SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
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
incorporation or organization) Identification 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
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(unaudited)
============= =============
June 30, December 31,
1997 1996
------------- -------------
ASSETS
Participating first mortgage bonds-at
fair value $ 148,136,653 $ 148,123,426
Temporary investments 3,800,000 3,600,000
Cash and cash equivalents 519,077 249,192
Interest receivable, net 507,276 735,343
Promissory notes receivable, net 491,591 275,572
Deferred bond selection fees, net 1,712,581 1,804,942
Due from affiliates 0 84,225
Other assets 0 23,775
------------- -------------
Total assets $155,167,178 $154,896,475
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Deferred income $ 374,380 $ 394,259
Accrued expenses 63,836 107,421
Due to affiliates 408,416 72,194
------------- -------------
Total liabilities 846,632 573,874
------------- -------------
Contingencies
Partners' capital (deficit):
BUC$holders (9,151,620 BUC$
issued and outstanding) 160,620,449 160,622,463
General Partners (184,301) (184,260)
Net unrealized loss on participating
first mortgage bonds (6,115,602) (6,115,602)
------------- -------------
Total partners' capital 154,320,546 154,322,601
------------- -------------
Total liabilities and partners' capital $ 155,167,178 $ 154,896,475
============= =============
See accompanying notes to financial statements
2
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
======================= =======================
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Interest income:
Participating first mortgage
bonds $2,937,554 $3,084,231 $5,654,579 $5,964,784
Temporary investments 40,854 33,638 73,146 63,803
Promissory notes 10,249 4,633 18,079 8,957
---------- ---------- ---------- ----------
Total revenues 2,988,657 3,122,502 5,745,804 6,037,544
========== ========== ========== ==========
Expenses:
Management fees 202,656 202,656 405,312 405,312
Loan serving fees 101,051 100,775 200,991 201,549
General and administrative 107,158 130,875 193,234 210,624
Amortization of deferred
bond selection fees 46,181 46,180 92,361 92,360
Loss on impairment
of assets 0 1,500,000 0 1,500,000
---------- ---------- ---------- ----------
Total expenses 457,046 1,980,486 891,898 2,409,845
---------- ---------- ---------- ----------
Net Income $2,531,611 $1,142,016 $4,853,906 $3,627,699
========== ========== ========== ==========
Allocation of Net
Income:
BUC$holders $2,480,979 $1,119,176 $4,756,828 $3,555,145
========== ========== ========== ==========
General Partners $ 50,632 $ 22,840 $ 97,078 $ 72,554
========== ========== ========== ==========
Net Income per BUC $ .27 $ .12 $ .52 $ .39
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(unaudited)
<TABLE>
<CAPTION>
================================================================
Net Unrealized
Loss on
General Participating First
Total BUC$holders Partners Mortgage Bonds
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Partners' capital (deficit) -
January 1, 1997 $ 154,322,601 $ 160,622,463 $ (184,260) $ (6,115,602)
Net Income 4,853,906 4,756,828 97,078 0
Distributions (4,855,961) (4,758,842) (97,119) 0
------------- ------------- ------------- -------------
Partners' capital (deficit) -
June 30, 1997 $ 154,320,546 $ 160,620,449 $ (184,301) $ (6,115,602)
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
==========================
Six Months Ended
June 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received, net $ 5,940,765 $ 6,186,699
Loans made to properties (280,000) (300,000)
Amount received which was due from affiliate 84,225 0
Fees and expenses paid (483,125) (505,330)
----------- -----------
Net cash provided by operating activities 5,261,865 5,381,369
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchase of temporary investments (200,000) (875,000)
Principal payments received from loans made to
properties 63,981 16,630
----------- -----------
Net cash used in investing activities (136,019) (858,370)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid (4,855,961) (4,855,962)
----------- -----------
Net increase (decrease) in cash and cash equivalents 269,885 (332,963)
Cash and cash equivalents at beginning of period 249,192 972,889
----------- -----------
Cash and cash equivalents at end of period $ 519,077 $ 639,926
=========== ===========
Schedule reconciling net income to net cash
provided by operating activities:
Net income $ 4,853,906 $ 3,627,699
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on impairment of assets 0 1,500,000
Amortization of deferred bond selection fees 92,361 92,360
Amortization of deferred income (33,106) (33,106)
Changes in:
Interest receivable, net 228,067 182,261
Promissory notes receivable, net 0 21,620
Other assets 23,775 12,498
Accrued expenses (43,585) (36,655)
Deferred income 0 (21,620)
Due from affiliates 84,225 0
Due to affiliates 336,222 336,312
----------- -----------
Total adjustments 687,959 2,053,670
----------- -----------
Net cash provided by operating activities $ 5,541,865 $ 5,681,369
=========== ===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(unaudited)
NOTE 1 - General
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments, (consisting of
only normal recurring adjustments) necessary to present fairly the financial
position of Summit Tax Exempt L.P. II (the "Partnership") as of June 30, 1997,
the results of its operations for the three and six months ended June 30, 1997
and 1996 and its cash flows for the six months ended June 30, 1997 and 1996.
However, the operating results for the interim periods may not be indicative of
the results expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1996.
Certain reclassifications have been made to prior year amounts to conform
to the current year's presentation.
NOTE 2 - Participating First Mortgage Bonds ("FMBs")
The Partnership accounts for its investments in the FMBs as "available for
sale" debt securities under the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). Accordingly, investments in FMBs are carried at their
estimated fair values, with unrealized gains and losses reported in a separate
component of partners' capital.
Because the FMBs are not readily marketable, the Partnership estimates fair
value for each bond as the present value of its expected cash flows using a
discount rate for comparable tax-exempt investments. This process is based upon
projections of future economic events affecting the real estate collateralizing
the bonds, such as property occupancy rates, rental rates, operating cost
inflation and market capitalization rates, and upon determination of an
appropriate market rate of interest, all of which are based on good faith
estimates and assumptions developed by the Partnership's management. Changes in
market conditions and circumstances may occur which would cause these estimates
and assumptions to change, therefore, actual results may vary from the estimates
and the variance may be material.
Effective January 1, 1997, forbearance agreements with respect to the
Suntree and Players Club FMBs were modified and extended due to a continuing
weak rental market and to ensure real estate tax payments and capital
improvements are made. Pursuant to the modification, the minimum pay rate for
Suntree was reduced to 6.5% and 7.5% for the periods January 1, 1997 through
June 30, 1997 and July 1, 1997 through December 31, 1997, respectively.
Thereafter, the stated rate is to be reinstated. The minimum pay rate for
Players Club was reduced to 6.5% and 6.25% for the periods January 1, 1997
through January 31, 1997 and February 1, 1997 through December 31, 1997,
respectively. Thereafter, it is expected that the stated rate of 8% will be
reinstated. Due to continuing weak market conditions and a change in property
management, effective with the July payment, the forbearance agreement with
Suntree was further modified extending the minimum pay rate of 6.5% through
December 31, 1997.
6
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(unaudited)
NOTE 2 - Participating First Mortgage Bonds ("FMBs")(continued)
On May 12, 1997, the Partnership loaned the obligor of the Players Club FMB
$280,000 to cover its shortfall on its 1996 real estate tax payment and to fund
a capital improvement account. The note is self-amortizing beginning July 1,
1997 at the annual rate of 8%, is payable in 48 equal monthly installments of
$6,835.62 and matures on May 1, 2001.
Effective as of January 30, 1997, pursuant to the terms of a forbearance
agreement entered into in August 1995, the obligor of the Sunset Downs FMB
transferred the deed to the underlying property to an affiliate of the Related
General Partner, who made no equity investment in the property but assumed the
day-to-day responsibilities of operations and obligations under the FMB. With
respect to the Sunset Downs FMB, the Partnership paid certain insurance premiums
on January 31, 1997 in the amount of approximately $92,000. This loan was
recorded in operating income as a reduction of interest income from
participating first mortgage bonds because the Sunset Downs FMB is paying
interest on a cash flow basis.
A forbearance agreement with the owner of the Cedar Pointe property was
executed on February 1, 1997, which provided for a minimum pay rate of 7% per
annum effective September 16, 1996. Pursuant to the terms of the forbearance
agreement, the FMB was formally and permanently modified to provide for a new
base interest rate of 7% and a contingent interest rate of up to 6% payable from
25% of cash flow or sale or refinancing proceeds. In addition, the FMB
modification calls for the discharge of any accrued and unpaid primary
contingent interest, primary deferred interest, supplemental contingent
interest, supplemental deferred interest and construction period deferred and
contingent interest through September 15, 1996, whether payable before, on, or
after September 15, 1996. In addition, the maturity of the FMB was extended to
2017 and the mandatory redemption call date extended from 1999 to 2006.
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 $777,000 and $616,000 for the six months ended June 30, 1997 and
1996, respectively.
