UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE AC
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
incorporation or organization) No.)
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
Page 1 of
<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>
<TABLE>
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:
<CAPTION>
Average
Final Interest Stated
Face Amount Carrying Completion Rate Paid Interest
Property Closing Date of Bond Amount Date in 1995* Rate
- -------- ------------ ------- ------ ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Bay Club, Mt. Pleasant, SC 9/11/86 $ 6,400,000 $ 6,287,573 12/87 7.50%(A) 8.25%
Loveridge, Contra Costa, CA 11/13/86 8,550,000 8,550,000 3/87 6.80 8.00
The Lakes, Kansas City, MO 12/30/86 13,650,000 12,750,000 1/89 5.30 (E) 4.87
Crowne Pointe, Olympia, WA 12/31/86 5,075,000 5,075,000 6/87 8.00 8.00
Orchard Hills, Tacoma, WA 12/31/86 5,650,000 5,650,000 9/87 8.00 8.00
Highland Ridge, St. Paul, MN 2/02/87 15,000,000 15,000,000 1/89 7.80 (F) 8.00
Newport Village, Tacoma, WA 2/11/87 13,000,000 13,000,000 2/87 7.80 (D) 8.00
Sunset Downs, Lancaster, CA 2/11/87 15,000,000 15,000,000 7/87 5.70 8.00
Pelican Cove, St. Louis, MO 2/27/87 18,000,000 17,600,000 11/89 7.50 8.00
Willow Creek, Ames, IA 2/27/87 6,100,000 6,100,000 8/88 8.00 8.00
Cedar Pointe, Nashville, TN 4/22/87 9,500,000 9,500,000 9/89 8.00 8.00
Shannon Lake, Atlanta, GA 6/26/87 12,000,000 12,000,000 8/88 6.00 8.00
Bristol Village, Bloomington, MN 7/31/87 17,000,000 17,000,000 9/89 7.90 (D) 8.00
Suntree, Ft. Myers, FL 7/31/87 7,500,000 7,500,000 12/85 7.50 8.00
River Run, Miami, FL 8/07/87 7,200,000 7,200,000 7/87 8.00 8.00
Players Club, Ft. Myers, FL (B) 8/14/87 2,500,000 2,500,000 12/85 7.00 8.00
---------- -----------
$162,125,000 $160,712,573
============
Less:Allowance for loss on impairment of assets (2,500,000)
------------
Carrying amount $158,212,573
============
<CAPTION>
Minimum
Pay Rate at Occupancy Rental Rates No. of
December February 11, at December 31, Rental
Property 31, 1995* 1996 1995 Units
- -------- --------- ----------- --------------- -----
<S> <C> <C> <C> <C>
Bay Club, Mt. Pleasant, SC 7.25%(A) 97.5% $505-655 160
Loveridge, Contra Costa, CA (C) 95.2 552-691 148
The Lakes, Kansas City, MO 4.87 91.6 380-560 400
Crowne Pointe, Olympia, WA 8.00 95.0 480-775 160
Orchard Hills, Tacoma, WA 8.00 96.0 460-755 176
Highland Ridge, St. Paul, MN 8.00 94.7 675-1,200 228
Newport Village, Tacoma, WA 7.00 90.3 435-590 402
Sunset Downs, Lancaster, CA (C) 78.5 460-680 264
Pelican Cove, St. Louis, MO (C) 98.2 465-625 402
Willow Creek, Ames, IA 8.00 00.0 500-825 138
Cedar Pointe, Nashville, TN 8.00 93.7 480-810 210
Shannon Lake, Atlanta, GA 6.00 98.0 385-680 294
Bristol Village, Bloomington, MN 7.50 00.0 610-1,059 290
Suntree, Ft. Myers, FL 7.50 92.4 450-635 240
River Run, Miami, FL 8.00 94.4 609-829 164
Players Club, Ft. Myers, FL (B) 7.00 87.6 450-645 288
</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 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 proposed forbearance
effective with the November 1, 1995 payment which is currently being
finalized.
