UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1997:
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-16856
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3368726
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue, Greenwich, CT 06830
(Address or principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-862-7444
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Each Class which registered
- ------------------- ----------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest, $250 per Unit
(Title of Class)
Indicate by check mark whether 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 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]
<PAGE>
PART I
Item 1. Business
General
Registrant is a Delaware limited partnership formed on August 14, 1986. RAM
Funding, Inc., a Delaware corporation that is a wholly-owned subsidiary of
Presidio Capital Corp. ("Presidio"), is Registrant's managing general partner
("Managing General Partner"). RAM Funding Inc., was until November 3, 1994 a
wholly owned subsidiary of Integrated Resources Inc. (Integrated"). On November
3, 1994, Integrated consummated its plan of reorganization under Chapter 11 of
the United States Bankruptcy Code, at which time, pursuant to such plan of
reorganization, the newly formed Presidio purchased substantially all of
Integrated's assets.
In December 1994, Z Square G Partners II, the Associate General Partner of
Registrant whose partners were previously associated with Integrated, notified
Registrant of its withdrawal as the Associate General Partner. The withdrawal
became effective, after 60 days prior written notice to Limited Partners, on
February 28, 1995. Upon the effective date of such withdrawal, Presidio AGP
Corp. ("Presidio AGP"), which is a wholly-owned subsidiary of Presidio, became
the Associate General Partner. (The Managing General Partner and Associate
General Partner are hereinafter collectively referred to as the "General
Partners").
Registrant invested primarily in "zero coupon" first and junior mortgage loans
("Mortgage Loans") on properties owned or acquired principally by privately and
publicly syndicated limited partnerships originally sponsored by affiliates of
Integrated. The Mortgage Loans had original terms of approximately twelve years
with all interest and principal due and payable at the maturity or prepayment of
the Mortgage Loan.
Effective with the consummation of Integrated's plan of reorganization, Presidio
entered into an Administrative Services Agreement with Concurrency Management
Corp. ("Concurrency") to provide administrative services to Presidio and its
subsidiaries. Effective January 1, 1996, Wexford Management Corp. (formerly
Concurrency) assigned this agreement to Wexford Management LLC ("Wexford").
On August 28, 1997, an affiliate of NorthStar Capital Partners acquired all of
the Class B shares of Presidio, the corporate parent of the General Partners.
This acquisition, when aggregated with previous acquisitions, caused NorthStar
Capital Partners to acquire indirect control of the General Partners.
On November 2, 1997, the Administrative Services Agreement between Presidio and
Wexford expired. Pursuant to that agreement Wexford had the authority to
designate directors of the General Partners. Effective November 3, 1997, Wexford
and Presidio entered into a new Administrative Services Agreement (the "ASA"),
which expires on May 3, 1998. Under the terms of the ASA, Wexford will provide
consulting and administrative services to Presidio and its affiliates, including
the General Partners and Registrant. On August 28, 1997, Presidio also entered
into a management agreement with NorthStar Presidio Management Company, LLC
("NorthStar Presidio"). Under the terms of the management agreement, NorthStar
Presidio will provide the day-to-day management of Presidio and its direct and
indirect subsidiaries and affiliates.
<PAGE>
Effective November 3, 1997, the officers and employees of Wexford that had
served as officers and/or directors of the General Partners tendered their
resignation. On the same date, the Board of Directors of Presidio appointed new
individuals to serve as officers and/or directors of the General Partners.
Registrant offered 400,000 units of limited partnership interest (the "Units")
pursuant to the Prospectus dated April 12, 1988 (the "Prospectus") of Registrant
which was filed with the Securities and Exchange Commission as part of
Post-Effective Amendment No. 2 to Registrant's Registration Statement on Form
S-11, Commission File No. 33-9705, as amended (the "Registration Statement").
The Prospectus was supplemented by supplements dated August 12, 1988, February
8, 1989, March 10, 1989, April 28, 1989 and June 26, 1989. In June 1988,
Registrant had its initial admission of limited partners, and its offering
terminated on September 20, 1989. As of its final admission on October 1, 1989,
Registrant had accepted subscriptions for 187,919 Units (including Units owned
by the initial limited partner) resulting in total gross proceeds of $46,979,750
of which $18,405,847 of the offering proceeds was not invested or committed by
April 12, 1990 and was returned in accordance with the terms of Registrant's
partnership agreement ("Partnership Agreement"). For the years ended December
31, 1997, 1996 and 1995, the percentage of Registrant's revenue attributable to
interest on short term investments was 88.0%, 6.6% and 8.3%, respectively. For
the years ended December 31, 1997, 1996 and 1995, the Sierra Loan accounted for
approximately 0.0%, 91.1% and 90.7%, respectively, of Registrant's revenues.
Investments of Registrant
Registrant originally invested 100% of its net proceeds in four Mortgage Loans
in the original amount of $23,323,513, including interest of $23,513. In June
1992, the senior mortgage lender on one of Registrant's investments, the
Promenade Loan, foreclosed on the property securing its loan, and Registrant
lost its entire investment. As of March 1, 1998 Registrant had investments in
the remaining three Mortgage Loans in the original amounts of $17,700,000,
including interest of $23,513. All interest and principal is due and payable at
maturity and there are no current payments due on any of the Mortgage Loans.
Following is a description of the status of Registrant's investments:
Sierra Marketplace Loan
A $6,500,000 first Mortgage Loan (the "Sierra Loan") to High Cash Partners, L.P.
(the "Sierra Borrower"), a public limited partnership originally sponsored by
Integrated, which is secured by a shopping center commonly known as the Sierra
Marketplace located in Reno, Nevada (the "Sierra Property"). The Sierra Property
consists of approximately 233,000 square feet of net rentable area. The shopping
center occupies 18.67 acres, consisting of two main buildings and three anchor
tenant buildings with surface parking for 1,184 automobiles.
The Sierra Loan was funded on February 10, 1989 and bears interest at a rate of
11.22% per annum, compounded monthly and is due on February 28, 2001, at which
time a balloon payment of $24,966,653, together with additional interest (as
described below) if any, will be due and payable. Under the terms of the Sierra
Loan, the Sierra Borrower must provide, on request, a current appraisal of the
Sierra Property. If the sum of (i) the principal balance of the Sierra Loan plus
all other then outstanding indebtedness secured by the Sierra Property plus (ii)
all accrued and unpaid interest in excess of 5% per annum of the principal
balance of such mortgages, exceed 85% of the current appraised value, the Sierra
Borrower shall be immediately obligated to pay such excess. In the event that
such excess becomes due, the Sierra Borrower may not have sufficient liquidity
to satisfy its obligation to Registrant. The Sierra Borrower could be forced to
<PAGE>
sell its property or seek other relief, including protection under the
bankruptcy laws. Management has prepared a valuation of the Property and based
on that valuation, no additional amounts are presently due. However, it appears
possible that the Sierra loan could accrue to a value in excess of the
property's market at some point in the future.
Registrant is entitled to additional interest equivalent to 23.9% of the
appreciation in the value of the Sierra Property after payment of a specified
return to the Sierra Borrower. The maximum annual rate of interest, including
the additional interest, cannot exceed 16% compounded annually. It is unlikely
that Registrant will realize any additional interest from the appreciation of
the property.
The total amount, including fees, allocated to the Sierra Loan from the gross
proceeds of Registrant's offering was $7,715,134 including payment to the
Managing General Partner of a mortgage placement fee of $385,757.
