of the Loan). This Guaranty sets
forth the entire agreement and understanding of Summit and Guarantor with
respect to the matters covered by this Guaranty, and Guarantor absolutely,
unconditionally and irrevocably waives any and all right to assert any defense,
setoff, counterclaim or crossclaim of any nature whatsoever with respect to the
obligations of any other person or party (including, without limitation,
Developer) relating to this Guaranty or with respect to the Debt in any action
or proceeding brought by
-5-
<PAGE>
Summit to collect the Debt, or any portion thereof. Guarantor acknowledges that
no oral or other agreements, understandings, representations or warranties exist
with respect to this Guaranty or with respect to the obligations of Guarantor
under this Guaranty, except those specifically set forth in this Guaranty.
13. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, AND SUMMIT BY
ITS ACCEPTANCE OF THIS GUARANTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN
CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS GUARANTY.
14. If either a petition is filed under the Bankruptcy Code or under any
other applicable federal or state bankruptcy, preference or fraudulent
conveyance law or other similar law in regard to Developer, or an action or
proceeding is commenced for the benefit of the creditors of Developer, this
Guaranty shall at all times thereafter remain effective in regard to any
payments or other transfers of assets to Summit received from or on behalf of
Developer which are held voidable on the grounds of preference, fraudulent
conveyance or otherwise, whether or not the Debt has been paid in full.
15. If at any time any payment, or portion thereof, made by, or for the
account of, Guarantor on account of the obligations under this Guaranty is set
aside by any court or trustee having jurisdiction as a voidable preference,
fraudulent conveyance or otherwise as being subject to avoidance or recovery
under the provisions of the Bankruptcy Code or under any other applicable
federal or state bankruptcy, preference or fraudulent conveyance law or similar
law, Guarantor hereby agrees that this Guaranty (a) shall continue and remain in
full force and effect or (b) if previously terminated as a result of Guarantor
having fulfilled Guarantor's obligations hereunder in full or as a result of
Summit having released Guarantor from its obligations and liabilities hereunder,
shall without further act or instrument be reinstated and shall thereafter
remain in full force and effect, in either case with the same force and effect
as though such payment or portion thereof had not been made, and if applicable,
as if such previous termination had not occurred.
16. Any notice, demand or other communication which any party hereto may
desire or may be required to give to any other party hereto shall be in writing,
and shall be deemed given (a) if and when personally delivered, (b) upon receipt
if sent by a nationally recognized overnight courier addressed to a party at its
address set forth below, or (c) on the third (3rd) business day after being
deposited in United States registered or certified mail, postage prepaid,
addressed to a party at its address set forth below, or to such other address as
the party to receive such notice may have designated to all other parties by
notice in writing in accordance herewith:
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<PAGE>
If to Summit: Summit Tax Exempt L.P. II
c/o Related Capital Company
625 Madison Avenue
New York, New York 10022-1801
Attention: Mr. Bruce Brown
With copies to: Best & Flanagan, P.L.L.P.
4000 First Bank Place
601 South 2nd Avenue
Minneapolis MN 55402
Attention: Richard A. Peterson
and to: Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York NY 10022
Attention: Eric Landau
If to Guarantor: Mr. Stuart H. Nolan
c/o Stuart Shelard Management
1050 W. 80th Street
Bloomington, MN 55420-1000
With a copy to: Ravich, Meyer, Kirkman & McGrath, P.A.
4545 IDS Center
80 South 8th Street
Minneapolis MN 55402-2225
Attention: Paul Ravich
Each party to this Guaranty may designate a change of address by written notice
given to the other parties as provided in this paragraph and shall be deemed
effective at the time as provided in this paragraph.
17. This Guaranty is, and shall be deemed to be, a contract entered into
under and pursuant to the laws of the State of Minnesota and shall be in all
respects governed, construed, applied and enforced in accordance with the laws
of the State of Minnesota. No defense given or allowed by the laws of any other
state or country shall be interposed in any action or proceeding hereon unless
such defense is also given or allowed by the laws of the State of Minnesota.