Note: Provisions for loss on impairment of assets of $1,000,000 and $500,000,
were recorded during the years ended December 31, 1995 and 1994, respectively,
to record the estimated impairment of FMBs based upon an analysis of estimated
cash flows from the individual properties securing the FMBs bringing the total
allowance for loss on impairment of assets at December 31, 1995 to $2,500,000.
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<PAGE>
Bond Modifications/Forbearance Agreements
Due to increases in its real estate taxes, the obligor under the
Highland Ridge FMB is in final stages of negotiations with the Registrant with
regard to entering into a forbearance agreement. Based on current discussions
and in addition to other terms and conditions, it is anticipated that such
agreement, when finalized, will encompass a partial deferral on monthly interest
payments for a period of four years to be repaid from future available cash flow
or sale or refinancing proceeds. In addition delinquent taxes will be paid by
the developer over an 18 month period. Also, the developer has offered to
guarantee this obligation with a personal guarantee. Since November, 1995 the
FMB has paid partial payments of interest two months in arrears at a 7.0%
annualized rate and the property is delinquent in the payment of its 1995
installments of its real estate taxes. At this time, no agreement has been
finalized and there is no assurance that an agreement will be signed.
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 agreement have been
subsequently extended through 1996. The borrower has asked for a two year
extension of the forbearance which is currently being negotiated. 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. The current
balance outstanding as of December 31, 1995 is approximately $138,000. Due to
the forbearance agreement, an allowance for possible loss was established for
the entire loan amount during 1993. Interest payments on both the FMB and the
tax loan are current at December 31, 1995.
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 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. 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 $164,957,435 $165,917,943 $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>
-8-
<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
FMBs are carried at cost less a valuation allowance where appropriate.
The Registrant periodically evaluates the collectibility of both interest and
principal of its FMBs to determine whether they are impaired. An FMB is
considered to be impaired when, 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. When an FMB is considered to be impaired ,
the amount of the valuation allowance is determined by discounting the expected
cash flows at the FMB's original effective interest rate, or, for practical
purpose, at the estimated fair value of the collateral.
The process of determining impairment of the FMBs and the appropriate
level of the valuation allowance is based upon projections of future economic
events such as property occupancy rates, rental rates, operating cost inflation
and market capitalization rates. The cash flows used in this process 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, which, in turn, could cause
additional impairments. Thus, the Registrant may be required to provide for
additional valuation allowances, which could be material, in subsequent years.
The Registrant's accounting policy for its FMBs conforms to Statement of
Financial Accounting Standards 114 and 118, "Accounting by Creditors for
Impairment of a Loan" (the "Statements"), which the Registrant adopted in 1995.
Adoption of the Statements did not have a material impact on the Registrant's
financial position or results of operations. Prior to the adoption of the
Statements, 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 on these FMBs
and has no present intention to do so, they have been reclassified as FMBs for
all periods presented, in accordance with the Statements. 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
provision for loss on impairment of assets of $1,000,000 and $500,000 recorded
in 1995 and 1994, respectively, and for the reasons discussed below.
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<PAGE>
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 provision for loss on impairment of assets was recorded
during the year ended December 31, 1995 to reflect the estimated impairment of
the FMBs based upon an analysis of estimated cash flows from the individual
properties securing the FMBs.
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
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 provision for loss on impairment of assets was recorded
during the year ended December 31, 1994 to reflect the estimated impairment of
the FMBs based upon an analysis of estimated cash flows from the individual
properties securing the FMBs. A $1,000,000 provision for loss on impairment of
assets was recorded during the year ended December 31, 1993. This provision was
based on estimates of the value of the underlying properties using the
discounted cash flow method which includes the discounted value of the favorable
tax-exempt bond financing.
-10-
<PAGE>
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.