During the first quarter of 1997, the Sierra Borrower wrote the Sierra Property
down on its books to what its management believed to be its estimated fair
market value of $15,875,000. The balance of the Sierra Loan at December 31, 1996
was approximately $15,979,000 and it was unlikely that any additional interest
accrued on the Sierra Loan would ultimately be recovered from the value of the
underlying property. Consequently, as of January 1, 1997, Registrant ceased
accruing interest on the Sierra Loan.
Harborista Loan
A $10,000,000 second Mortgage Loan (the "Harborista Loan") to Harborista
Associates L.P. (the "Harborista Borrower"), a private limited partnership
originally sponsored by Integrated, is secured by an office building commonly
known as the Harbor Plaza, located in Boston, Massachusetts ("Harbor Plaza").
Harbor Plaza consists of a 13-story office building on .88 acres containing
approximately 334,000 square feet of rentable space, located in the Fort Point
Channel section of downtown Boston. Harbor Plaza is 100% leased pursuant to a
master net lease (the "Master Lease") which, subject to a right of early
termination by the Harborista Borrower, expires on November 30, 1998.
The Harborista Loan was funded on February 13, 1989 and bears interest at a rate
of 13.307% per annum, compounded monthly and was originally due on December 1,
1998 at which time a balloon payment of $36,568,146 would have been payable.
The total amount, including fees, allocated to the loan from the gross proceeds
of Registrant's offering was $11,897,345 including payment to the Managing
General Partner of a mortgage placement fee of $594,867.
Harbor Plaza is also encumbered by a first mortgage loan in the amount of
$24,475,000 (the "Northwestern Mortgage") held by Northwestern Mutual Life
Insurance Co. ("Northwestern"). The Northwestern Mortgage was due to mature on
December 1, 1995, but was extended until December 1, 1999.
In 1993, based upon information that the cash flow from the tenant at Harbor
Plaza was far below the amount of rental payments due under the Master Lease,
the condition of the Boston real estate market and the likelihood that the
public works construction which had adversely affected Harbor Plaza would
continue for some time, there was a substantial likelihood that the Harborista
Borrower would not be able to refinance the Northwestern Mortgage when it
<PAGE>
matured. For these reasons, during 1993 management determined that interest on
the Harborista Loan should cease to accrue and that an allowance for loan losses
was necessary for the entire carrying value of the Harborista Loan which, at
that time, was $10,618,380. In addition, if 470 Atlantic Management Corp. was
successful in the lawsuit referred to below, it may have resulted in an
attempted foreclosure by Northwestern.
The Master Lessee and Registrant consummated an agreement during the fourth
quarter of 1995, pursuant to which Registrant received $341,038 (which is
included in other income for the year ended December 31, 1995). In accordance
with this agreement, Registrant subordinated its lien to any new monies invested
in Harbor Plaza and extended its loan (as did the first mortgagor) until 1999,
among other things. For additional information concerning the Harborista Loan
see Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Item 8 "Financial Statements and Supplementary Data."
Twin Oak Loan
A $1,200,000 second Mortgage Loan (the "Twin Oak Loan") to Twin Oak Plaza
Associates (the "Twin Oak Borrower"), a limited partnership originally sponsored
by Integrated, which is secured by the Twin Oak Shopping Center, located in Fort
Lauderdale, Florida (the "Twin Oak Property").
The Twin Oak Property is a 113,217 square foot community retail shopping center
which includes a 15,000 square foot addition built by the Twin Oak Borrower,
which had been fully leased to McCrory until March 1995 at which time McCrory
vacated. McCrory filed a voluntary petition for reorganization under Chapter 11
of the United States Bankruptcy Code in February 1992. In July, 1993, the
Bankruptcy Court approved McCrory's application for a Lease Amendment which
allowed for a reduction in its rental rates to current market levels. The tenant
had been current with its rent payments since the Bankruptcy Court hearing,
however, McCrory had petitioned the Bankruptcy Court to terminate its Lease and
vacated the premises on March 31, 1995. During 1996 and 1997 the McCrory space
was leased to Scotty's Hardware, who began paying rent to the Twin Oak Borrower
in April 1997.
The Twin Oak Loan was funded on April 3, 1990 and bears interest at a rate of
12.23% per annum, compounded annually, and is due on May 1, 2002 at which time a
balloon payment of $4,843,839 will be due and payable. Under the terms of the
Twin Oak Loan, the Twin Oak Borrower must provide, at Registrant's request, a
current appraisal of the Twin Oak Property. If the sum of (i) the principal
balances of the Twin Oak Loan plus the first mortgage plus (ii) all accrued and
unpaid interest in excess of 5% per annum of the principal balance of such
mortgages exceeds 85% of the then current appraised value, the Twin Oak Borrower
shall be immediately obligated to pay such excess. Based on management's cash
flow projections and analyses, the Twin Oak Borrower is currently failing this
test. Registrant will not take action against Twin Oak at this time as there is
not an adequate remedy for the Registrant. By Registrant calling its mortgage,
Twin Oak would most likely seek protection under Chapter 11 of the United States
Bankruptcy Code. Since the estimated value of the underlying property is
currently approximately equal to the first mortgage plus the carrying value of
Registrant's mortgage, by calling its loan, Registrant would jeopardize its
potential of realizing any proceeds from the Twin Oak Loan.
The total amount, including fees, allocated to the loan from the gross proceeds
of Registrant's offering was $1,424,332, including payment to the Managing
General Partner of a mortgage placement fee of $71,217.
<PAGE>
The Twin Oak Property is also encumbered by a first mortgage in the original
amount of $4,250,000, held by Southern Life Assurance Company (the "Southern
Life Mortgage"). The Southern Life Mortgage bore interest at a rate of 10% per
annum plus contingent interest, and was payable in 119 equal monthly
installments of $36,550. The maturity date of the Southern Life Mortgage,
originally July 1, 1993, was extended by three years to July 1, 1996. During
October 1997, the Twin Oak Borrower and Southern Life Assurance Company formally
agreed to extend the maturity date of the first mortgage until July 1, 1998. The
outstanding balance of the extended first mortgage loan at December 31, 1997 was
$3,810,937.
In order for the Twin Oak Borrower to consummate its loan extension with
Southern Life Assurance Company, the consent of the Registrant was required.
Registrant agreed to consent on the condition that the Twin Oak Borrower either
refinance its first mortgage loan and the Twin Oak Loan before July 1,1998, or
give to Registrant a deed-in-lieu of foreclosure of the Twin Oak Property. The
Twin Oak Borrower has not yet refinanced either of its mortgage loans. It is
impossible to predict at this time whether the Twin Oak Borrower will be able to
refinance its mortgage loans on or before July 1, 1998.
In January 1995, Registrant ceased accruing interest on the Twin Oak loan due to
the fact that McCrory, a tenant occupying approximately 13% of the retail space,
filed a voluntary petition for reorganization under Chapter 11 of the United
States Bankruptcy Code which significantly reduced the value of the Property.
During the year ended 1996, a $1,515,000 provision for loan losses was recorded
on the Twin Oak Loan. As a result of the continued vacancy of the former McCrory
space and uncertainties regarding its lease up, a decline in the standard of
living in the surrounding area of the Twin Oak Shopping Center and negotiations
with the first mortgage lender regarding an extension of its loan which was due
July 1, 1996, cash flow projections were performed during the second quarter of
1996 which indicated that the estimated fair value of the Twin Oak property was
approximately $4,530,000 at that time. The contractual balance of the first
mortgage at June 30, 1996 was approximately $3,890,000, necessitating a
provision for loan losses of $1,515,000 to reduce the carrying value of the loan
to approximately $640,000.