18. Guarantor agrees to submit to personal jurisdiction in the State of
Minnesota in any action or proceeding arising out of this Guaranty and, in
furtherance of such agreement, Guarantor hereby agrees and consents that without
limiting other methods of obtaining jurisdiction, personal jurisdiction over
Guarantor in any such action or proceeding may be obtained within or without the
jurisdiction of any court located in the State of Minnesota and that
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<PAGE>
any process or notice of motion or other application to any such court in
connection with any such action or proceeding may be served upon Guarantor by
registered or certified mail to or by personal service at the last known address
of Guarantor, whether such address be within or without the jurisdiction of any
such court.
19. No exculpatory provisions contained in the Note, the Mortgage, any of the
other Loan Documents, or in any other document or instrument executed and
delivered in connection therewith or otherwise with respect to the Loan shall in
any event or under any circumstance be deemed or construed to modify, qualify or
affect in any manner whatsoever the personal recourse obligations and
liabilities of Guarantor under this Guaranty.
20. Notwithstanding anything to the contrary contained in this Guaranty other
than the provisions of paragraphs 14 and 15 hereof, Summit shall not make a
demand for payment under this Guaranty nor commence any action or proceeding to
enforce the obligations of Guarantor under this Guaranty if:
(a) Guarantor dies or involuntarily ceases to be a general partner of
Developer, and thereupon this Guaranty shall be of no further force or effect
and Summit shall, upon request of Guarantor or his representative, confirm
such termination of this Guaranty; or
(b) a Post-Forbearance Transfer of the Project occurs as provided in
paragraph 5 of the Forbearance Agreement, and upon the completion of such
Title Transfer this Guaranty shall be of no further force or effect and
Summit shall, upon request of Guarantor, confirm such termination of this
Guaranty.
If a Forbearance Termination Event occurs which is cured with the applicable
Cure Period, then Guarantor shall have no liability under this Guaranty arising
out of that particular Forbearance Termination Event, but the provisions of this
Guaranty shall continue to remain in full force and effect and Guarantor shall
not be discharged hereunder except in accordance with the provisions of
paragraph 5 of this Guaranty. Summit shall have the absolute and unconditional
right to make immediate demand for payment on this Guaranty and to immediately
pursue all rights and remedies of any nature whatsoever available to Summit to
enforce the obligations of Guarantor under this Guaranty if the Debt is not so
brought current, or if a default occurs under paragraph 5B of the Forbearance
Agreement.
21. Guarantor shall not by reason of an Asset Transfer cause the Net Worth of
Guarantor to be less than three million ($3,000,000) dollars (the "Minimum Net
Worth Requirement"). If the Net Worth of Guarantor falls below the Minimum Net
Worth Requirement at any time during the term of this Guaranty by reason of an
Asset Transfer, the Minimum Net Worth Requirement shall cease to be satisfied
for the purposes of this Guaranty and for determining whether a Forbearance
Termination Event has occurred.
22. Notwithstanding anything contained herein, on or prior to , 1996,
Guarantor shall deliver to Summit a Required Financial Statement dated December
31, 1995.
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<PAGE>
23. If any term, covenant or provision of this Guaranty shall be held to be
invalid, illegal or unenforceable in any respect, this Guaranty shall be
construed without such term, covenant or provision, and the parties shall
cooperate to amend this Guaranty to the extent possible to conform to the
original intent of any such invalid, illegal or unenforceable term, covenant or
provision.
24. Guarantor acknowledges that he (i) has had the opportunity to obtain
advice of counsel of his own choosing in connection with the negotiations
concerning this Guaranty and the drafting and other preparation of this
Guaranty; (ii) has read the Guaranty, has had the Guaranty fully explained by
such counsel, and is fully aware of its contents and legal effects; (iii) has
entered into this Guaranty of his own free will and accord and without threats,
coercion, fraud or duress of any kind and (iv) is not relying on any
representation, statement or warranty of any person, party or entity regarding
this Guaranty or the transactions contemplated hereby, except as set forth in
this Guaranty.
25. IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty as
of the day and year first above set forth.