-11-
<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>
Average
Final Interest
Face Amount Carrying Completion Rate Paid
Property Closing Date of Bond Amount Date in 1995*
- -------- ------------ ------- ------ ---- --------
<S> <C> <C> <C> <C> <C>
Bay Club, Mt. Pleasant, SC 9/11/86 $ 6,400,000 $ 6,287,573 12/87 7.50% (A)
Loveridge, Contra Costa, CA 11/13/86 8,550,000 8,550,000 3/87 6.80
The Lakes, Kansas City, MO 12/30/86 13,650,000 12,750,000 1/89 5.30 (E)
Crowne Pointe, Olympia, WA 12/31/86 5,075,000 5,075,000 6/87 8.00
Orchard Hills, Tacoma, WA 12/31/86 5,650,000 5,650,000 9/87 8.00
Highland Ridge, St. Paul, MN 2/02/87 15,000,000 15,000,000 1/89 7.80 (F)
Newport Village, Tacoma, WA 2/11/87 13,000,000 13,000,000 2/87 7.80 (D)
Sunset Downs, Lancaster, CA 2/11/87 15,000,000 15,000,000 7/87 5.70
Pelican Cove, St. Louis, MO 2/27/87 18,000,000 17,600,000 11/89 7.50
Willow Creek, Ames, IA 2/27/87 6,100,000 6,100,000 8/88 8.00
Cedar Pointe, Nashville, TN 4/22/87 9,500,000 9,500,000 9/89 8.00
Shannon Lake, Atlanta, GA 6/26/87 12,000,000 12,000,000 8/88 6.00
Bristol Village, Bloomington, MN 7/31/87 17,000,000 17,000,000 9/89 7.90 (D)
Suntree, Ft. Myers, FL 7/31/87 7,500,000 7,500,000 12/85 7.50
River Run, Miami, FL 8/07/87 7,200,000 7,200,000 7/87 8.00
Players Club, Ft. Myers, FL (B) 8/14/87 2,500,000 2,500,000 12/85 7.00
---------- -----------
$162,125,000 $160,712,573
============
Less:Allowance for loss on impairment of assets (2,500,000)
------------
Carrying amount $158,212,573
============
<CAPTION>
Minimum
Stated Pay Rate at Occupancy Rental Rates No. of
Interest December February 11, at December 31, Rental
Property Rate* 31, 1995* 1996 1995 Units
- -------- ----- --------- ----------- -------------- -----
<S> <C> <C> <C> <C> <C>
Bay Club, Mt. Pleasant, SC 8.25% 7.25% (A) 97.5% $505-655 160
Loveridge, Contra Costa, CA 8.00 (C) 95.2 552-691 148
The Lakes, Kansas City, MO 4.87 4.87 91.6 380-560 400
Crowne Pointe, Olympia, WA 8.00 8.00 95.0 480-775 160
Orchard Hills, Tacoma, WA 8.00 8.00 96.0 460-755 176
Highland Ridge, St. Paul, MN 8.00 8.00 94.7 675-1,200 228
Newport Village, Tacoma, WA 8.00 7.00 90.3 435-590 402
Sunset Downs, Lancaster, CA 8.00 (C) 78.5 460-680 264
Pelican Cove, St. Louis, MO 8.00 (C) 98.2 465-625 402
Willow Creek, Ames, IA 8.00 8.00 00.0 500-825 138
Cedar Pointe, Nashville, TN 8.00 8.00 93.7 480-810 210
Shannon Lake, Atlanta, GA 8.00 6.00 98.0 385-680 294
Bristol Village, Bloomington, MN 8.00 7.50 00.0 610-1,059 290
Suntree, Ft. Myers, FL 8.00 7.50 92.4 450-635 240
River Run, Miami, FL 8.00 8.00 94.4 609-829 164
Players Club, Ft. Myers, FL (B) 8.00 7.00 87.6 450-645 288
</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 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 proposed forbearance
effective with the November 1, 1995 payment which is currently being
finalized.
Note: Provisions for loss on impairment of assets of $1,000,000 and $500,000,
were recorded during the years ended December 31, 1995 and 1994, respectively,
to record the estimated impairment of FMBs based upon an analysis of estimated
cash flows from the individual properties securing the FMBs bringing the total
allowance for loss on impairment of assets at December 31, 1995 to $2,500,000.
-12-
<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.
-13-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
(a) 1. Financial Statements Page
-------------------- ----
Independent Auditors' Report
Statements of Financial Condition as of December 31, 1995 and
1994
Statements of Income for the years ended December 31, 1995,
1994 and 1993
Statements of Changes in Partners' Capital (Deficit) for the
years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993
Notes to Financial Statements
-14-
<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.