Employees
Registrant does not have any employees. Certain services are performed by the
General Partners and/or their affiliates in connection with the servicing of the
Mortgage Loans pursuant to a mortgage servicing agreement. NorthStar Presidio
currently performs accounting, secretarial, transfer and administrative services
for Registrant and Registrant pays for its pro rata amount of such services.
NorthStar Presidio also performs similar services for other affiliates of the
General Partners. See Item 10, "Directors and Executive Officers of Registrant
", Item 11, "Executive Compensation" and Item 13, "Certain Relationship and
Related Transactions."
<PAGE>
Item 2. Properties
None.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for Registrant's Securities and Related Security Holder
Matters
There is no established public trading market for the Units of Registrant.
There are restrictions set forth in the Partnership Agreement which may limit
the ability of a limited partner to transfer units. Such restrictions could
impair the ability of a limited partner to liquidate its investment in the event
of an emergency or for any other reason.
As of March 1, 1998 there were approximately 4,200 holders of Units of
Registrant, owning an aggregate of 187,919 Units (including Units held by the
initial limited partner).
There are no material legal restrictions set forth in the Partnership Agreement
upon Registrant's present or future ability to make distributions. No
distributions were made in 1997, 1996 and 1995. No distributions from cash flow
are anticipated to be made in as much as all payments due from borrowers under
the Mortgage Loans are deferred and payable upon maturity or prepayment of the
respective Mortgage Loans. Where deemed appropriate, the Managing General
Partner will consider accepting prepayments on a negotiated basis.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 165,064 $ 1,794,213 $ 1,946,240 $ 1,885,747 $ 1,797,318
Net Income (Loss) $ 72,682 $ 123,888 (2) $ 1,765,545 $ 1,723,537 $ (9,056,306) (1)
Net Income (Loss)
Per Unit $ .38 $ .64 (2) $ 9.16 $ 8.94 $ (46.99) (1)
Total Assets $ 19,537,040 $ 19,501,016 $ 19,346,908 $ 17,554,159 $ 15,853,759
</TABLE>
(1) Net of provision for loan losses of $10,618,380 or $55.09 per Unit.
(2) Net of provision for loan losses of $1,515,000 or $7.86 per Unit.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Registrant has invested the net proceeds of its public offering in "zero coupon"
first and junior mortgage loans secured by properties owned principally by
privately and publicly syndicated limited partnerships originally sponsored by
affiliates of Integrated. The initial admission of limited partners occurred on
June 1, 1988 and as of the termination of its offering on September 20, 1989
Registrant had raised gross proceeds of $46,979,750. Since all gross proceeds
that were raised had not been invested or committed for investment, Registrant
was obligated under the terms of the Prospectus to return such uninvested funds.
The Managing General Partner distributed these proceeds in the amount of
$19,263,445 (including interest of $857,598) in August, 1990. This represented a
return of capital of $90.06 per unit and an allocation of interest earned on
uninvested gross proceeds, ranging from $6.42 per unit to $17.90 per unit
depending on the date of admission. Additionally, Registrant made a second
related distribution of $606,978, or $3.23 per unit, on October 30, 1990.
The General Partners hold a 2.5% equity interest in Registrant. However, at the
inception of Registrant, the General Partners' equity account was credited with
only the actual capital contributed in cash, $1,000. Registrant's management
determined that this accounting does not appropriately reflect the Limited
Partners' and the General Partners' relative participations in Registrant's net
assets, since it does not reflect the General Partners' 2.5% equity interest in
Registrant. Thus, Registrant has restated its financial statements to reallocate
$733,757 (2.5% of the gross proceeds raised at Registrant's formation) of the
partners' equity to the General Partners' equity account. This reallocation was
made as of the inception of Registrant and all periods presented in the
financial statements have been restated to reflect the reallocation. The
reallocation has no impact on Registrant's financial position, results of
operations, cash flows, distributions to partners, or the partners' tax basis
capital accounts.
Registrant had invested in four Mortgage Loans aggregating approximately
$23,300,000 in principal. In June, 1992 Registrant lost its investment in the
Promenade Loan which represented original loan proceeds of $5,600,000 leaving an
aggregate of original investments of approximately $17,700,000.
In October 1997, the Twin Oak borrower and the first mortgage lender agreed to
extend the maturity date of the Twin Oak loan until July 1, 1998. Registrant
agreed to consent on the condition that the Twin Oak borrower either refinance
both the first and Registrant's mortgage, or give Registrant a deed-in-lieu of
foreclosure to the Twin Oak property. To date, the Twin Oak borrower has not
refinanced either mortgage. Registrant is unable to determine the ultimate
outcome of this matter.
Registrant uses working capital reserves provided from the proceeds of its
public offering and subsequent settlement amounts, and interest earned thereon
as its primary measure of liquidity. Registrant does not anticipate making any
distributions from cash flow during its first 8 to 12 years of operations, or
until such time as the Mortgage Loans mature or are prepaid. Working capital
reserves are invested in short-term instruments and are expected to be
sufficient to pay administrative expenses during the term of Registrant. As of
December 31, 1997, Registrant had working capital reserves of approximately
$2,827,000.
<PAGE>
Except as discussed above, management is not aware of any other known trends,
events, commitments, or uncertainties that will have a significant impact on
liquidity.
Real Estate Market
The real estate market has begun to recover from the effects of the recession
which included a substantial decline in the market value of existing properties.
However, market values have been slow to recover, and high vacancy rates
continue to exist in some areas. These factors may continue to reduce rental
rates. As a result, Registrant's potential for realizing the full value of its
investment in certain mortgages is considered unlikely.
Allowance for Loan Losses
An allowance for loan losses is established based upon a quarterly review of
each of the mortgage loans in Registrant's portfolio. In performing the review,
management considers the estimated net realizable value of the property or
collateral as well as other factors, such as the current occupancy, the amount
and status of senior debt, if any, the prospects for the property and the
economic situation in the region where the property is located. Because this
determination of net realizable value is based upon projection of future
economic events which are inherently subjective, the amounts ultimately realized
at disposition may differ materially from the carrying values as of December 31,
1997.
For the quarter ended June 30, 1996, a $1,515,000 allowance for loan losses was
recorded on the Twin Oak Loan. As a result of the vacancy of the former McCrory
space and uncertainties regarding its lease up, a decline in the standard of
living in the surrounding area of the Twin Oak Shopping Center and negotiations
with the first mortgage lender regarding an extension of its loan which was due
July 1, 1996, cash flow projections were performed which indicated the estimated
fair value of the Twin Oak property to be approximately $4,530,000 at June 30,
1996. The contractual balance of the first mortgage at June 30, 1996 was
approximately $3,890,000, necessitating a write-down of $1,515,000 to reduce the
carrying value of the loan to approximately $640,000.
Additionally, during 1993 management of Registrant determined that any recovery
from the Harborista Loan would be unlikely and recorded an allowance for loan
losses of $10,618,380.
The allowance is inherently subjective and is based on management's best
estimate of current conditions and assumptions about expected future conditions.
Registrant may provide additional losses in subsequent years and such provisions
could be material.
Year 2000
Costs associated with the year 2000 conversion are not expected to have any
impact on the operations of the Registrant.
Results of Operations
1997 vs. 1996
Net income decreased for the year December 31, 1997 compared to 1996. The
decrease was due to a greater decrease in revenues than the decrease in costs
and expenses.
<PAGE>
Revenues decreased compared to the same period in 1996 primarily due to a
decrease in mortgage interest income. Mortgage interest income decreased due to
the cessation of the interest accrual on the Sierra Loan. During the first
quarter of 1997, High Cash Partners, L.P. the owner of the Sierra property and
the borrower under the Sierra loan wrote the property down to what its
management believed to be its estimated fair market value of $15,875,000. The
balance of the Sierra loan at December 31, 1996 was approximately $15,979,000
and its was unlikely that any additional interest accrued on the Sierra loan
would ultimately be recovered from the value of the underlying property.