The cost basis of the FMBs at June 30, 1997 and December 31, 1996 was
$154,252,255 and $154,239,028, respectively. The net unrealized loss on FMBs
consists of gross unrealized gains and losses of $951,666 and $7,067,268,
respectively, at both June 30, 1997 and December 31, 1996.
7
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(unaudited)
NOTE 2 - Participating First Mortgage Bonds ("FMBs") (continued)
Descriptions of the FMBs owned by the Partnership at June 30, 1997 are
as follows:
<TABLE>
<CAPTION>
Annualized
Interest Rate
Paid for the
six months Minimum Carrying
ended Pay Rate at Stated Amount at
June 30, June Interest Maturity June
Property Location 1997* 30, 1997* Rate* Call Date Date Face Amount 30, 1997(G)
- - --------------- ---------------- ------------- ----------- -------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bay Club Mt. Pleasant, SC 7.82%(D) 8.25%(D) 8.25% Sept.2000 Sept.2006 $6,400,000 $6,147,815
Loveridge Contra Costa, CA 5.43 (B) 8.00 Nov. 1998 Nov. 2006 8,550,000 6,826,198
The Lakes Kansas City, MO 5.99(H) 4.87 4.87 Dec. 2006 Dec. 2006 13,650,000 10,101,816
Crowne Pointe Olympia, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,075,000 5,322,225
Orchard Hills Tacoma, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,650,000 5,842,439
Highland Ridge St. Paul, MN 7.25 7.25(F) 8.00 Feb. 1999 Feb. 2007 15,000,000 12,971,183
Newport Village Tacoma, WA 8.36(C) 8.00 8.00 Jan. 1999 Jan. 2007 13,000,000 12,843,816
Sunset Downs Lancaster, CA 4.50 (B) 8.00 May 1999 May 2007 15,000,000 11,306,665
Willow Creek Ames, IA 8.00 8.00 8.00 Oct. 1999 Oct. 2006 6,100,000 6,019,067
Cedar Pointe Nashville, TN 7.00 7.00 7.00 Apr. 2006 Apr. 2015 9,500,000 8,423,412
Shannon Lake Atlanta, GA 6.00 6.00(F) 8.00 Jun. 1999 Jun. 2007 12,000,000 10,920,358
Bristol Village Bloomington, MN 8.88(C)(E) 8.00 8.00 Jun. 1999 Jun. 2005 17,000,000 17,254,892
Suntree Ft. Myers, FL 6.71 6.50(F) 8.00 Jul. 1999 Jul. 2007 7,500,000 7,387,848
River Run Miami, FL 10.03(E) 8.00 8.00 Aug. 1999 Aug. 2007 7,200,000 7,457,110
Pelican Cove St. Louis, MO 7.50 (B) 8.00 Feb. 1999 Feb. 2007 18,000,000 16,907,362
Players Club (A) Ft. Myers, FL 6.37 6.25(F) 8.00 Aug. 1999 Aug. 2007 2,500,000 2,404,447
------------ ------------
$162,125,000 $148,136,653
============ ============
</TABLE>
*The annualized interest rate paid represents the interest recorded by the
Partnership while the stated interest rate represents the coupon rate of the FMB
and the minimum pay rate represents the minimum rate payable pursuant to the
applicable forbearance agreements, if any.
(A) Summit Tax Exempt L.P. III, of which the general partners are either the
same or affiliates of the General Partners of the Partnership, acquired the
other $7,200,000 of the Players Club FMB.
(B) Pay rate is based on net cash flow generated by operations of the
underlying property.
(C) Includes receipt of deferred base interest related to prior periods.
(D) The minimum pay rate on the FMB increased 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.
(E) Includes receipt of primary contingent interest related to prior periods.
(F) The minimum pay rate on the FMB is scheduled to increase to the stated
interest rate over the remaining term of the FMB.
(G) The FMBs are carried at their estimated fair value at June 30, 1997.
(H) Includes receipt of primary and supplemental contingent interest.
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(unaudited)
NOTE 3 - Related Parties
Prudential-Bache Properties, Inc. ("PBP") and the Related General Partner
(collectively, the "General Partners") and their affiliates perform services for
the Partnership which include, but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; asset management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Agreement of Limited Partnership (the "Partnership Agreement"). The costs
and expenses were:
------------------- -------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
PBP and affiliates:
Management fee $101,328 $101,328 $202,656 $202,656
General and administrative 17,276 22,506 34,722 33,678
-------- -------- -------- --------
118,604 123,834 237,378 236,334
-------- -------- -------- --------
Related General Partner
and affiliates:
Management fee 101,328 101,328 202,656 202,656
Loan servicing fees 101,051 100,775 200,991 201,549
General and administrative 19,000 4,170 31,309 28,170
-------- -------- -------- --------
221,379 206,273 434,956 432,375
-------- -------- -------- --------
$339,983 $330,107 $672,334 $668,709
-------- -------- -------- --------
An affiliate of the Related General Partner receives loan servicing fees
(see above) in an amount of .25% per annum of the principal amount outstanding
on FMBs serviced by the affiliate.
The General Partners are paid, in the aggregate, an annual management fee
(see above) equal to .5% of the original amount invested in FMBs.
During January and February of 1996, a division of Prudential Securities
Incorporated ("PSI"), an affiliate of PBP, was responsible for the purchase,
sale and safekeeping of the Partnership's temporary investments. This account
was maintained in accordance with the Partnership Agreement.
PSI owns 62,015 BUC$ at June 30, 1997.
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.
As of June 30, 1997, the original owners of the underlying properties and
obligors of the Pelican Cove, Loveridge and Sunset Downs FMBs have been replaced
with affiliates of the Related General Partner who have not made equity
investments. These entities have assumed the day-to-day responsibilities and
obligations of the underlying properties. Buyers are being sought who would make
equity investments in the underlying properties and assume the nonrecourse
obligations for each of the FMBs.
9
<PAGE>
SUMMIT TAX EXEMPT L.P. II
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(unaudited)
NOTE 4 - Contingencies
Previous quarterly and annual reports by the Partnership have disclosed the
commencement and status of the putative class actions captioned Kinnes, et al.
v. Prudential Securities Group, Inc., et al., CV-93-654 (D.Az.), Connelly, et.
al v. Prudential-Bache Securities, Inc., et al. 93 Civ. 713 (D. Az.), and Levine
v. Prudential-Bache Properties, Inc., et. al. 92 Civ. 52 (N.D., Ill.). These
putative class actions were transferred along with certain other cases, by the
Judicial Panel on Multidistrict Panel to a single judge of the United States
District Court for the Southern District Court of New York (the "Court") for
consolidated and coordinated pre-trial proceedings under the caption In re
Prudential Securities Incorporated Limited Partnerships Litigation, MDL Docket
No. 1005 (the "Class Action"). As previously disclosed in the last quarterly
report, the Related General Partner and certain of its affiliates entered in
December 1996, into a stipulation of settlement with counsel for plaintiffs to
settle the Class Action against the Related General Partner and certain of its
affiliates (the "Related Settlement").
On June 11, 1997, the Court issued orders that, inter alia, approved the
solicitation statement describing in detail the transactions contemplated
pursuant to the proposed Related Settlement, directed that it be mailed along
with the class notice to the members of the class and rescheduled the settlement
fairness hearing to consider the final approval of the Related Settlement for
August 28, 1997. In accordance with the Court's orders, the solicitation
statement and class notice were mailed to BUC$holders of the Partnership.
There can be no assurance that the conditions to the closing of the
proposed Related Settlement and the reorganization of the Partnership (as
disclosed in previous quarterly and annual reports and in the solicitation
statement and class notice) will be satisfied nor as to the time frame as to
which the closing may occur. In the event that the Related Settlement is not
consummated, the Related General Partner believes it has meritorious defenses to
the Class Action and intends to defend this action vigorously.
NOTE 5 - Subsequent Event
In August 1997, distributions of approximately $2,379,000 and $49,000 were
paid to the BUC$holders and General Partners, respectively, for the quarter
ended June 30, 1997.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
Summit Tax Exempt L.P. II (the "Partnership") has invested in sixteen
tax-exempt participating first mortgage bonds ("FMBs") issued by various state
or local governments or their agencies or authorities. The FMBs are secured by
participating first mortgage loans on multi-family residential apartment
projects.
At the beginning of the year, the Partnership had cash and temporary
investments of $3,849,000. After payment of distributions of approximately
$4,856,000, loans made to properties of approximately $280,000, principal
payments received from loans made to properties of approximately $64,000 and
receipt of the net cash flow from operations of approximately $5,542,000, the
Partnership had approximately $4,319,000 in cash and temporary investments at
June 30, 1997. The second quarter distribution of $2,379,000 ($.26 per BUC) was
paid to BUC$holders in August 1997 from cash flow from operations.
Effective January 1, 1997, forbearance agreements with respect to the
Suntree and Players Club FMBs were modified and extended due to a continuing
weak rental market and to ensure real estate tax payments and capital
improvements are made. Pursuant to the modification, the minimum pay rate for
Suntree was reduced to 6.5% and 7.5% for the periods January 1, 1997 through
June 30, 1997 and July 1, 1997 through December 31, 1997, respectively.