DELOITTE & TOUCHE LLP
New York, New York
March 20, 1996
-15-
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
ASSETS
December 31,
--------------------
1995 1994
---- ----
Participating first mortgage bonds, net $158,212,573 $159,186,119
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 $164,957,435 $165,917,943
============ ============
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)
-------- -------
Total partners' capital 164,305,085 164,829,205
----------- -----------
Total liabilities and partners' capital $164,957,435 $165,917,943
============ ============
See accompanying notes to financial statements
-16-
<PAGE>
<TABLE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF INCOME
<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
Provision for 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
-17-
<PAGE>
<TABLE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<CAPTION>
Total BUC$holders General Partners
----- ----------- ----------------
<S> <C> <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)
Net income 9,623,049 9,430,588 192,461
Distributions (9,711,923) (9,517,685) (194,238)
----------- ---------- ---------
Partners' capital (deficit) - December 31, 1994 164,829,205 164,925,646 (96,441)
Net income 9,187,803 9,004,047 183,756
Distributions (9,711,923) (9,517,685) (194,238)
----------- ----------- ---------
Partners' capital (deficit) - December 31, 1995 $164,305,085 $164,412,008 $ (106,923)
============ ============ ============
</TABLE>
See accompanying notes to financial statements
-18-
<PAGE>
<TABLE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF CASH FLOWS
<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 FMB 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:
Provision for 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
-19-
<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
FMBs are carried at cost less a valuation allowance where appropriate.
The Partnership periodically evaluates the collectibility of both interest and
principal of its FMBs to determine whether they are impaired. An FMB is
considered to be impaired when, 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. When an FMB is considered to be
impaired , the amount of the valuation allowance is determined by discounting
the expected cash flows at the FMB's original effective interest rate, or, for
practical purpose, at the estimated fair value of the collateral.
The process of determining impairment of the FMBs and the appropriate
level of the valuation allowance is based upon projections of future economic
events such as property occupancy rates, rental rates, operating cost inflation
and market capitalization rates. The cash flows used in this process 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, which, in turn, could cause
additional impairments. Thus, the Partnership may be required to provide for
additional valuation allowances, which could be material, in subsequent years.
-20-
<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)
The Partnership's accounting policy for its FMBs conforms to Statement
of Financial Accounting Standards 114 and 118, "Accounting by Creditors for
Impairment of a Loan" (the Statements"), which the Partnership adopted in 1995.
Adoption of the Statements did not have a material impact on the Partnership's
financial position or results of operations. Prior to the adoption of the
Statements, 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 on these FMBs
and has no present intention to do so, they have been reclassified as FMBs for
all periods presented, in accordance with the Statements. 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.
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) Reclassifications
Certain reclassifications have been made to prior year amounts to
conform to the current year presentation.
-21-
<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
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.
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 increases in its real estate taxes, the obligor under the
Highland Ridge FMB is in final stages of negotiations with the Partnership with
regard to entering into a forbearance agreement. Based on current discussions
and in addition to other terms and conditions, it is anticipated that such
agreement, when finalized, will encompass a partial deferral on monthly interest
payments for a period of four years to be repaid from future available cash flow
or sale or refinancing proceeds. In addition delinquent taxes will be paid by
the developer on an 18 month period. Also, the developer has offered to
guarantee this obligation with a personal guarantee. Since November, the FMB has
paid partial payments of interest two months in arrears at a 7% annualized rate
and the property is delinquent in the payment of its 1995 installments of its
real estate taxes. At this time, no agreement has been finalized and there is no
assurance that an agreement will be signed.
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)
-22-
<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)
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 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 1996. The borrower has asked for a two year
-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)
extension of the forbearance which is currently being negotiated. 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. The current
balance outstanding as of December 31, 1995 is approximately $138,000. Due to
the forbearance agreement, an allowance for possible loss was established for
the entire loan amount during 1993. Interest payments on both the FMB and the
tax loan are current at December 31, 1995.