---------------------------------
Stuart H. Nolan
JOINDER
Summit hereby joins in the execution and delivery of this Guaranty solely and
exclusively for the purpose of acknowledging its acceptance of this Guaranty and
its agreement to be bound by the terms, conditions and limitations set forth in
this Guaranty.
SUMMIT TAX EXEMPT L.P. II,
a Delaware limited partnership
By _____________________________
Name_________________________
Title________________________
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<PAGE>
EXHIBIT B
TO
FORBEARANCE AGREEMENT
RELEASE AND COVENANT NOT TO SUE
This Release and Covenant Not to Sue is given this day of , 1996, by
("Limited Partner"), to and for the benefit of Summit Tax Exempt L.P. II, a
Delaware limited partnership ("Bondholder"), and its partners, successors and
assigns.
RECITALS
A. Limited Partner is one of the limited partners of Highland Ridge Limited
Partnership, a Minnesota limited partnership ("Developer"). Developer is the
owner of a 228-unit multifamily residential rental housing development known as
Highland Ridge Apartments, located in the City of St. Paul, Ramsey County,
Minnesota (the "Project"). The cost of acquiring, constructing, improving and
equipping the Project was financed by the Housing and Redevelopment Authority of
the City of St. Paul (the "Issuer"), by the issuance of its Multifamily Housing
Revenue Bond, Series 1987 (Highland Ridge Project), in the principal amount of
$15,000,000 (the "Bond"), pursuant to a Resolution adopted as of January 28,
1987 (the "Resolution").
B. The terms of the Bond, the security therefor, the rights and remedies of
the holders thereof, and various other matters in connection therewith were
prescribed pursuant to an Indenture of Trust dated as of February 1, 1987 (the
"Indenture"), between Issuer and First Trust National Association, formerly
known as First Trust Company, Inc., a Minnesota corporation, as Trustee.
C. Proceeds of the Bond were loaned to Developer by Issuer pursuant to a Loan
Agreement between Issuer and Developer dated as of February 1, 1987 (the "Loan
Agreement"), which evidenced the indebtedness of Developer in the amount of
$15,000,000.
D. The Bond issued pursuant to the Indenture was purchased and is owned as
of the date hereof by Bondholder. Capitalized terms not defined herein shall
have the meanings as defined in the Forbearance Agreement.
E. Developer has failed to pay when due certain amounts of Base Interest as
defined in the Indenture, which constitutes an Event of Default pursuant to
various provisions of the Loan Documents as defined in the Indenture.
Additionally, Developer has failed to pay certain real property taxes and
assessments when due, which also constitutes an Event of Default pursuant to
various provisions of the Loan Documents.
F. Pursuant to Section 8-2(a) of the Indenture, Bondholder, as the sole owner
of the Bond, is the designated "Acting Party" with the sole authority to take
actions with respect to any Event of Default. Developer has requested that
Bondholder, in its capacity as Acting Party, agree to forbear from enforcing its
remedies as a result of certain defaults with respect to the non-payment of Base
Interest, taxes, assessments and insurance when due, as provided in a
Forbearance Agreement between Bondholder and Developer, a copy of which is
attached hereto as Exhibit A.
<PAGE>
G. Limited Partner will obtain substantial benefits if Bondholder enters into
the Forbearance Agreement. Bondholder is not willing to enter into the
Forbearance Agreement unless Limited Partner grants to Bondholder a release as
contemplated in Paragraph 18 of the Forbearance Agreement.
RELEASE AND COVENANT NOT TO SUE
In consideration of the entry into the Forbearance Agreement by Bondholder,
and in consideration of the benefits to Limited Partner derived from the
Forbearance Agreement, Limited Partner hereby agrees as follows:
1. Limited Partner hereby confirms the above Recitals, and consents to the
entry into and performance of the Forbearance Agreement by the Developer.