Thereafter, the stated rate is to be reinstated. The minimum pay rate for
Players Club was reduced to 6.5% and 6.25% for the periods January 1, 1997
through January 31, 1997 and February 1, 1997 through December 31, 1997,
respectively. Thereafter, it is expected that the stated rate of 8% will be
reinstated. Due to continuing weak market conditions and a change in property
management, effective with the July payment, the forbearance agreement with
Suntree was further modified extending the minimum pay rate of 6.5% through
December 31, 1997.
On May 12, 1997, the Partnership loaned the obligor of the Players Club FMB
$280,000 to cover its shortfall on its 1996 real estate tax payment and to fund
a capital improvement account. The note is self-amortizing beginning July 1,
1997 at the annual rate of 8%, is payable in 48 equal monthly installments of
$6,835.62 and matures on May 1, 2001.
Effective as of January 30, 1997, pursuant to the terms of a forbearance
agreement entered into in August 1995, the obligor of the Sunset Downs FMB
transferred the deed to the underlying property to an affiliate of the Related
General Partner, who made no equity investment in the property but assumed the
day-to-day responsibilities of operations and obligations under the FMB. With
respect to the Sunset Downs FMB, the Partnership paid certain insurance premiums
on January 31, 1997 in the amount of approximately $92,000. This loan was
recorded in operating income as a reduction of interest income from
participating first mortgage bonds because the Sunset Downs FMB is paying
interest on a cash flow basis.
A forbearance agreement with the owner of the Cedar Pointe property was
executed on February 1, 1997, which provided for a minimum pay rate of 7% per
annum effective September 16, 1996. Pursuant to the terms of the forbearance
agreement, the FMB was formally and permanently modified to provide for a new
base interest rate of 7% and a contingent interest rate of up to 6% payable from
25% of cash flow or sale or refinancing proceeds. In addition, the FMB
modification calls for the discharge of any accrued and unpaid primary
contingent interest, primary deferred interest, supplemental contingent
interest, supplemental deferred interest and construction period deferred and
contingent interest through September 15, 1996, whether payable before, on, or
after September 15, 1996. In addition, the maturity of the FMB was extended to
2017 and the mandatory redemption call date extended from 1999 to 2006.
11
<PAGE>
The Partnership has entered into forbearance agreements on several FMBs and
may be required to extend these agreements or enter into new agreements in the
future. Such agreements may adversely impact liquidity; however interest
payments from FMBs are anticipated to provide sufficient liquidity to fund in
future years the Partnership's operating expenditures and distributions.
For a discussion of the proposed settlement of the Class Action relating to
the Partnership, see Note 4 to the financial statements.
Management is not aware of any trends or events, commitments or
uncertainties, which have not otherwise been disclosed that will or are likely
to impact liquidity in a material way. The Partnership's investments in FMBs are
secured by a Partnership interest in properties which are diversified by
location so that if one area of the country is experiencing downturns in the
economy, the remaining properties may be experiencing upswings. However, the
geographic diversification of the portfolio may not protect against a general
downturn in the national economy.
Results of Operations
Net income increased approximately $1,390,000 and $1,226,000, respectively,
for the three and six months ended June 30, 1997 as compared to 1996 primarily
due to a loss on impairment of assets in 1996 and for the reasons discussed
below.
Interest income from FMBs decreased by approximately $147,000 and $310,000,
respectively, for the three and six months ended June 30, 1997 as compared to
1996 primarily due to a reduction in the income recorded from the Highland Ridge
FMB as a result of a forbearance agreement for which a retroactive adjustment to
October 1995 was made in the fourth quarter of 1996, a reduction in the income
recorded from the Cedar Pointe FMB as a result of a forbearance agreement
effective September 16, 1996, a decrease in contingent interest received by
River Run in the second quarter of 1997, a decrease in deferred base interest
received by Bristol Village in 1997 and a decrease due to an insurance loan made
to the owner of the underlying property of the Sunset Downs FMB in the first
quarter of 1997 which was recorded as a reduction of income.
Interest income from temporary investments increased by approximately
$7,000 and $9,000, respectively, for the three and six months ended June 30,
1997 as compared to 1996 primarily due to higher interest rates and invested
cash balances in 1997.
Interest income from promissory notes increased by approximately $6,000 and
$9,000, respectively, for the three and six months ended June 30, 1997 as
compared to 1996 primarily due to the $300,000 increase in the Shannon Lake loan
in July 1996 and the $280,000 Players Club loan on May 12, 1997.
General and administrative expenses decreased by approximately $24,000 for
the three months ended June 30, 1997 as compared to 1996 primarily due to
non-recurring legal expenses incurred during the second quarter of 1996.
A $1,500,000 loss on impairment of assets was recorded during the second
quarter of 1996 to recognize other-than-temporary impairment of one FMB based
upon continuing operating difficulties being experienced at the property
securitizing the FMB.
General
The determination as to whether it is in the best interest of the
Partnership to enter into forbearance agreements on the FMBs or, alternatively,
to pursue its remedies under the loan
12
<PAGE>
documents, including foreclosure, is based upon several factors including, but
not limited to, property performance, owner cooperation and projected legal
costs.
Certain property owners have, at times, supplemented the cash flow
generated by the properties to meet the required FMB interest payments. There
can be no assurance that in the future any property owner will elect to
supplement property cash flow to satisfy bond interest requirements, if
necessary. No property owner made supplementary payments during the six months
ended June 30, 1997 and 1996.
Property Information
The following table lists the FMBs the Partnership owns together with
occupancy rates of the underlying properties as of June 30, 1997:
<TABLE>
<CAPTION>
Annualized
Interest Minimum
Rate Paid Annual
for the six Pay Rate
Stated months ended at
Face Amount Interes June June
Property Location of FMB Occupancy Rate* 30, 1997* 30, 1997*
- - -------------- ---------------- -------------- --------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Bay Club Mt. Pleasant, SC $ 6,400,000 93.7% 8.25% 7.82%(D) 8.25%(D)
Loveridge Contra Costa, CA 8,550,000 98.0 8.00 5.43 (B)
The Lakes Kansas City, MO 13,650,000 94.4 4.87 5.99(G) 4.87
Crowne Pointe Olympia, WA 5,075,000 81.4 8.00 8.00 8.00
Orchard Hills Tacoma, WA 5,650,000 95.4 8.00 8.00 8.00
Highland Ridge St. Paul, MN 15,000,000 97.7 8.00 7.25 7.25 (F)
Newport Village Tacoma, WA 13,000,000 94.9 8.00 8.36(C) 8.00
Sunset Downs Lancaster, CA 15,000,000 95.8 8.00 4.50 (B)
Willow Creek Ames, IA 6,100,000 100.0 8.00 8.00 8.00
Cedar Pointe Nashville, TN 9,500,000 89.5 7.00 7.00 7.00
Shannon Lake Atlanta, GA 12,000,000 90.1 8.00 6.00 6.00 (F)
Bristol Village Bloomington, MN 17,000,000 99.6 8.00 8.88(C)(E) 8.00
Suntree Ft. Myers, FL 7,500,000 88.1 8.00 6.71 6.50 (F)
River Run Miami, FL 7,200,000 95.0 8.00 10.03(E) 8.00
Pelican Cove St. Louis, MO 18,000,000 95.5 8.00 7.50 (B)
Players Club(A) Ft. Myers, FL 2,500,000 77.7 8.00 6.37 6.25 (F)
-------------
$ 162,125,000
=============
</TABLE>
*The annualized interest rate paid represents the interest recorded by the
Partnership while the stated interest rate represents the coupon rate of the FMB
and the minimum pay rate represents the minimum rate payable pursuant to the
applicable forbearance agreements, if any.
(A) Summit Tax Exempt L.P. III, of which the general partners are either the
same or affiliates of the General Partners of the Partnership, acquired the
other $7,200,000 of the Players Club FMB.
(B) Pay rate is based on the net cash flow generated by operations of the
underlying property.
(C) Includes receipt of deferred base interest related to prior periods.
(D) The minimum pay rate on the FMB increased in increments from 6.0% in 1990
to 8.25% in 1997. The actual pay rate is adjusted as of the property's
fiscal year-end based on audited financial statements to no less than the
minimum pay rate.
(E) Includes receipt of primary contingent interest related to prior periods.
(F) The minimum pay rate on the FMB is scheduled to increase to the stated
interest rate over the remaining term of the FMB.
(G) Includes receipt of primary and supplemental contingent interest.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Incorporated by reference to Note 4 to the financial statements filed
herewith in Item 1 of Part 1 of the Registrant's Quarterly Report.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information
Thomas F. Lynch, III ceased to serve as President, Chief Executive Officer,
Chairman of the Board of Directors and Director of Prudential-Bache Properties,
Inc. effective May 2, 1997. Effective May 2, 1997, Brian J. Martin was elected
President, Chief Executive Officer, Chairman of the Board of Directors and
Director of Prudential-Bache Properties, Inc.