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. 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.
-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)
At December 31, 1995 and 1994, the estimated fair value of the FMBs was
$143,600,000 and $140,800,000, respectively. These estimates are based on the
projected cash flows of the FMBs and a market interest rate for similar
tax-exempt financing as of December 31, 1995 and 1994. Fair value estimates are
made at a specific point in time, based on relevant market information and
information about the financial instrument. This estimate is subjective in
nature and involves uncertainties and matters of significant judgment. Changes
in assumptions could significantly affect estimates. Due to the
property-specific nature of the FMBs and the lack of a ready market for such
investments, this fair value estimate does not necessarily represent the amount
which the Partnership could realize upon a current sale of its investments.
As of December 31, 1995, the Partnership has classified FMBs with
a recorded investment totaling $78,150,000 as impaired in accordance with the
definition in Note 2.b. A valuation allowance has been provided for FMBs
comprising $50,550,000 of this amount; the Partnership has determined that the
remainder do not require a valuation allowance at December 31, 1995. Interest
income of approximately $5,422,000 was recognized on loans classified as
impaired during 1995.
The total valuation allowance relating to FMBs was $2,500,000 at
December 31, 1995; $1,000,000 of the amount was recorded in 1993, $500,000 in
1994 and $1,000,000 in 1995.
-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
Descriptions of the various FMBs owned by the Partnership at December
31, 1995 are as follows:
<TABLE>
<CAPTION>
Average Stated Minimum Pay
Interest Rate Interest Rate at December
Property Location Paid in 1995* Rate* 31, 1995* Call Date
- -------- -------- ------------- ----- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Bay Club Mt. Pleasant, SC 7.50% (E) 8.25% 7.25%(E) Sep. 2000
Loveridge Contra Costa, CA 6.80 8.00 (B) Nov. 2006
The Lakes Kansas City, MO 5.30 (D) 4.87 4.87 Dec. 2006
Crowne Pointe Olympia, WA 8.00 8.00 8.00 Dec. 1998
Orchard Hills Tacoma, WA 8.00 8.00 8.00 Dec. 1998
Highland Ridge St. Paul, MN 7.80 (F) 8.00 8.00 Feb. 1999
Newport Village Tacoma, WA 7.80 (C) 8.00 7.00 Jan. 1999
Sunset Downs Lancaster, CA 5.70 8.00 (B) May 1999
Pelican Cove St Louis, MO 7.50 8.00 (B) May 1999
Willow Creek Ames, IA 8.00 8.00 8.00 Oct. 1999
Cedar Pointe Nashville, TN 8.00 8.00 8.00 Apr. 1999
Shannon Lake Atlanta, GA 6.00 8.00 6.00 Jun. 1999
Bristol Village Bloomington, MN 7.90 (C) 8.00 7.50 Jun. 1999
Suntree Ft. Myers, FL 7.50 8.00 7.50 Jul. 1999
River Run Miami, FL 8.00 8.00 8.00 Aug. 1999
Players Club (A) Ft. Myers, FL 7.00 8.00 7.00 Aug. 1999
<CAPTION>
Property Maturity Date Face Amount Carrying Amount
- -------- ------------- ----------- ---------------
<S> <C> <C> <C>
Bay Club Sep. 2006 $ 6,400,000 $ 6,287,573
Loveridge Nov. 2006 8,550,000 8,550,000
The Lakes Dec. 2006 13,650,000 12,750,000
Crowne Pointe Dec. 2006 5,075,000 5,075,000
Orchard Hills Dec. 2006 5,650,000 5,650,000
Highland Ridge Feb. 2007 15,000,000 15,000,000
Newport Village Jan. 2007 13,000,000 13,000,000
Sunset Downs May 2007 15,000,000 15,000,000
Pelican Cove Feb. 2007 18,000,000 17,600,000
Willow Creek Oct. 2006 6,100,000 6,100,000
Cedar Pointe Apr. 2007 9,500,000 9,500,000
Shannon Lake Jun. 2007 12,000,000 12,000,000
Bristol Village Jun. 2005 17,000,000 17,000,000
Suntree Jul. 2007 7,500,000 7,500,000
River Run Aug. 2007 7,200,000 7,200,000
Players Club (A) Aug. 2007 2,500,000 2,500,000
--------- ----------
$162,125,000 160,712,573
============
Less: Allowance for loss on impairment of assets (2,500,000)
----------
Carrying Amount $158,212,573
============
</TABLE>
- ----------
* The rate paid represents the interest recorded by the Partnership while the
stated rate represents the coupon rate of the FMB and the minimum pay rate
represents the minimum rate payable pursuant to the applicable forbearance
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 proposed forbearance
effective with the November 1, 1995 payment which is currently being
finalized.