Consequently, as of January 1, 1997, the Partnership ceased accruing interest on
the Sierra loan.
Costs and expenses decreased compared to the year ended December 31, 1996. The
decrease was due to an allowance for loan losses recorded in 1996 on the Twin
Oak loan, while no allowance was recorded in 1997, coupled with a decrease in
general and administrative expenses. General and administrative expenses
decreased primarily due to a decrease in payroll costs in 1997.
1996 vs. 1995
Net income decreased for the year December 31, 1996 compared to 1995. The
decrease was primarily due to the provision for loan losses recorded on the Twin
Oak loan during the second quarter of 1996, as discussed above.
Revenues decreased compared to the same period in 1995. The decrease was
primarily a result of a decrease in other income due to the receipt of $341,038
relating to the settlement of the Harbor Plaza Litigation in 1995, partially
offset by an increase in the contractual value of the Sierra loan (due to the
deferral of interest) on which the mortgage interest income is calculated.
Costs and expense increased for the year ended December 31, 1996 compared to the
same period in 1995. The increase was primarily due to the provision for loan
losses recorded on the Twin Oak loan, partially offset by a decrease in general
and administrative expenses. General and administrative expenses decreased
primarily as a result of decreased payroll related costs.
<PAGE>
Item 8. Financial Statements and Supplementary Data
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
INDEX
Independent Auditor's Report
Financial Statements - Years ended
December 31, 1997, 1996 and 1995
Balance sheets
Statements of income
Statement of partners' equity
Statements of cash flows
Notes to financial statements
All financial statement schedules are omitted because they are not applicable or
the required information is shown in the financial statements or notes thereto.
<PAGE>
To the Partners of
Resources Accrued Mortgage Investors 2 L.P.
Greenwich, Connecticut
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Resources Accrued Mortgage
Investors 2 L.P. ( a limited partnership) as of December 31, 1997 and 1996, and
the related statements of income, partners' equity and cash flows for each of
the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Resources Accrued Mortgage
Investors 2 L.P. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Hays & Company
February 12, 1998
New York, New York
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
BALANCE SHEETS
December 31,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Investments in mortgage loans (net of allowance
for loan losses of $12,133,380 at
December 31, 1997 and 1996) ............................. $16,616,033 $16,616,033
Cash and cash equivalents .................................. 2,908,425 2,873,084
Other receivable ........................................... 12,582 11,899
----------- -----------
$19,537,040 $19,501,016
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable and accrued expenses ...................... $ 94,140 $ 130,798
----------- -----------
Commitments and contingencies (Notes 3 and 4)
Partners' equity
Limited partners' equity (as restated) (187,919 units issued
and outstanding) ........................................ 18,956,853 18,885,988
General partners' equity (as restated) ..................... 486,047 484,230
----------- -----------
Total partners' equity .................................. 19,442,900 19,370,218
----------- -----------
$19,537,040 $19,501,016
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOU0CES ACCRUED MORTGAGE INVESTORS 2 L.P.
STATEMENTS OF INCOME
Year ended December 31,
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues
Short term investment interest .............. $ 145,249 $ 144,945 $ 133,136
Other income ................................ 19,815 29,388 357,488
Interest income on mortgage loans ........... -- 1,619,880 1,455,616
---------- ---------- ----------
165,064 1,794,213 1,946,240
---------- ---------- ----------
Costs and expenses
General and administrative expenses ......... 92,382 155,325 180,695
Provision for loan losses ................... -- 1,515,000 --
---------- ---------- ----------
92,382 1,670,325 180,695
---------- ---------- ----------
Net income ....................................... $ 72,682 $ 123,888 $1,765,545
========== ========== ==========
Net income attributable to
Limited partners ............................ $ 70,865 $ 120,791 $1,721,406
General partners ............................ 1,817 3,097 44,139
---------- ---------- ----------
$ 72,682 $ 123,888 $1,765,545
========== ========== ==========
Net income per unit of limited partnership
interest (187,919 units outstanding) ........ $ .38 $ .64 $ 9.16
========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
STATEMENT OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1995 ..................... $ (296,763) $ 17,777,548 $ 17,480,785
Reallocation of partners' equity (Note 6) .... 733,757 (733,757) --
------------ ------------ ------------
Balance, January 1, 1995 (as restated) ....... 436,994 17,043,791 17,480,785
Net income - 1995 ............................ 44,139 1,721,406 1,765,545
------------ ------------ ------------
Balance, December 31, 1995 (as restated) ..... 481,133 18,765,197 19,246,330
Net income - 1996 ............................ 3,097 120,791 123,888
------------ ------------ ------------
Balance, December 31, 1996 (as restated) ..... 484,230 18,885,988 19,370,218
Net income - 1997 ............................ 1,817 70,865 72,682
------------ ------------ ------------
Balance, December 31, 1997 ................... $ 486,047 $ 18,956,853 $ 19,442,900
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
STATEMENTS OF CASH FLOWS
Year ended December 31,
---------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
Cash flows from operating activities
Net income ..................................... $ 72,682 $ 123,888 $ 1,765,545
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses ................... -- 1,515,000 --
Non-cash interest earned
on mortgage loans ....................... -- (1,619,880) (1,455,616)
Changes in assets and liabilities
Other receivables ........................... (683) (11,899) --
Accounts payable and accrued expenses ....... (36,658) 30,220 27,204
----------- ----------- -----------
Net cash provided by operating activities 35,341 37,329 337,133
----------- ----------- -----------
Net increase in cash and cash equivalents ........... 35,341 37,329 337,133
Cash and cash equivalents, beginning of year ........ 2,873,084 2,835,755 2,498,622
----------- ----------- -----------
Cash and cash equivalents, end of year .............. $ 2,908,425 $ 2,873,084 $ 2,835,755
=========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1 ORGANIZATION
Resources Accrued Mortgage Investors 2 L.P. (formerly Resources Accrued
Mortgage Investors L.P. - Series 87 and Resources Accrued Mortgage
Investors L.P. - Series 88), a Delaware limited partnership (the
"Partnership"), was formed in August 1986 under the Delaware Revised
Uniform Limited Partnership Law for the purpose of investing primarily in
senior and junior accrued interest mortgage loans on properties owned or
acquired principally by publicly or privately syndicated limited
partnerships sponsored by affiliates of Integrated Resources, Inc.
("Integrated"), the former parent of the General Partners.
The Partnership originally offered 400,000 units of limited partnership
interest (the "Units") pursuant to the Prospectus dated April 12, 1988
(the "Prospectus") which was filed with the Securities and Exchange
Commission as part of Post-Effective Amendment No. 2 to the Partnership's
Registration Statement on Form S-11, Commission File No. 33-9705, as
amended by supplements dated August 12, 1988, February 8, 1989, March 10,
1989, April 28, 1989 and June 26, 1989. In June 1988 the Partnership had
its initial admission of limited partners, and its offering terminated on
September 20, 1989. As of its final admission, which was effective October
1, 1989, the Partnership had accepted subscriptions for 187,919 Units
(including Units owned by the initial limited partner) resulting in total
gross proceeds of $46,979,750. Since all gross proceeds that were raised
had not been invested or committed for investment, the Partnership was
obligated, under the terms of the Prospectus, to return such uninvested
funds. The Partnership distributed these funds in the amount of
$19,263,445, including interest of $857,598, in August, 1990.