Solicitation information was mailed to BUC$holders in connection with the
proposed Related Settlement (see Note 4 to the financial statements filed
herewith in Item 1 of Part I of the Registrant's Quarterly Report).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
4(a) Partnership Agreement, incorporated by reference to Exhibit A to
the Prospectus of Registrant, dated July 7, 1986, filed pursuant to Rule
424(b) under the Securities Act of 1933, File No. 33-5213.
4(b) Certificate of Limited Partnership, incorporated by reference to
Exhibit 4 to the Amendment No. 1 to Registration Statement on Form S-11,
File No. 33-5213.
10(ao) Amended Forbearance Agreement for the Suntree First Mortgage
Bond dated December 1, 1996 (incorporated by reference to Exhibit 10(ao) in
the Registrant's Quarterly Report on Form 10-Q dated March 31, 1997).
10(ap) Amended Forbearance Agreement for the Players Club First
Mortgage Bond dated December 1, 1996 (incorporated by reference to Exhibit
10(ap) in the Registrant's Quarterly Report on Form 10-Q dated March 31,
1997).
10(aq) Amended Forbearance Agreement for the Suntree First Mortgage
Bond dated July 1, 1997 (filed herewith).
10(ar) Amended First Mortgage Bond dated April 1, 1997, with respect
to the Cedar Pointe project, in the principal amount of $9,500,000 (filed
herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SUMMIT TAX EXEMPT L.P. II
By: Related Tax Exempt Associates II, Inc.
A Delaware corporation, General Partner
Date: August 13, 1997 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Vice President
(Principal Financial Officer)
Date: August 13, 1997 By: /s/ Richard A. Palermo
----------------------
Richard A. Palermo
Treasurer
(Principal Accounting Officer)
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
Date: August 13, 1997 By: /s/ Eugene D. Burak
-------------------
Eugene D. Burak
Vice President
[LETTERHEAD OF SUMMIT TAX EXEMPT L.P. II]
July 1, 1997
Suntree at Fort Myers, Ltd.
c/o H/R Florida Associates, L.P.
625 Madison Avenue
New York, NY 10022
Gentlemen
We entered into a Letter Agreement dated as of December 1, 1996 (the "1996
Letter Agreement"), a copy of which is attached hereto and made a part hereof.
Confirming our recent discussions, this will confirm our agreement to amend
paragraph 1 of the 1996 Letter Agreement by deleting the Minimum Pay Rate of
"7.5% per annum" applicable to the Time Period 07/01/97-12/31/97, and by
substituting a Minimum Pay Rate of "6.5% per annum" in lieu thereof.
Please return five (5) copies of this letter executed by you in the space
provided below, at which time this letter shall constitute a binding amendment
to the 1996 Letter Agreement.
Very truly yours,
SUMMIT TAX EXEMPT L.P. II
By: Related Tax Exempt Associates II, Inc.,
a general partner
By: /s/ Alan Hirmes
-------------------------------
Accepted and Agreed to as of the
day of July, 1997.
SUNTREE AT FORT MYERS, LTD.
A California limited partnership
By: H/R Florida Associates, L.P.
a Delaware limited partnership
a general partner
By: RELATED ADVANTAGED RESIDENTIAL ASSOCIATES, INC.,
a Delaware corporation,
a general partner
By: /s/ Max Schlopy, V.P.
----------------------------------------
625 MADISON AVENUE NEW YORK. N.Y. 10022 212-421-3333
SPONSORED BY AFFILIATES OF THE RELATED COMPANIES, INC. AND PRUDENTIAL-BACHE
SECURITIES. INC.
UNITED STATES OF AMERICA
STATE OF TENNESSEE
The Industrial Development Board of the Metropolitan Government
of Nashville and Davidson County
Multifamily Housing Revenue Refunding Bond
(Cedar Pointe Project)
Series 1987
Number: R-1
Dated Date: April 22, 1987
Maturity Date: April 1, 2017
Registered Owner: Summit Tax Exempt L.P. II
Principal Amount: $9,500,000.00
The Industrial Development Board of the Metropolitan Government of
Nashville and Davidson County (the "Issuer"), a public, nonprofit corporation
organized and existing under the laws of the State of Tennessee (the "State"),
created and existing under and by virtue of the laws of the State, hereby
acknowledges itself indebted and for value received promises to pay to the
registered owner hereof stated above, or registered assigns, at the maturity
date stated above, or earlier upon redemption or acceleration, but only from the
sources and as hereinafter provided, upon presentation and surrender of this
Bond at the principal office of First Tennessee Bank National Association, as
successor in interest to First American National Bank of Nashville in Nashville,
Tennessee, or its successor as Trustee (the "Trustee"), under the Indenture
(described below), the principal amount stated above, and to pay interest on
said principal amount, from and including the dated date hereof until the
principal amount shall have been paid in accordance with the terms of this Bond
and the Indenture, as and when set forth below, but only from the sources and as
hereinafter provided, by wire transfer if there be one Owner of all of the Bonds
or otherwise by check or draft mailed to the record Owners of Bonds as the same
appear upon the books of registry to be maintained by the Trustee, as registrar.
This Bond has been issued, sold and delivered in the State of Tennessee and
pursuant to and in full compliance with the Constitution and laws of said State,
particularly Chapter 53 of Title 7, Section 7-53-101 to 7-53-311, inclusive, of
Tennessee Code Annotated, as supplemented and amended. Section 67-5-205(3) of
Tennessee Code Annotated, as supplemented and amended, provides that whenever
any incorporated town or city or any agency thereof shall issue any bonds or
notes for any public purpose, without regard to when authorized, neither the
principal nor the interest of said bonds or notes shall be taxed by the state or
by any county or municipality in the state, and it shall be so stated on the
face of said bonds or notes when issued. See also; Tennessee Code Annotated,
Section 7-53-305. Interest on this Bond, however, is subject to the corporate
excise tax under Section 67-4-801, et seq., Tennessee Code Annotated, as
amended.
<PAGE>
This Bond is one of a series of bonds (the "Bonds") issued pursuant to the
Trust Indenture dated as of April 1, 1987, between the Issuer and First American
National Bank of Nashville, as Trustee, as amended by a First Supplemental
Indenture dated as of April 1, 1997 (as further amended and supplemented from
time to time, the "Indenture") between the Issuer and the Trustee, and Chapter
53, Title 7, Tennessee Code Annotated, as amended and supplemented from time to
time (the "Act"). Reference is made to the Indenture and the Act for a full
statement of their respective terms. Capitalized terms used herein and not
otherwise defined herein or in the Definitional Appendix attached hereto have
the respective meanings accorded such terms in the Indenture, which are hereby
incorporated herein by reference. The Bonds issued under the Indenture are
expressly limited to $9,500,000 principal amount at any time Outstanding and are
all of like tenor, except as to numbers and denominations, and are issued for
the purpose of refunding the Series 1985 Bonds (as defined in the Indenture),
which were issued for the purpose of providing construction and permanent
financing for qualified multifamily rental housing units in the State and of
paying certain expenses incidental thereto.
THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE ISSUER. NEITHER THE STATE
OF TENNESSEE NOR ANY POLITICAL SUBDIVISION THEREOF SHALL BE LIABLE ON THE BONDS,
AND THE BONDS DO NOT AND SHALL NOT CONSTITUTE A DEBT OF THE STATE OF TENNESSEE.
THE ISSUER HAS NO TAXING POWER.
Interest on the Bonds.
(a) General. The Bonds shall bear interest as provided below.
(b) Base Interest. Through the Conversion Date, the Bonds shall bear
interest calculated and payable as follows (which interest is referred to herein
as "Base Interest"):
(1) Reserved.
(2) Subject to subsection (b)(3) below, during the Second Period, the
Bonds shall bear Base Interest at a rate equal to 9.0% per annum for the
first 549 days; 8.0% per annum from the 550th day through January 15, 1997;
and 7.0% thereafter, in each case payable on each payment date specified in
paragraph (e)(1) below.
(3) Base Interest shall in no event exceed eleven and three-quarters
percent (11 3/4%) per annum, calculated on the basis of a 365-day year,
which is a rate of interest permissible under Section 47-14-106 of the
Tennessee Code Annotated on the issuance date of the Bonds.
Subject to the foregoing, Base Interest shall be calculated on the basis of a
year of 360 days, actual days elapsed.
2
<PAGE>
(c) Contingent Interest. After the Initial Period and through the
Conversion Date, the Bonds also shall bear interest calculated and payable as
follows:
(1) Reserved.
(2) During each year, or part thereof, of the Second Period, the Bonds
shall bear interest at an annual rate equal to the Supplemental Contingent
Interest Rate payable on the basis and to the extent of 25% of Net Cash
Flow for each such year, or part thereof, or, to the extent not fully paid
because 25% of Net Cash Flow is insufficient, on the basis and to the
extent of 25% of Net Cash Flow thereafter during the Second Period and
25% of Net Sale or Refinancing Proceeds, all as provided below.