-26-
<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
Provision for 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 and the recording of distributions.
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
------------- ----------- ------------
PBP and affiliates
<S> <C> <C> <C>
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>
-27-
<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.
-28-
<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.
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.
-29-
<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:
Name Position
---- --------
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
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.
-30-
<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
-31-
<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.
-32-
<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.
-33-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
Sequential
(a) 1. Financial Statements Page
-------------------- ----
Independent Auditors' Report
Statements of Financial Condition of as of
December 31, 1995 and 1994
Statements of Income for the years ended
December 31, 1995, 1994 and 1993
Statements of Changes in Partners' Capital (Deficit)
for the years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Financial Statements
(a) 2. Financial Statement Schedules
-----------------------------
Schedule II-Valuation and Qualifying Accounts and Reserves for the years
ended December 31, 1995, 1994 and 1993
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.
-34-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
Sequential
(a) 3. Exhibits (continued) Page
----
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 (filed herewith)
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)
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)
-35-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
Sequential
(a) 3. Exhibits (continued) Page
----
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)
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)
-36-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
Sequential
(a) 3. Exhibits (continued) Page
----
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)
(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)
-37-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
Sequential
(a) 3. Exhibits (continued) Page
----
(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)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
-38-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Summit Tax Exempt L.P. II
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: Eugene D. Burak Date: March 29,
--------------- 1996
Eugene D. Burak
Vice President
By: Related Tax Exempt Associates II, Inc.
A Delaware corporation, General Partner
By: Alan P. Hirmes Date: March 29,
-------------- 1996
Alan P. Hirmes
Vice President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities (with respect to the
General Partners) and on the dates indicated.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: Thomas F. Lynch III Date: March 29,
------------------- 1996
Thomas F. Lynch III
President, Chief Executive Officer,
Chairman of the Board of Directors and Director
By: Barbara J. Brooks Date: March 29,
----------------- 1996
Barbara J. Brooks
Vice President-Finance and Chief Financial Officer
By: Eugene D. Burak Date: March 29,
--------------- 1996
Eugene D. Burak
Vice President
By: _______________ Date:
Frank W. Giordano
Director
By: Nathalie P. Maio Date: March 29,
---------------- 1996
Nathalie P. Maio
Director
-39-
<PAGE>
By: Related Tax Exempt Associates II, Inc.
A Delaware corporation, General Partner
By: J. Michael Fried Date: March 29,
---------------- 1996
J. Michael Fried
President and Director
By: Alan P. Hirmes Date: March 29,
-------------- 1996
Alan P. Hirmes
Vice President
By: Lawrence J. Lipton Date: March 29,
------------------ 1996
Lawrence J. Lipton
Treasurer
By: Stephen M. Ross Date: March 29,
--------------- 1996
Stephen M. Ross
Director
-40-
<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 $1,500,000 $1,000,000 $ 0 $ 0 $2,500,000
1994 1,000,000 500,000 0 0 1,500,000
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 $138,000
1994 138,000 0 0 0 138,000
1993 0 138,000 0 0 138,000
</TABLE>
AMENDMENT NUMBER ONE
TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
SUMMIT TAX EXEMPT BOMD FUND, L.P.
AMENDMENT NUMBER ONE (this "Amendment"), is made as of October 1, 1995
(the "Effective Date") to the Agreement of Limited Partnership entered into as
of the 18th day of December, 1985, and amended as of January 31, 1986 (the
"Partnership Agreement") of Summit Tax Exempt Bond Fund, L.P. (the
"Partnership").