2. Limited Partner hereby irrevocably and unconditionally releases, acquits,
waives, and forever discharges Bondholder and each of its agents, partners,
employees, representatives, attorneys, and all persons acting by, through, under
or in concert with any of them, from any and all legal or equitable charges,
complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of actions, defenses, affirmative
defenses, rights of set-off, suits, rights, demands, costs, losses, debts, and
expenses (including attorneys' fees, accountant or other professional fees and
other costs actually incurred) of any nature whatsoever, known or unknown,
suspected or unsuspected, arising out of any matter, fact or thing occurring on
or before the date of the execution of this Release, which Limited Partner now
has, owns, holds, or claims to have, own or hold, or which Limited Partner at
anytime heretofore had, owned, held or claimed to have had, owned or held
against Bondholder in connection with the loan evidenced by the Loan Documents,
the Forbearance Agreement, and any dealings related thereto.
2. If a Forbearance Termination Event occurs and remains uncured after the
expiration of any applicable grace or cure period, Limited Partner hereby agrees
not to contest, impede or in any way interfere with any Foreclosure or
Receivership, including, without limitation, filing any documents or papers
(such as answers, motions, claims or counterclaims); and Limited Partner further
agrees not to cause or acquiesce in action by or on behalf of Developer to so
contest, impede or in any way interfere with any Foreclosure or Receivership.
3. This Agreement is binding on the heirs, representatives, successors and
assigns of Limited Partner and is for the benefit of Bondholder and its
partners, successors and assigns.
Executed this day of , 1996.
LIMITED PARTNER
___________________________________
<PAGE>
SCHEDULE A
HIGHLAND RIDGE TAX PAYMENT PLAN
1994 TAX OWED: 57,198.89
1995 TAX TO 3/31/95: 558,779.48
INTEREST TO 4/30/95: 5,021.63
TOTAL DELINQUENT: 621,000.00
1996 TAX DUE: 486,305.74
EST. 1997 TAX DUE: 510,621.02
<TABLE>
<CAPTION>
94/95 APPROXIMATE 1996 1996 1996 1997 1997 1997
TAX DELINQUENT ESCROW TAX TAX ESCROW TAX ESTIMATED
DATE PAYMENT TAX DUE: PAYMENT PAYMENT DUE PAYMENT PAYMENT TAX DUE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3/15/96 621,000.00 486,305.74
4/15/96 207,000.00+ 414,000.00+ 243,152.87 243,152.87
5/15/96 414,000.00+ 48,630.57 194,522.30
6/15/96 414,000.00+ 48,630.57 145,891.73
7/15/96 414,000.00+ 48,630.57 97,261.16
8/15/96 414,000.00+ 48,630.57 48,630.59
9/15/96 414,000.00+ 48,630.57 - 510,621.02
10/15/96 414,000.00+ 42,551.75 468,069.27
11/15/96 414,000.00+ 42,551.75 425,517.52
12/15/96 414,000.00+ 42,551.75 382,965.77
1/15/97 207,000.00+ 207,000.00+ 42,551.75 340,414.02
2/15/97 207,000.00 42,551.75 297,862.27
3/15/97 207,000.00 42,551.75 255,310.52
4/15/97 207,000.00 42,551.75 255,310.51 212,758.77
5/15/97 207,000.00 42,551.75 170,207.02
6/15/97 207,000.00 42,551.75 127,655.27
7/15/97 207,000.00 42,551.75 85,103.52
8/15/97 207,000.00 42,551.75 42,551.77
9/15/97 207,000.00 42,551.75 -
10/15/97 207,000.00+ -
</TABLE>
1ST HALF TAXES ARE DUE ON OR BEFORE 5/15/96
2ND HALF TAXES ARE DUE ON OR BEFORE 10/15/96
*ESTIMATED 1997 TAXES ASSUME 5% INCREASE OVER 1996 TAXES
<PAGE>
SCHEDULE B
HIGHLAND RIDGE FORBEARANCE AGREEMENT
ESTIMATED COSTS
Legal $20,000
Issuer $3,500
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 972,889
<SECURITIES> 153,074,452
<RECEIVABLES> 2,971,973
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 157,019,314
<CURRENT-LIABILITIES> 652,350
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 156,366,964
<TOTAL-LIABILITY-AND-EQUITY> 157,019,314
<SALES> 0
<TOTAL-REVENUES> 12,039,287
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,851,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,187,803
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,187,803
<EPS-PRIMARY> .98
<EPS-DILUTED> 0
</TABLE>