Contingent Interest equal to Maximum Supplemental Contingent Interest shall
be payable on the Bonds on each payment date specified in paragraph (e)(2) below
on the basis and to the extent of 25% of Net Cash Flow, measured for purposes of
such payment and subject to the adjustments and reconciliation as specified in
paragraph (f) below. If 25% of Net Cash Flow is insufficient to pay the Maximum
Supplemental Contingent Interest payable on any payment date specified in
paragraph (e)(2) below, then there shall be payable the maximum amount possible
on the basis and to the extent of 25% of Net Cash Flow (which amount is referred
to as the "Supplemental Contingent Interest"). The difference between the
Maximum Supplemental Contingent Interest and the Supplemental Contingent
Interest shall be deferred without interest (such deference is referred to
collectively with all such amounts previously deferred and unpaid as
"Supplemental Deferred Interest") and shall thereafter be payable on the
earliest possible payment dates specified in paragraph (e)(2) below on the basis
and to the extent of 25% of Net Cash Flow, measured for purposes of such payment
and subject to the adjustments and reconciliation as specified in paragraph (f)
below. Supplemental Deferred interest shall be paid on the basis and to the
extent of 25% of Net Cash Flow before any Supplemental Contingent Interest is
paid on such basis.
To the extent that Maximum Supplemental Contingent Interest and all
Supplemental Deferred Interest are not fully paid on the basis and to the extent
of 25% of Net Cash Flow on payment dates specified in paragraph (e)(2) below,
they shall be payable on the basis and to the extent of 25% of Net Sale or
Refinancing Proceeds on the earliest possible payment dates specified in
paragraph (e)(3) below, including a current payment date for Contingent Interest
and Deferred Interest payable on the basis and to the extent of Net Cash Flow
specified in paragraph (e)(2)(iii) below.
(d) Reserved.
(e) Payment Dates for Interest. The interest payable on the Bonds as
provided above shall be payable on the following dates:
3
<PAGE>
(1) Base Interest shall be payable (i) on each Interest Payment Date
for Base Interest, (ii) on each redemption date before the Conversion Date
(but only with respect to the Bonds redeemed) and (iii) on the Conversion
Date.
(2) Contingent Interest and Deferred Interest that is payable on the
basis of Net Cash Flow, shall be payable (i) on each Interest Payment Date
for Contingent Interest and Deferred Interest to and including the
Conversion Date, (ii) on each redemption date during the Second Period (but
only with respect to the Bonds redeemed), (iii) on each date on which
Contingent Interest and Deferred Interest is payable from Net Sale or
Refinancing Proceeds (as provided in paragraph (e)(3) below), and (iv) on
the Conversion Date.
(3) Contingent Interest and Deferred Interest that is payable on the
basis of Net Sale or Refinancing Proceeds shall be payable on the next
Interest Payment Date for any interest succeeding by at least thirty (30)
days the date of the Event of Sale or Refinancing relating to the Sale of
the Project or Refinancing of the Project, except in the case of (x) a
Refinancing of the Project described in clause (i) or (iv) of the
definition thereof, in which case it shall be payable on the redemption
date or payment date, as the case may be, (y) a Sale of the Project
described in clause (i) of the definition thereof resulting in a call of
the Bonds for redemption pursuant to Section 4.01 (f) of the Indenture, in
which case it shall be payable on the redemption date or (z) a Refinancing
of the Project described in clause (ii) of the definition thereof, in which
case it shall be payable on the Initial Remarketing Date.
(f) Calculation of Net Cash Flow.
(1)(i) No later than thirty (30) days before each payment date for
Contingent Interest and Deferred Interest specified in paragraph (e)(2)
above (or such lesser number of days as shall be the maximum number of days
possible if the payment date was not known until less than forty (40) days
before the payment date), the Developer shall calculate Net Cash Flow for
the three-month period ending on the last day of the third preceding month
before such payment date and shall provide the Trustee and the Owners (if
fewer than three) (i) the analysis of such Net Cash Flow, (ii) unaudited
financial statements of the Developer for such three-month period and (iii)
a calculation of the amount of Contingent Interest and Deferred Interest
then payable.
(ii) Notwithstanding the foregoing in clause (i), (A) except as may
result from adjustments and reconciliation provided below in this paragraph
(f), the period of time for which Net Cash Flow is measured for purposes of
a payment date for Contingent Interest and Deferred Interest on any Bonds
specified in paragraph (e)(2) of Section 3.06 hereof shall not include any
time for which Net Cash Flow has been measured for purposes of a previous
payment date for Contingent Interest and Deferred Interest on such Bonds
specified in paragraph (e)(2) of section 3.06 hereof, and (B) the
calculation of Net Cash Flow
4
<PAGE>
and the amount of Contingent Interest and Deferred Interest payable
therefrom on the Conversion Date shall be reconciled to give effect to the
actual amount of Net Cash Flow for the current calendar year (and the
preceding calendar year if the Conversion Date falls before delivery of the
audit referred to in paragraph (f)(2) hereof in the current calendar year)
up to but not including the Conversion Date (such actual amount of Net Cash
Flow being measured by the actual amount known as of the most recent
possible date and an amount reasonably estimated to be earned between such
date and the Conversion Date) and all Contingent Interest and Deferred
Interest paid during the current calendar year (and the preceding calendar
year if the Conversion Date falls before delivery of the audit referred to
in paragraph (f)(2) hereof in the current calendar year) in the manner
described in paragraph (f)(3) below, except that any underpayments or
overpayments of Contingent Interest and Deferred Interest shall be paid or
refunded, as the ease may be, on the Conversion Date.
(iii) The amount of Net Cash Flow reflected in the analysis described
above, as adjusted in the ease of the analysis in connection with the
Conversion Date, shall provide the basis for the calculation of Contingent
Interest and Deferred Interest payable on the basis of Net Cash Flow on
each payment date therefor specified in paragraph (e)(2) hereof, except as
provided below. The Trustee, at the request of the Issuer and the Owners of
a majority in principal amount of Bonds Outstanding, or the said Owners
themselves, may request further substantiation of the Developer's
calculation of Net Cash Flow and may verify and correct as necessary the
calculations thereof. If the Trustee or the Owners of a majority in
principal amount of the Bonds Outstanding do so reasonably modify such
calculation, the Trustee or such Owners shall notify the Developer of such
modified calculation no later than ten (10) Business Days before such
payment date (or such lesser number of days as shall be the maximum number
of days practicable if the Trustee or such Owners received the calculation
of Net Cash Flow' less than thirty (30) days before the payment date) and
such modified calculation shall be the basis for the calculation of
Contingent Interest and Deferred Interest payable on the basis of Net Cash
Flow on the payment date. Except to the extent provided in this paragraph
(f)(l) with respect to the Conversion Date, the analysis and payment on the
basis of Net Cash Flow described in this paragraph (f)(1) is intended to
provide a preliminary payment of Contingent Interest and Deferred Interest
on the basis of Net Cash Flow prior and subject to the adjustment and
reconciliation process described in paragraphs (f)(2) and (f)(3) hereof.
(2) No later than February 28 of each calendar year (up to and, unless
the Conversion Date falls before delivery of the audit, including the
calendar year in which the Conversion Date occurs) the Developer shall
provide to the Issuer, the Trustee and the Owners of the Bonds if fewer
than three) an audit of the operations of the Project for the preceding
calendar year prepared and certified by an Accountant acceptable to the
Trustee and the Owners if fewer than three) in accordance with generally
accepted auditing standards. The audit
5
<PAGE>
is required to state the actual amount of Net Cash Flow for that calendar
year and shall calculate all Contingent Interest and Deferred Interest paid
and payable from Net Cash Flow during such calendar year pursuant hereto.
(3) The audit prepared as described in paragraph (f)(2) shall state
the amount of Contingent Interest and Deferred Interest payable and paid
during the subject calendar year. If the amounts of Contingent Interest and
Deferred Interest payable on the basis of Net Cash Flow (measured on the
basis of actual Net Cash Flow for such calendar year according to the
audit) exceeded the amount paid, then there shall be payable to the Owners
of the Bonds any such payable and unpaid amounts on the payment date for
Contingent Interest and Deferred Interest specified in paragraph (e)(2)
below immediately following the receipt by the Trustee and the said Owners
of the audit. If the amount of Contingent Interest and Deferred Interest
payable on the basis of Net Cash Flow (measured on the basis of actual Net
Cash Flow for such calendar year according to the audit) is less than the
amount actually paid, such overpaid amount shall be credited against any
other interest payments (whether Base Interest or Contingent Interest or
Deferred Interest) or other payments due from the Issuer to the Owners of
the Bonds on the Bond Payment Date (or Bond Payment Dates) immediately
following the receipt by the Trustee and the said Owners of the audit and
the Owners shall not be required to refund any such amount unless the
crediting does not exhaust the overpayment, in which case the balance of
the overpayment will be refunded by the Owners on the Conversion Date.