Additionally, the Partnership made a second related distribution of
$606,978 on October 30, 1990.
In August 1986, the Partnership admitted Resources Capital Corp. as the
Administrative General Partner; RAM Funding, Inc. as the Investment
General Partner; and Z Square G Partners II as the Associate General
Partner (collectively, the "General Partners"). In September, 1986, the
General Partners made capital contributions to the Partnership of $960,
$20, and $20, respectively. The General Partners were originally entitled
to receive 4.8%, .1% and .1%, respectively, of the Adjusted Cash From
Operations, Disposition Proceeds and Allocations of Net Income and Loss,
each as defined in the Prospectus. The initial limited partner was
admitted in August, 1986, and made a capital contribution of $2,500 for
ten Units. In May 1987, RAM Funding, Inc. purchased from Resources Capital
Corp. its 4.8% general partner interest in the Partnership for $960. RAM
Funding, Inc. then became the Managing General Partner of the Partnership.
All of the undertakings and responsibilities originally assumed by
Resources Capital Corp. were assumed by RAM Funding, Inc. as the Managing
General Partner. Integrated, the parent of the Managing General Partner
until November 3, 1994, agreed to such changes.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1 ORGANIZATION (continued)
In December 1987, RAM Funding, Inc. and Z Square G Partners II reduced
their general partner interests from 4.9% and .1%, respectively, to 2.45%
and .05%, respectively; accordingly, RAM Funding, Inc. and Z Square G
Partners II were then entitled to receive 2.45% and .05%, respectively, of
Adjusted Cash From Operations, Disposition Proceeds and Allocations of Net
Income and Loss. In addition, the Limited Partners' interest in Adjusted
Cash from Operations, Disposition Proceeds and Allocations of Net Income
and Loss had increased from 95% to 97.5%.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments in mortgage loans
The Partnership principally invests in "zero coupon" senior and junior
mortgage loans on properties owned or acquired by limited partnerships
originally sponsored by affiliates of the General Partners. These loans
generally contain provisions whereby the Partnership may be entitled to
additional interest represented by participation in the appreciation of
the underlying property.
The Partnership accounts for its investments in mortgage loans under the
following methods:
Investment method
Mortgage loans representing transactions in which the Partnership is
considered to have substantially the same risks and potential rewards
as the borrower are accounted for as investments in real estate
rather than as loans. Although the transactions are structured as
loans, due to the terms of the zero coupon mortgage, it is not
readily determinable at inception that the borrower will continue to
maintain a minimum investment in the property. Under this method of
accounting, the Partnership will recognize as revenue the lesser of
the amount of interest as contractually provided for in the mortgage
loan, or its pro rata share of the actual cash flow from operations
of the underlying property inclusive of depreciation and interest
expense on any senior indebtedness.
Interest method
Under this method of accounting, the Partnership recognizes revenue
as interest income over the term of the mortgage loan so as to
produce a constant periodic rate of return. Interest income will not
be recognized as revenue during periods where there are concerns
about the ultimate realization of the interest or loan principal.
Allowance for loan losses
An allowance for loan losses is established based upon a quarterly review
of each of the mortgage loans in the Partnership's portfolio. In
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
performing this review, management considers the estimated net realizable
value of the mortgage loan or collateral as well as other factors, such as
the current occupancy, the amount and status of any senior debt, the
prospects for the property and the economic situation in the region where
the property is located. Because this determination of net realizable
value is based upon projections of future economic events which are
inherently subjective, the amounts ultimately realized at disposition may
differ materially from the carrying value at each year end. Accordingly,
the Partnership may provide for additional losses in subsequent years and
such provisions could be material.
Financial statements
The financial statements include only those assets, liabilities and
results of operations which relate to the business of the Partnership.
Cash and cash equivalents
For the purpose of the statements of cash flows, the Partnership considers
all short-term investments which have original maturities of three months
or less to be cash equivalents.
Substantially all of the Partnership's cash and cash equivalents are held
at one financial institution.
Fair value of financial instruments
The fair value of financial instruments is determined by reference to
market data and other valuation techniques as appropriate. The
Partnership's financial instruments include cash and cash equivalents and
investments in mortgage loans. Unless otherwise disclosed, the fair value
of financial instruments approximates their recorded values.
Net income per unit of limited partnership interest
Net income per unit of limited partnership interest is computed based upon
the number of units outstanding (187,919) during the year.
Income taxes
No provisions have been made for federal, state and local income taxes,
since they are the personal responsibility of the partners.
The income tax returns of the Partnership are subject to examination by
federal, state and local taxing authorities. Such examinations could
result in adjustments to Partnership income, which changes could effect
the income tax liability of the individual partners.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reclassifications
Certain reclassifications have been made to the financial statements shown
for the prior years in order to conform to the current year's
classifications.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Recently issued accounting pronouncements
The Financial Accounting Standards Board has recently issued several new
accounting pronouncements. Statement No. 128, "Earnings Per Share"
established standards for computing and presenting earnings per share, and
became effective for financial statements for both interim and annual
periods ending after December 15, 1997. Statement No. 129, "Disclosure of
Information about Capital Structure" established standards for disclosing
information about an entity's capital structure, and became effective for
financial statements for periods ending after December 15, 1997. Statement
No. 130, "Reporting Comprehensive Income" establishes standards for
reporting and display of comprehensive income and its components, and is
effective for fiscal years beginning after December 15, 1997. Statement
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued
to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers, and is
effective for financial statements for periods beginning after December
15, 1997.
Management of the Partnership does not believe that these new standards
have, or will have a material effect on the Partnership's reported
operating results, per unit amounts, financial position or cash
flows.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Managing General Partner of the Partnership, RAM Funding, Inc., was
until November 3, 1994 a wholly-owned subsidiary of Integrated at which
time, pursuant to the consummation of Integrated's Plan of Reorganization,
the assets of Integrated were sold to Presidio Capital Corp. ("Presidio").
As of February 28, 1995, the Associate General Partner of the Partnership
is Presidio AGP Corp., a Delaware Corporation ("Presidio AGP"), which
replaced Z Square G Partners II, a New York general partnership comprised
of a general partnership and individuals who were all former officers,
directors and significant shareholders of Integrated. Presidio AGP is a
wholly-owned subsidiary of Presidio. The General Partners and certain
affiliates of the General Partners, are general partners in several other
limited partnerships which are also affiliated with Presidio, and which
are engaged in businesses that are, or may be in the future, in direct
competition with the Partnership.
Presidio controls the Partnership through its direct and indirect
ownership of the General Partners. On August 28, 1997, an affiliate of
NorthStar Capital Partners acquired all of the Class B shares of Presidio.
This acquisition, when aggregated with previous acquisitions, caused
NorthStar Capital Partners to acquire indirect control of the General
Partners.
Wexford Management Corp. had been engaged to perform management and
administrative services for Presidio and its direct and indirect
subsidiaries as well as the Partnership under an Administrative Services
Agreement. Wexford Management Corp. was engaged to perform similar
services for other similar entities that may be in competition with the
Partnership. Effective January 1, 1996, Wexford Management Corp., formerly
Concurrency Management Corp., assigned its agreement to provide management
and administrative services to Presidio and its subsidiaries to Wexford
Management LLC ("Wexford"). Under this agreement, Wexford also had the
authority to designate directors of the General Partners.