All capitalized terms used herein shall have the meanings specified in
Article One of this Amendment.
RECITALS
A. The purpose of this amendment is to amend the Partnership Agreement
to permit the subsistution of the Related General Partner for Pru-Bache
Properties as the "Tax Matters partner."
B. The General Partners have agreed that the Related General Partner
will assume the responsibilities and duties of the Tax Matters Partner (as
defined in Section 2.1 hereof) as of the Effective Date.
C. Pursuant to Section 15.2.19(i) of the Partnership Agreement, the
General Partners, without consent of the Limited Partners or BUC$ holders, may
amend the Partnership Agreement to add to their duties or surrender any right or
power granted to them, for the benefit if the Limited Partners and BUC$ holders.
D. The General Pertners have determined that the duties of the Tax
Matters Partner from Pru-Bache Properties to the Related General Partner is in
the best interests of the Limited Partners and BUC$ holders and that the
Partnership Agreement be amended to reflect that the Related General Partner is
the Tax Matters Partner as of the Effective Date.
E. Pursuant to Article 20 of the Partnership Agreement, each Limited
Partner has granted to the General Partners a special power of attorney
irrevocably making, constituting and appointing and appointing eah of the
General Partners as the attorney-in-fact for such Limited Partner, with power
and authority to act in his name and on his behalf to execute,
<PAGE>
acknowledge and swear to the execution, acknowledgement and filing of certain
amendments to the Partnership Agreement.
Accordingly, the Partnership Agreement is hereby amended as follows:
ARTICLE ONE
DEFINITIONS
1.1 Definitions. For all purposes of this Amendment, except as otherwise
expressly provided or unless the context requires, (i) the terms defined in this
Amendment have the meanings assigned to them in this Amendment and include the
plural as well as the singular and (ii) all acpitalized terms used in this
Amendment but not defined herein have the meanings ascribed to them in the
Partnership Agreement.
ARTICLE TWO
AMENDMENTS
2.1 Amendment. Section 15.8 of the Partnership Agreement is hereby
amended as of the Effective Date to reflect that the General Realted Partner is
the "Tax Matters Partner." As of the Effective Date, all other references in the
Partnership Agreement to the Tax Matters Partner shall mean the Related General
Partner.
ARTICLE THREE
NOTICE
3.1 Counterparts. This Amendment may be executed in counterparts, each
of which shall be deemed an original and all of which, when taken together,
shall constitute one and the same instrument.
3.2 Effectiveness. The provisions of this Amendment shall be effective
as of the Effective Date.
3.3 Conflict. in the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the Partnership
Agreement, the terms of this Amendment shall govern. in all other respects, the
Partnership Agreement, as amended, modified and supplemented hereby, shall
remain unchanged and infull force and effect.
3.4 Governing Law. This Amendment shall be governed by and contrued in
accordance with the laws of the State of Delaware.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
duly executed as of the date and year first above written.
Related Tax Exempt Bond Associates, Inc.
By: /S/ ALAN P. HIRMES
--------------------------
Name: Alan P. Hirmes
Title:
Prudential-Bache Properties, Inc.
By: /S/ THOMAS F. LYNCH, III
--------------------------
Name: Thomas F. Lynch, III
Title: President
Limited Partners
By: Related Tax Exempt Bond Associates, Inc.
By: /S/ ALAN P. HIRMES
--------------------------
Name: Alan P. Hirmes
Title:
By: Prudential-Bache Properties, Inc.
By: /S/ THOMAS F. LYNCH, III
--------------------------
Name: Thomas F. Lynch, III
Title: President
As attorneys-in-fact for all Limited Partners
pursuant to Article 20 of the Partnerhip
Agreement
-3-
<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
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<S> <C>
<PERIOD-TYPE> YEAR
<CASH> 972,889
<SECURITIES> 161,012,573
<RECEIVABLES> 2,971,973
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 164,957,435
<CURRENT-LIABILITIES> 652,350
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 164,305,085
<TOTAL-LIABILITY-AND-EQUITY> 164,957,435
<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>