(g) Fair Market Value of the Project for Purposes of Determining
Refinancing Proceeds.
(1) In order to calculate the fair market value of the Project for
purposes of determining Sale or Refinancing Proceeds in the event of a
Refinancing of the Project (other than a Refinancing of the Project
described in clause (iii) of the definition thereof), the fair market value
of the Project is required to be determined as set forth below, such
determination to be completed no later than fifteen (15) days before the
date on which Contingent Interest and Deferred Interest are payable on the
basis and to the extent of Net Sale or Refinancing Proceeds or as soon
thereafter as possible (but not after the said payment date if the notice
described in the following sentence cannot be given at the time specified).
The Trustee is required to give notice to the Developer (unless it has
given the Trustee notice) and the Owners of the Bonds of the impending
Refinancing of the Project at least ninety (90) days before the expected
date of Refinancing of the Project or as much notice as is possible,
promptly upon learning of the impending Refinancing of the Project. The
Owners of all of the Bonds and the Developer may jointly determine and
agree upon the fair market value of the Project but must do so at least
sixty (60) days before the proposed date of the Refinancing of the Project;
failing such agreement the Owners of a majority in principal amount of the
Bonds shall select an independent M.A.I.
6
<PAGE>
appraiser and the Developer shall select an independent M.A.I.
appraiser. The appraisers shall jointly determine and agree upon the fair
market value of the Project. If the two appraisers are unable to agree upon
the fair market value of the Project at least thirty (30) days before the
proposed date of the Refinancing of the Project, the Owners and the
Developer shall select a third independent M.A.I. appraiser. If such Owners
and the Developer are unable to agree upon a third appraiser by such date,
the two appraisers shall select the third appraiser. If the two appraisers
are unable to agree upon the third appraiser at least twenty-five (25) days
before the proposed date of the Refinancing of the Project, such Owners or
Developer may petition any court of competent jurisdiction for the
appointment of the third independent appraiser. As early as practicable,
but prior to the expected date of the Refinancing of the Project, the third
appraiser shall select from between the two appraisals the one which the
third appraiser believes to assess more accurately the fair market value of
the Project and the appraisal so selected shall be the fair market value of
the Project, shall provide the basis for the calculation of Contingent
Interest and Deferred Interest payable on the basis of Net Sale or
Refinancing Proceeds in the event of a Refinancing of the Project (other
than a Refinancing of the Project described in clause (iii) of the
definition thereof) on each payment date therefor specified in paragraph
(e)(3) of Section 3.06 hereof and shall be binding upon the Developer and
the Owners of the Bonds. The fees and expenses of the appraiser selected by
each party shall be borne by the party selecting the appraiser and the cost
of the third appraiser shall be borne equally by the Developer and the
Owners of the Bonds.
(2) The fair market value of the Project for purposes of this
paragraph (9) shall reflect the amount each appraiser believes an informed
and willing purchaser under no compulsion to purchase the Project would pay
to an informed and willing seller under no compulsion to sell the Project,
less those costs of a sale appropriate to the marketplace within which the
Project would be sold. Such determination shall take into consideration
such factors as the appraisers may deem relevant. Except as provided below,
the fair market value of the Project set forth in an appraisal shall be
determined as of the date of such appraisal.
(3) If the Refinancing of the Project is based upon a redemption of
Bonds pursuant to Section 4.01 (d) of the Indenture, the fair market value
of the Project shall be determined as of the day before the occurrence of
any events requiring the payment of Insurance Proceeds or a Condemnation
Award, as if such events had not occurred and were not anticipated.
(h) Interest During Variable Rate Period. From and after the Initial
Remarketing Date, if all of the Bonds have been remarketed in accordance
herewith, the Bonds shall bear interest at a rate determined as follows:
(1) On a Business Day not later than six (6) Business Days prior to
the Initial Remarketing Date and each subsequent Remarketing Date, the
7
<PAGE>
Remarketing Agent, having due regard to prevailing market conditions, shall
determine the interest rate (the "Variable Rate") which, if borne by the
Remarketed Bonds on such date, would be the interest rate, but would not
exceed the interest rate, which would result in the market value of the
Remarketed Bonds on such day (as if such day were the first day of such
Remarketing Period) being 100% of the principal amount thereof (together
with interest, if any, accrued thereon). If for any reason the Variable
Rate so determined by the Remarketing Agent shall be held to be invalid or
unenforceable by a court of competent jurisdiction, the Remarketing Agent
shall determine the interest rate for such Remarketing Period, which shall
be a percentage of the 11-Bond Index (as published in The Bond Buyer; or if
such Index is not available, an index comparable to such Index, in the
judgment of the Remarketing Agent) for the most recent period for which
information is available, computed in accordance with the following table:
- - --------------------------------------------------------------------------------
If the length of the But the length of the The applicable
Remarketing Period (in Remarketing Period (in percentage of the 11-
years) is at least: years) is less than: Bond Index is:
- - --------------------------------------------------------------------------------
5 or greater (N.A) 85%
1 5 80%
- - --------------------------------------------------------------------------------
Notwithstanding the foregoing, in no event shall the Variable Rate exceed
eleven and three-quarters percent (11 3/4%) per annum, calculated on the
basis of a 365-day year (the "Cap Rate"), which is a rate of interest
permissible under Section 47-14-106 of the Tennessee Code Annotated as of
the issuance date of the Bonds. The Remarketing Agent shall promptly, upon
the determination of the Variable Rate, notify the Issuer, the Developer
and the Trustee of the Variable Rate. The determination of the Variable
Rate for a Remarketing Period shall be conclusive and binding upon the
Owners of the Bonds, the Issuer and the Developer. The Trustee shall
immediately give written notice (which may include written notice by
electronic means) to the owners of all of the Bonds of the Variable Rate
for the period between the imminent Remarketing Date and the subsequent
Remarketing Date.
(2) No more than sixty (60) days, but at least forty-five (45) days,
prior to the Initial Remarketing Date, the Developer shall notify the
Owners, the Trustee and the Remarketing Agent of the length of the proposed
Remarketing Period commencing on the Initial Remarketing Date, which shall
extend for one (1) or more years. Subsequent to the Initial Remarketing
Date, the Developer will establish subsequent Remarketing Dates as follows:
no more than sixty (60) days, but at least forty-five (45) days, prior to
each Remarketing Date, the Developer will notify the Owners of the Bonds,
the Issuer, the Trustee and the Remarketing Agent of the proposed
subsequent Remarketing Date, which shall be one (1 ) or more years from the
next Remarketing Date. The Developer shall also specify the interest
payment dates if different than January 1 and July 1;
8
<PAGE>
provided that the interest payment dates specified may be no more frequent
than once each month.
(3) Notice of the Remarketing Date shall be given by the Trustee not
later than the twenty-fifth (25th) day preceding such Remarketing Date by
registered or certified mail to the Owners of all Outstanding Bonds and
such notice shall state that the Bonds are subject to mandatory tender on
the Remarketing Date, unless the Owner thereof waives such tender; shall
indicate the subsequent Remarketing Date, if any; and shall include a form
to indicate the election not to tender Bonds.
(4) Interest on the Bonds during the Variable Rate Period shall be
payable on each Interest Payment Date therefor and shall be calculated, to
the extent allowed by applicable law, on the basis of a year of 360 days
and the actual number of days elapsed.
Notwithstanding anything elsewhere contained in this Bond, (a) total
interest paid on this Bond, including, without limitation, Contingent Interest
and Deferred Interest, cumulative from the original date of issuance of the Bond
to the date of calculation up to and including the Conversion Date, shall not
exceed the sum of 13% per annum, simple and noncompounded for each year
(calculated on the basis of a 365-day year) from such date of issuance to the
date of calculation; and (b) if the interest rate (as the same shall be
determined for purposes of applicable usury laws) on this Bond shall at any time
be deemed to be in excess of the Cap Rate, then this Bond shall instead bear
interest (as the same shall be determined for purposes of applicable usury laws)
at the Cap Rate. Any excess payment of such interest shall be deemed to be a
credit against the unpaid principal amount of this Bond.
It is agreed that Contingent Interest and Deferred Interest shall not be
deemed to be interest, loan charges, commitment fees, or brokerage commissions
for purposes of applicable usury laws (and only for such purposes), but shall
constitute additional consideration to the holders of the Bonds pursuant to
Chapter 173 of the Public Laws of Tennessee 1981, Tennessee Code Annotated,
Sections 47-24-101 and 47-2~102. Contingent Interest and Deferred Interest are
otherwise for all purposes intended to be interest on the Bonds.
The foregoing interest provisions are a summary of those contained in the
Indenture, and reference is hereby made to the Indenture for a full statement of
their terms, which are incorporated herein by reference.