On November 2, 1997, the Administrative Services Agreement with Wexford
expired. Effective November 3, 1997, Wexford and Presidio entered into a
new Administrative Services Agreement (the "ASA"), which expires on May 3,
1998. Under the terms of the ASA, Wexford will provide consulting and
administrative services to Presidio and its affiliates, including the
General Partners and the Partnership. Presidio also entered into a
management agreement with NorthStar Presidio Management Company LLC
("NorthStar Presidio"). Under the terms of the management agreement,
NorthStar Presidio will provide the day-to-day management of Presidio and
its direct and indirect subsidiaries and affiliates. During the years
ended December 31, 1997 and 1996, the Partnership paid Wexford $24,153 and
$30,813 for management and administrative services rendered.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
Effective November 3, 1997, the officers and employees of Wexford that had
served as officers and/or directors of the General Partners tendered their
resignation. On the same date, The Board of Directors of Presidio
appointed new individuals to serve as officers and/or directors of the
General Partners.
Presidio is a liquidating company. Although it has no immediate plans to
do so, it will ultimately seek to dispose of the interests it acquired
from Integrated through liquidation; however, there can be no assurance of
the timing of such transaction or the effect it may have on the
Partnership.
The Partnership has invested principally in mortgage loans on properties
owned or acquired by privately syndicated limited partnerships originally
sponsored by Integrated. Transactions entered into between the Partnership
and affiliates of Integrated are subject to inherent conflicts of
interest.
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES
The Partnership invests in zero-coupon, nonrecourse senior and junior
mortgage loans. Collection of the amounts due on the Partnership's junior
mortgage loans is solely dependent upon the sale or refinancing of the
underlying properties at amounts sufficient to satisfy the Partnership's
mortgage notes after payment of the senior mortgage notes owned by
unaffiliated third parties.
All of the Partnership's mortgage notes, with the exception of the
Harborista Loan, contain a provision which requires the borrowers to
provide current appraisals based upon certain conditions or in some cases
upon request.
The Partnership has prepared internal valuations for the properties owned
by Twin Oak Plaza Associates, L.P. ("Twin Oak") and High Cash Partners,
L.P. ("High Cash"). The general partners of High Cash were, until June 13,
1997, affiliated with the General Partners. All of the loans, with the
exception of the Harborista Loan, contain a provision that requires that
if the appraisal indicates that the value of all indebtedness senior to
and including the Partnership's loan, taking into account principal plus
accrued interest in excess of 5% per annum, exceeds 85% of the then
current appraisal, the borrower must repay the indebtedness to a point
where the 85% loan to value ratio is restored. The Twin Oak and High Cash
borrowers may not have sufficient liquidity available to restore the 85%
loan to value ratio should this amount be called by the Partnership.
While there are risks inherent in a zero-coupon nonrecourse senior or
junior mortgage loan portfolio, the above described provisions were
intended to provide some mitigation of these risks. However, in the event
a borrower is required to make a payment under such loan provisions, there
can be no assurance that the borrower will be able to make such payments.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Harborista Loan
A $10,000,000 second mortgage loan (`the Harborista Loan") to Harborista
Associates, L.P. is secured by an office building, commonly known as the
Harbor Plaza, located in Boston, Massachusetts (the "Harbor Plaza"). The
Harborista Loan was funded on February 13, 1989 and bears interest at the
rate of 13.307% per annum, compounded monthly and was originally due to
mature on December 1, 1998, at which time a balloon payment of
approximately $36,000,000 would have been due and payable. Harbor Plaza is
also encumbered by a first mortgage loan in the original amount of
$24,475,000 held by Northwestern Mutual Life Insurance Co.
("Northwestern"). The first mortgage was due to mature on December 1,
1995, but was extended until December 1, 1999.
In 1993, based upon information that the cash flow from the tenant at
Harbor Plaza was far below the amount of rental payments due under the
Master Lease, the condition of the Boston real estate market and the
likelihood that the public works construction which had adversely affected
Harbor Plaza would continue for some time, there was a substantial
likelihood that Harborista Associates, L.P. would not be able to refinance
the Northwestern Mortgage when it matured. For these reasons, during 1993
management determined that interest on the Harborista Loan should cease to
accrue and that an allowance for loan losses was necessary for the entire
carrying value of the Harborista Loan which amounted to $10,618,380. In
addition, if 470 Atlantic Management Corp. ("470"), the Master Lessee of
Harbor Plaza, was successful in the lawsuit referred to below, it may have
resulted in an attempted foreclosure by Northwestern.
On December 13, 1991 a Summons and Complaint was issued by 470. The
defendants in the lawsuit were Harborista Associates L.P., Harbor Plaza
Property Credit Corp., an unsecured lender to Harborista Associates, L.P.,
which was also an affiliate of Integrated, and Northwestern. The
Partnership was not named as a defendant in this lawsuit. Each of the
defendants to this lawsuit had filed separate motions to dismiss. In a
joint hearing held in June 1992, the Court denied the motions to dismiss.
An attempt was made to join the Commonwealth of Massachusetts as a
party-defendant in the lawsuit. This attempt to join the Commonwealth to
this action was dismissed by the Court in July, 1993. In its complaint,
470 requested a declaratory judgment that a Substantial Taking (as defined
in the Master Lease) of Harbor Plaza had occurred, thus permitting 470 to
terminate their Master Lease.
In December 1995, this litigation was settled. As part of the settlement,
the Partnership received a payment of $341,038 (included in other income
for 1995 in the accompanying statement of income) in exchange for, among
other things, extending its mortgage until 1999 and subordinating its lien
to any new monies invested in the Harbor Plaza.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Twin Oak Loan
The Partnership holds a $1,200,000 second mortgage on the Twin Oak
property. The first mortgage on this property, which is held by an
unaffiliated third party, was due to mature on July 1, 1993. However,
during 1993, the mortgage loan was extended for three years until July 1,
1996. For the period between July, 1996 and October 1997, the Twin Oak
borrower continued to make reduced mortgage payments to the first mortgage
lender in anticipation of a loan extension or modification. In October
1997, the Twin Oak borrower and its first mortgage lender formally agreed
to extend the maturity date of the first mortgage until July 1, 1998.
In order for the Twin Oak borrower to consummate this loan extension, the
consent of the Partnership was required. The Partnership agreed to consent
on the condition that the Twin Oak borrower either refinance both the
first mortgage and the Partnership's mortgage on or before July 1, 1998 or
give the Partnership a deed-in-lieu of foreclosure to the Twin Oak
Property. To date, the Twin Oak borrower has not yet refinanced either of
its mortgage loans. The Partnership is unable to determine at this time
the ultimate outcome of this matter.
In January 1995, the Partnership ceased accruing interest on its second
mortgage loan to Twin Oak due to the fact that McCrory, a tenant occupying
approximately 13% of the retail space, filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code which
significantly reduced the value of the property. McCrory successfully
petitioned the Court to terminate its lease and vacated the premises in
March 1995.
As a result of the continued vacancy of the former McCrory space and
uncertainties regarding its lease-up, a decline in the economic
environment in the surrounding area of the Twin Oak Shopping Center and
negotiations with the first mortgage lender regarding an extension of its
loan which was due July 1, 1996, cash flow projections were performed
during the second quarter of 1996 which indicated that the estimated fair
value of the Twin Oak property was approximately $4,530,000 at that time.
The contractual balance of the first mortgage loan at June 30, 1996 was
approximately $3,890,000, necessitating a provision for loan losses of
$1,515,000 to reduce the carrying value of the loan to approximately
$640,000.
Sierra Loan
A $6,500,000 first mortgage loan to High Cash is secured by a shopping
center located in Reno, Nevada. Interest on the loan accrues at the rate
of 11.22% per annum with no payments due until maturity on February 28,
2001.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Sierra Loan (continued)
During the first quarter of 1997, High Cash wrote the property down to
what its management believed to be its estimated fair market value of
$15,875,000. Management of the Partnership performed its own evaluation
and determined that this amount was a fair estimate of the property value.
The outstanding balance of the loan at December 31, 1996 was approximately
$15,979,000 and it was unlikely that any additional interest accrued on
the Sierra loan would ultimately be recovered from the value of the
underlying property. Consequently, as of January 1, 1997 the Partnership
ceased accruing interest on the Sierra loan.
On June 13, 1997, the general partners of High Cash, who were formerly
affiliated with the General Partners, sold their general partner interests
to Pembroke HCP LLC and Pembroke AGP Corp., unaffiliated third parties.
Interest recognized by year for each mortgage loan is summarized as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
Description 1997 1996 1995
----------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Shopping Center
Sierra Marketplace
Reno, Nevada $ - $ 1,619,880 $ 1,455,616
============= ============= =============
</TABLE>
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Information with respect to the Partnership's mortgage loans is summarized
as follows:
<TABLE>
<CAPTION>
Mortgage Mortgage Mortgage
Interest Compound Loan Maturity Amount Purchased Placement
Description Rate % Period Type Date Date Advanced Interest Fees
- ----------- ------ ------ ---- ---- ---- -------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office Building
Harbor Plaza 13.307 Monthly 2nd 13-Feb-89 1-Dec-98 $10,000,000 $23,513 $594,867
Boston, Mass (a)(e)
Shopping Centers
Sierra Marketplace (b)(c) 11.220 Monthly 1st 10-Feb-89 28-Feb-01 6,500,000 - 385,757
Reno, Nevada
Twin Oak (b) 12.280 Annually 2nd 3-Apr-90 1-May-02 1,200,000 - 71,218
Ft. Lauderdale, Florida
----------- ------- ----------
$17,700,000 $23,513 $1,051,842
=========== ======= ==========
<CAPTION>
Interest Recognized Carrying Value Contractual Balance
------------------------ ----------------------------- ----------------------------
December 31, 1996 and December 31, December 31, December 31, December 31,
Description 1997 Prior Reserves 1997 1996 1997 1996
- ----------- ------------ ----------- ------------ -------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office Building
Harbor Plaza ............ $ -- $ -- $(10,618,380) $ -- $ -- $ 32,401,302 $ 28,385,002
Boston, Mass (a)
Shopping Centers
Sierra Marketplace (b)(c) -- 9,093,598 -- 15,979,355 15,979,355 17,529,616 15,688,574
Reno, Nevada
Twin Oak (b) ............ -- 880,460 (1,515,000) 636,678 636,678 2,934,380 2,614,938
Ft. Lauderdale, Florida
------------- ------------ ------------ ------------ ----------- ------------ ------------
$ 1,619,880 9,974,058 $(12,133,380) $ 16,616,033 $16,616,033 $ 52,865,298 $ 46,688,514
------------ --------- ------------ ------------ ----------- ------------ ------------
</TABLE>
(a) This loan is accounted for under the investment method.
(b) These loans are accounted for under the interest method.
(c) The Partnership may be entitled to additional interest in the appreciation
of the property which is subordinated to a specified return to the
borrower. It is unlikely that the Partnership will realize any additional
interest from this loan.
(d) Contractual balance represents the amount that would be required to be paid
by the borrower if the loan was liquidated (principal plus accrued interest
earned to date).
(e) This mortgage loan was extended until December 1, 1999.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
A summary of mortgage loan activity is as follows:
<TABLE>
<CAPTION>
Investment Interest
Method Method Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1995 .. $ -- $ 15,055,537 $ 15,055,537
Interest recognized ....... -- 1,455,616 1,455,616
------------ ------------ ------------
Balance, December 31, 1995 -- 16,511,153 16,511,153
Interest recognized ....... 1,619,880 1,619,880
Provision for loan losses . -- (1,515,000) (1,515,000)
------------ ------------ ------------
Balance, December 31, 1996 -- 16,616,033 16,616,033
Interest recognized ....... -- -- --
------------ ------------ ------------
Balance, December 31, 1997 $ -- $ 16,616,033 $ 16,616,033
============ ============ ============
</TABLE>
Unaudited financial information for Harbor Plaza, which is a mortgage loan
accounted for under the investment method which exceeds 10% of the
Partnership's original capital contributions, is not presently available.
5 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
-------- --------
<S> <C> <C>
Expense reimbursements ................... $ 37,888 $ 73,041
Professional fees ........................ 39,323 35,312
Printing charges ......................... 11,204 8,466
Other .................................... 5,725 13,979
-------- --------
$ 94,140 $130,798
======== ========
</TABLE>
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
6 PARTNERS' EQUITY
The General Partners hold a 2.5% equity interest in the Partnership.
However, at the inception of the Partnership, the General Partners' equity
account was credited with only the actual capital contributed in cash,
$1,000. The Partnership's management determined that this accounting does
not appropriately reflect the Limited Partners' and the General Partners'
relative participations in the Partnership's net assets, since it does not
reflect the General Partners' 2.5% equity interest in the Partnership.
Thus, the Partnership has restated its financial statements to reallocate
$733,757 (2.5% of the gross proceeds raised at the Partnership's
formation) of the partners' equity to the General Partners' equity
account. This reallocation was made as of the inception of the Partnership
and all periods presented in the financial statements have been restated
to reflect the reallocation. The reallocation has no impact on the
Partnership's financial position, results of operations, cash flows,
distributions to partners, or the partners' tax basis capital accounts.
7 RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS TO
TAX BASIS
The Partnership presently recognizes interest income on all of its
investments in mortgage loans using the interest method for tax purposes.
For financial statement purposes, mortgage loans accounted for under the
investment method recognize income as described in Note 2.
A reconciliation of net income per financial statements to the tax basis
of accounting is as follows:
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net income per financial
statements ........................ $ 72,682 $ 123,888 $1,765,545
Interest income recognized for tax
purposes in excess of amounts
recognized for financial statements 5,974,947 3,682,033 3,249,413
Provision for loan losses ............ -- 1,515,000 --
---------- ---------- ----------
Net income per tax basis ............. $6,047,629 $5,320,921 $5,014,958
========== ========== ==========
</TABLE>
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
7 RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS TO
TAX BASIS (continued)
The differences between the Partnership's net assets per financial
statements and tax basis of accounting are as follows:
<TABLE>
<CAPTION>
December 31
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net assets per financial statements ............ $19,442,900 $19,370,218
Interest income recognized for tax purposes
in excess of amounts recognized for financial
statements ................................... 24,577,060 18,602,113
Allowance for loan losses ...................... 12,133,380 12,133,380
Syndication costs .............................. 2,230,944 2,230,944
----------- -----------
Net assets per tax basis ....................... $58,384,284 $52,336,655
=========== ===========
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of Registrant.
There are no officers or directors of Registrant. The Managing General Partner
has overall administrative responsibility for Registrant's operations and for
the selection, evaluation, negotiation and disposition of Mortgage Loans. The
Associate General Partner will not devote any material amount of its business
time and attention to the affairs of Registrant. The Managing General Partner is
a wholly-owned subsidiary of Presidio and was incorporated in Delaware in
September 1985. The Managing General Partner also serves as the investment
general partner of Resources Accrued Mortgage Investor L.P. -- Series 86 ("RAM
86"), an indirect subsidiary of Presidio.
Based on a review of Forms 3 and 4 and amendments thereto furnished to
Registrant pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), during its most recent fiscal year and Forms 5
and amendments thereto furnished to Registrant with respect to its most recent
fiscal year and written representations received pursuant to Item 405(b)(2)(i)
of Regulation S-K, none of the directors or officers of the General Partners, 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 or prior fiscal years. However, no written representations were received
from the partners of the former Associate General Partner.