Limited Recourse. Pursuant to a Loan Agreement dated as of April 1, 1987,
and a Note dated April 22, 1987 (the "Note"), CEDAR POINTE PROPERTIES, LTD., a
Georgia limited partnership (the "Developer'), has agreed to make payments to
the Issuer in amounts equal to amounts of principal of and premium, if any, and
interest on the Bonds. THE OBLIGATIONS OF THE ISSUER ON THIS BOND ARE EXPRESSLY
LIMITED TO AND ARE PAYABLE SOLELY FROM (I) THE PAYMENTS MADE
9
<PAGE>
PURSUANT TO THE LOAN AGREEMENT AND THE NOTE BY THE DEVELOPER, AND THE SECURITY
THEREFOR PROVIDED BY THE BUILDING LOAN DEED OF TRUST AND SECURITY AGREEMENT FROM
THE DEVELOPER TO G. SCOTT THOMAS FOR THE BENEFIT OF THE ISSUER, DATED AS OF
APRIL 1, 1987, AS AMENDED (THE "MORTGAGE"), AND THE ASSIGNMENT OF LEASES, RENTS
AND OTHER INCOME FROM THE DEVELOPER TO THE ISSUER, DATED AS OF APRIL 1, 1987,
ALL OF WHICH HAVE BEEN ASSIGNED TO THE TRUSTEE PURSUANT TO AN ASSIGNMENT
AGREEMENT FROM THE ISSUER TO THE TRUSTEE, DATED AS OF APRIL 1, 1987 AND (II) ANY
ADDITIONAL SECURITY PROVIDED IN THE INDENTURE. THE OBLIGATIONS OF THE DEVELOPER
UNDER THE LOAN AGREEMENT, THE NOTE AND THE MORTGAGE ARE NON-RECOURSE TO THE
DEVELOPER, AND ARE ENFORCEABLE SOLELY AGAINST THE PROJECT, EXCEPT AS OTHERWISE
PROVIDED THEREIN.
Transfer. This Bond is transferable by the registered owner hereof in
person or by his attorney duly authorized in writing at the office of the
Trustee as registrar, but only in the manner, subject to the limitations and
upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon such transfer a new registered Bond or Bonds, of
any authorized denomination or denominations, of the same maturity, same
interest rate, and for the same aggregate principal amount will be issued to the
transferee in exchange herefor.
Prior to the Conversion Date, a Bond may only be transferred (i) to any
affiliate of the partnership, to an affiliate of one of the general partners of
the Partnership, to any entity arising out of any merger or consolidation of the
Partnership, by operation of law, or to a trustee in bankruptcy of the
Partnership; (ii) by an assignment to a bank or other financial institution
issuing a letter of credit or like instrument in connection with the Mortgage,
or (iii) to one or more Institutional Investors if, in each instance, the Issuer
and the Trustee receive from the transferee its agreement to the transfer
restrictions set forth in this paragraph in connection with subsequent transfers
of the Bond.
The Bonds are issuable as fully registered Bonds in Authorized
Denominations as provided in the Indenture.
Redemption of Bonds. The Bonds are subject to redemption by the Issuer
prior to maturity as a whole or in part at such time or times, under such
circumstances, at such redemption prices and in such manner as is set forth in
the Indenture.
Mandatory Tender of Bonds. The Bonds shall be subject to mandatory tender
to the Remarketing Agent on each Remarketing Date after the Initial Remarketing
Date for purchase by the Remarketing Agent, at a purchase price equal to the
principal amount thereof plus accrued interest to the purchase date; provided,
however, that there need not be tendered on such Remarketing Date any Bonds with
respect to which the Remarketing Agent shall have received from the Owners
thereof a written notice at least five (5) Business Days prior to the applicable
Remarketing Date expressly
10
<PAGE>
electing not to tender their Bonds for purchase. Any such election may not
relate to a portion of any Bond held by the Owner, such election may apply only
to the entire principal amount of any Bond or Bonds.
Tendered Bonds. Any Bonds that are the subject of mandatory tender for
purchase but are not the subject of elections to retain the Bonds received by
the Remarketing Agent in a timely fashion shall be conclusively deemed tendered
for purchase on the Remarketing Date. If the Owner selects a redemption date for
redemption of the Bonds in accordance with the Indenture and the Developer makes
the remarketing election permitted by the Indenture, all Bonds shall be
conclusively deemed tendered for purchase on the Initial Remarketing Date. All
Bonds that are actually tendered for purchase pursuant to the Indenture or are
deemed tendered for purchase on a Remarketing Date, including the Initial
Remarketing Date, shall constitute tendered Bonds for purposes of the Indenture;
all tendered Bonds that are not actually delivered for purchase on a Remarketing
Date, including the Initial Remarketing Date shall constitute "Undelivered
Bonds" for purposes of the Indenture. Undelivered Bonds that have been
remarketed in accordance with the Indenture shall be deemed to have been
purchased if the purchase price therefor shall have been deposited therefor and
held by the Remarketing Agent; and the parties to whom the Remarketing Agent
shall have remarketed Undelivered Bonds so remarketed shall be the owners of
such Undelivered Bonds for all purposes under the Indenture, including without
limitation the right to transfer such Bonds. Interest accruing from and after
the Remarketing Date on such Undelivered Bonds shall no longer be payable to the
former Owners thereof but shall be paid to the new registered Owners thereof.
Former Owners of Undelivered Bonds so remarketed shall not be deemed to be
Owners of Bonds under the Indenture, and such Undelivered Bonds shall not be
deemed Outstanding for purposes of the Indenture, except for purposes of payment
of the purchase price of such Undelivered Bonds upon surrender thereof to the
Remarketing Agent.
Enforcement. Only the Acting Party shall have the right to enforce the
provisions of this Bond or the Indenture or to institute any action to enforce
the covenants herein or therein, or to take any action with respect to any Event
of Default under the Indenture or to institute, appear in or defend any suit or
other proceedings with respect thereto, except as provided in the Indenture. If
an Event of Default occurs and is continuing, the principal of all Bonds then
outstanding may be declared due and payable upon the conditions and in the
manner and with the effect provided in the Indenture.
The Issuer, the Trustee, and any other person may treat the person in whose
name this Bond is registered on the books of registry as the Owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not this Bond be overdue, and no person shall be affected by notice
to the contrary.
Discharge. The Indenture prescribes the manner in which it may be
discharged and after which the Bonds shall be deemed to be paid and no longer be
secured by or
11
<PAGE>
entitled to the benefits of the Indenture, except for certain purposes,
including the purposes of registration and exchange of Bonds and of such
payment.
Modifications. Modifications or alterations of the Indenture, or of any
supplements thereto, may be made only to the extent and in the circumstances
permitted by the Indenture.
By its acceptance of this Bond, the Owner hereof agrees that it will be
bound by and accepts the provisions of the Indenture and the Loan Documents (as
defined in the Loan Agreement). This Bond shall not be valid or obligatory for
any purpose until it shall have been signed on behalf of the Issuer and such
signature attested, by the officer, and in the manner, provided in the
Indenture, and authenticated by a duly authorized officer of the Trustee, as
Authenticating Agent.
It is hereby certified and recited that all conditions, acts and things
required by the Constitution or statutes of the State or by the Act or the
Indenture to exist, to have happened or to have been performed precedent to or
in the issuance of this Bond exist, have happened and have been performed and
that the issue of the Bonds, together with all other indebtedness of the Issuer,
is within every debt and other limit prescribed by said Constitution or
statutes.
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of
the Dated Date stated above.
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE METROPOLITAN GOVERNMENT
OF NASHVILLE AND DAVIDSON COUNTY
Attest: By: /s/ William E. McDonald
-----------------------------------
Chairman
/s/ Nettie Scalf
- - --------------------------------
Assistant Secretary
<PAGE>
FORM OF CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned Indenture
and is one of the Multifamily Housing Revenue Refunding Bonds (Cedar
Pointe Project) Series 1987 of The Industrial Development Board of the
Metropolitan Government of Nashville and Davidson County.
By: /s/ ILLEGIBLE
----------------------------
Authorized Officer
Date of Authentication:
4-1-97
- - --------------------------
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________ the within Multifamily Housing Revenue Refunding
Bond (Cedar Pointe Project) Series 1987, of The Industrial Development Board of
the Metropolitan Government of Nashville and Davidson County and hereby
authorizes the transfer of this Bond on the registration books of the Trustee.
Dated: _____________________________
____________________________________
Authorized Signature
____________________________________
Name of Transferee
Signature Guaranteed by:
____________________________________
____________________________________
Name of Bank
By: ________________________________
Title: _____________________________
13
<PAGE>
DEFINITIONAL APPENDIX
"Acting Party" means the Owner of all the Outstanding Bonds if all of the
Outstanding Bonds are owned by a single Owner, or the Trustee if all of the
Outstanding Bonds are not owned by a single Owner.
"Authorized Denominations" means $5,000 or any integral multiple of $5,000,
but not in excess of the aggregate principal amount of Bonds then Outstanding.
"Cash Flow" means all cash receipts from the operations of the Project,
including investment income on any reserves held by the Project (but excluding
tenant security deposits and income thereon).
"Contingent Interest" means Supplemental Contingent Interest.
"Deferred Interest" means Supplemental Deferred Interest.
"Disposition Factor" means, with respect to a Sale of the Project, (a) in
the case of an interest in the Project, the percentage of interest in the
Project sold, transferred or otherwise disposed of, or (b) in the case of an
interest in an entity which owns an interest in the Project, the product of the
percentage of interest in such entity (the "Transferred Entity") that is being
sold, transferred or otherwise disposed of times the percentage of interest that
such entity owns in the Project. If the Transferred Entity does not own an
interest in the Project, but owns an interest in another entity which owns an
interest in the Project (the "Ownership Entity"), then for purposes of clause
(b) of this definition the Transferred Entity shall be deemed to own an interest
in the Project that is equal to the product of the percentage of interest which
the Transferred Entity owns in the Ownership Entity times the percentage of
interest which the Ownership Entity owns in the Project. If the Transferred
Entity does not own an interest directly in the Ownership Entity, but does own
an interest indirectly in the Ownership Entity through one or more other
entities, then the percentage of interest which the Transferred Entity owns in
the ownership Entity shall be the result of applying the calculation set forth
in the preceding sentence to the ownership relationships of the entities through
which the Transferred Entity owns an interest in the Ownership Entity.
"Event of Sale or Refinancing" means the event or occurrence which is or
gives rise to a Sale of the Project or Refinancing of the Project including the
last event or occurrence among a number or series of events or occurrences, if
that be the case.
"Initial Syndication" means the first transaction after the issuance of the
Bonds in which direct or indirect ownership of the Project is sold or
transferred pursuant to an integrated offering to investors of limited
partnership interests in the Developer.
"Interest Payment Date" means (i) prior to the Conversion Dale, and with
respect to the payment of Base Interest, the fifteenth day of each month,
commencing on the first such date which is at least thirty (30) days after the
date of the initial issuance and
1
<PAGE>
delivery of the Bonds, and in addition to those dates the last day of the
Initial Period; (ii) prior to the Conversion Date, and with respect to the
payment of Contingent Interest (other than Additional Contingent Interest) and
any Deferred Interest, the fifteenth of each March, June, September and
December, respectively, commencing with the first of such months to occur during
the Second Period; and (iii) after the Initial Remarketing Date, and with
respect to the payment of Variable Rate Interest, each January 1 and July 1,
unless different dates are specified by the Developer in accordance with Section
3.06(h) of the Indenture.
"Maximum Supplemental Contingent Interest" means, on any payment date for
Contingent Interest and Deferred Interest specified in paragraph (e) above, 6%
of the aggregate principal amount of the Bonds on which Contingent Interest and
Deferred Interest are then payable, times a fraction, the numerator of which is
the number of days since the last date of calculation under the Indenture during
the Second Period of Contingent Interest and Deferred Interest payable on such
Bonds (or the first date of the Second Period if there is no previous date of
such calculation) and the denominator of which is 360.
"Net Cash Flow" means Cash Flow less Operating Expenses of the Project that
are paid and the amount deposited in the Replacement Reserve Fund specified in
the Loan Agreement.
"Net Sale or Refinancing Proceeds" means the amount remaining from the Sale
or Refinancing Proceeds after deducting the Cost Basis (except in the case of a
Refinancing of the Project described in clause (iii) of the definition thereof,
in which case there shall be no deduction). The "Cost Basis" for purposes of
this definition (except as provided in the ensuing sentence) shall mean the
number equal to $9,950,000, plus any amounts theretofore or thereupon added to
the basis of the Project for federal income tax purposes (but not as an
additional amount any construction period interest, whether or not added to the
capital account) as a result of expenditures made with (x) the proceeds of a
secondary financing secured by a lien on the Project in conformity with the
Mortgage (including the Refinancing Proceeds resulting from a Refinancing of the
Project based upon such a secondary financing), or (y) additional capital
contributions to the Developer by its partners minus the principal amount of any
Bonds theretofore paid. Notwithstanding the preceding sentence, in the context
of a Sale of the Project, "Cost Basis" shall be modified by multiplying the
amount determined according to the preceding sentence by the Disposition Factor
(as a percentage) for the sale, transfer or other disposition in question.
"Operating Expenses" means the ordinary and customary costs and expenses
directly attributable to operating the Project including taxes, wages,
utilities, management and security, but not, in the case of any category of cost
and expense for which the Loan Agreement specifies limitations, any costs or
expenses in excess of such costs or limitations. Operating Expenses shall not
include any allowance for depreciation or any principal payments on the
Developer Note or any other debt obligation; Operating Expenses shall include
interest paid on the Developer Note in
2
<PAGE>
order to pay Base Interest. Operating Expenses shall not include any interest on
borrowed or unpaid funds other than interest on any secondary financing secured
by a lien on the Project in conformity with the Mortgage after excluding the
amount of such interest that accrued on the portion of such secondary financing
that was retained by the Developer and not applied as an expenditure on the
Project and included in the Developers capital base in the Project for tax
purposes or applied to the payment of Contingent Interest or Deferred Interest.
"Refinancing of the Project" means (i) any redemption of the Bonds in whole
(or the requirement that the Bonds be redeemed in whole) (including such a
redemption or requirement pursuant to a Sale of the Project described in clause
(ii) of the definition thereof, but excluding such a redemption or requirement
pursuant to a Sale of the Project described in clause (i) of the definition
thereof) on or before the Conversion Date, (ii) a remarketing of all of the
Bonds on the Initial Remarketing Date (or delivery of the required notice to the
Fiduciary by the Developer on the Initial Remarketing Date that the remarketing
of all of the Bonds will occur on the Initial Remarketing Date according to the
terms hereof), (iii) a secondary financing of the Project in which the Project
is further encumbered to secure the financing or (iv) a payment in full of the
Bonds upon maturity, acceleration or otherwise on or before the Conversion Date
(or the requirement that the Bonds be so paid) (including such a payment or
requirement that is a redemption or requirement for redemption pursuant to a
Sale of the Project described in clause (ii) of the definition thereof but
excluding such a payment or requirement that is a redemption or requirement for
redemption pursuant to a Sale of the Project described in clause (i) of the
definition thereof).
Sale of the Project means (i) a sale, transfer or other disposition of more
than a 10% interest in the Project in any one transaction or more than one
transaction occurring within any three year period (aggregating all dispositions
during any such period for purposes of calculation), or (ii) a sale, transfer or
other disposition of more than a 50% interest in the entity or entities which
own, directly or indirectly, more than a 50% interest in the Project within any
three year period to one or more persons or entities acting in concert
(aggregating all dispositions during any such period for purposes of
calculation). There shall be excluded from clause (ii) of the preceding
sentence, however, (x) the Initial Syndication by the Developer if it occurs
within one (1) year after the Project Completion Date and the managing general
partner of the Developer does not change without the consent of the holders of
all the Bonds Outstanding, and (y) a transfer on account of death without
consideration or with consideration if the transfer is to an existing partner or
to the Developer. Indirect ownership by an entity or entities of an interest in
the Project shall be measured by multiplying the percentage of interest such
entity or entities own in the entity or entities that own directly an interest
in the Project times the percentage of interest in the Project so owned
directly. For purposes of this definition, an interest in the Project or an
entity or entities shall include, without limitation, an interest representing
legal ownership, an equitable interest or an economic interest.
3
<PAGE>
"Sale or Refinancing Proceeds" means (A) in the event of a Sale of the
Project described in clause (i) of the definition thereof, the actual sales
price and any other consideration to be paid (net of all customary and
reasonable costs), plus the balance on deposit in the Replacement Reserve Fund
if the Bonds are redeemed pursuant to Section 4.01 (f) of the Indenture, and in
the event of a Sale of the Project described in clause (ii) of the definition
thereof, there shall be no sale proceeds or (B) in the event of a Refinancing of
the Project, the fair market value of the Project as determined in accordance
with Section 3 06(9) of the Indenture, plus the balance on deposit in the
Replacement Reserve Fund, except if the Refinancing of the Project is described
in clause (iii) of the definition thereof, in which case the Refinancing
Proceeds shall be the amount of the secondary financing.
"Supplemental Contingent Interest Rate" means an interest rate of 6% per
annum.
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information
extracted from the financial statements for Summit
Tax Exempt L.P. II and is qualified in its entirety
by reference to such financial statements
</LEGEND>
<CIK> 0000792924
<NAME> Summit Tax Exempt L.P. II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 519,077
<SECURITIES> 151,936,653
<RECEIVABLES> 1,136,867
<ALLOWANCES> 138,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 155,167,178
<CURRENT-LIABILITIES> 472,252
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 154,320,546
<TOTAL-LIABILITY-AND-EQUITY> 155,167,178
<SALES> 0
<TOTAL-REVENUES> 5,745,804
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 891,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,853,906
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,853,906
<EPS-PRIMARY> .52
<EPS-DILUTED> 0
</TABLE>