As of March 15, 1998, the names and ages of, as well as the positions held by,
the officers and directors of the Managing and Associate General Partners were
as follows:
<TABLE>
<CAPTION>
Has served as a
Director and/or
Officer of the
Managing General
Name Age Position Partner since
---- --- -------- -------------
<S> <C> <C> <C>
W. Edward Scheetz 33 Director November 1997
David Hamamoto 38 Director November 1997
Richard Sabella 42 President, Director November 1997
David King 35 Executive VP, Director, Assistant Treasurer November 1997
Lawrence R. Schachter 41 Senior VP, Chief Financial Officer January 1998
Kevin Reardon 39 VP, Secretary, Treasurer, Director November 1997
Allan B. Rothschild 36 Executive VP December 1997
Marc Gordon 33 VP November 1997
Charles Humber 24 VP November 1997
Adam Anhang 24 VP November 1997
Gregory Peck 23 Assistant Secretary November 1997
</TABLE>
W. Edward Scheetz co-founded NorthStar Capital Partners with David Hamamoto in
July 1997, having previously been a partner at Apollo Real Estate Advisors L.P.
since 1993. From 1988 to 1993, Mr. Scheetz was a principal with Trammell Crow
Ventures.
<PAGE>
David Hamamoto co-founded NorthStar Capital Partners with W. Edward Scheetz in
July 1997, having previously been a partner and a co-head of the Real Estate
Principal Investment Area at Goldman, Sachs & Co., where he initiated the effort
to build a real estate principal investment business in 1988 under the auspices
of the Whitehall Funds.
Richard Sabella joined NorthStar Capital Partners in November 1997, having
previously been the head of real estate and a partner at the law firm of Cahill,
Gordon & Reindel since 1989. Mr. Sabella has also been associated with the law
firms of Milgrim, Thomajian, Jacobs & Lee, P.C. and Cravath, Swaine & Moore.
David King joined NorthStar Capital Partners in November 1997, having previously
been a Senior Vice President of Finance at Olympia & York Companies (USA). Prior
to joining Olympia & York in 1990, Mr. King worked for Bankers Trust in its real
estate finance group.
Lawrence R. Schachter joined NorthStar Presidio in January 1998, having
previously held the position as Controller at CB Commercial/Hampshire, LLC from
1996 to 1997. Prior to joining CB, Mr. Schachter held the position of Controller
at Goodrich Associates in 1996 and at Greenthal/Harlan Realty Services Co. from
1992 to 1995. Mr. Schachter, who holds a CPA, graduated from Miami University
(Ohio).
Kevin Reardon joined NorthStar Capital Partners in October 1997, having
previously held the position of Controller at Lazard Freres Real Estate
Investors from 1996 to 1997. Prior to joining Lazard Freres, Mr. Reardon was the
Director of Finance in charge of European expansion at the law firm of Dewey
Ballantine from 1993 to 1996. Prior to 1993, Mr. Reardon held a financial
position at Hearst - ABC - Viacom Entertainment Services. Mr. Reardon, who holds
a CPA, graduated from Fordham University with a B.S. in Accounting.
Allan B. Rothschild joined NorthStar Presidio in December 1997, having
previously been the Senior Vice President and General Counsel of Newkirk Limited
Partnership where he managed a large portfolio of net-leased real estate assets.
Prior to joining Newkirk, Mr. Rothschild was associated with the law firm of
Proskauer, Rose LLP in its real estate group.
Marc Gordon joined NorthStar Capital Partners in October 1997, having previously
been a Vice President in the Real Estate Investment Banking Group at Merrill
Lynch where he executed corporate finance and strategic transactions for public
and private real estate ownership companies, including REITs, real estate
service companies, and real estate intensive operating companies. Prior to
joining Merrill Lynch in 1993, Mr. Gordon was in the Real Estate and Banking
Group at the law firm of Irell & Manella. Mr. Gordon graduated from Dartmouth
College with an A.B. in economics and also holds a J.D. from the UCLA School of
Law.
Charles Humber joined NorthStar Capital Partners in September 1997, having
previously worked for Merrill Lynch's Real Estate Investment Banking Group from
1996 to 1997. Mr. Humber graduated from Brown University with a B.A. in
international relations and organizational behavior and management which is
where he was prior to 1996.
Adam Anhang joined NorthStar Capital Partners in August 1997, having previously
worked for The Athena Group's Russia and Former Soviet Union development team
from 1996 to 1997. Mr. Anhang graduated from the Wharton School of the
University of Pennsylvania with a B.S. in economics with concentrations in
finance and real estate, which is where he was prior to 1996.
<PAGE>
Gregory Peck joined NorthStar Capital Partners in July 1997, having previously
worked for the Morgan Stanley Realty Real Estate Funds (MSREF) and Morgan
Stanley's Real Estate Investment Banking Group from 1996 to 1997. Prior to
joining Morgan Stanley, Mr. Peck worked for Lazard Freres & Co. LLC in the Real
Estate Investment Banking Group from 1994 to 1996. Mr. Peck graduated from
Columbia College with an A.B. in mathematics and an A.B. in economics.
There are no family relations between any executive officer and any other
executive officer or director of the Managing General Partner.
Many of the above officers and directors of the Managing General Partner and
Associate General Partner are also officers and/or directors of the general
partners of other public partnerships affiliated with Presidio or of various
subsidiaries of Presidio.
Item 11. Executive Compensation.
Registrant is not required to and did not pay remuneration to the officers and
directors of the Managing General Partner or the general partners of the former
Associate General Partner. Certain officers and directors of the Managing
General Partner receive compensation from affiliates of the Managing General
Partner and/or its affiliates (but not from Registrant) for services performed
for various affiliated entities, which may include services performed for
Registrant; however, the Managing General Partner believes that any compensation
attributable to services performed for Registrant is not material. See Item 13,
"Certain Relationships and Related Transactions."
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 1, 1998, only the following entity was known by Registrant to be the
beneficial owner of more than 5% of the Units of Registrant.
<TABLE>
<CAPTION>
Percentage of Units
Limited Partner Number of Units Owned Outstanding
- --------------- --------------------- -----------
<S> <C> <C>
Los Angeles County 12,000 6.39%
Painting Industry Pension Trust Fund
P.O. Box 7887
3601 Alameda Avenue #300
Burbank, CA 91510
</TABLE>
As of March 1, 1998, neither the General Partners nor their officers and
directors were known by Registrant to be beneficially own Units or shares of
Presidio, the parent of the General Partners.
To the knowledge of the Registrant, the following sets forth
certain information regarding ownership of the Class A shares of Presidio as of
March 11, 1998 (except as otherwise noted) by (i) each person or entity who owns
of record or beneficially five percent or more of the Class A shares, (ii) each
director and executive officer of Presidio, and (iii) all directors and
executive officers of Presidio as a group. To the knowledge of Presidio, each of
such shareholders has sole voting and investment power as to the shares shown
unless otherwise noted.
All outstanding shares of Presidio are owned by Presidio
Capital Investment Company, LLC ("PCIC"), a Delaware limited liability company.
The interest in PCIC (and beneficial ownership in Presidio) are held as follows:
<TABLE>
<CAPTION>
Percentage Ownership
in PCIC and Percentage
Beneficial Ownership
Name of Beneficial Owner in Presidio
------------------------ -----------------------
<S> <C>
Five Percent Holders:
Presidio Holding Company, LLC(1) 71.93%
AG Presidio Investors, LLC(2) 14.12%
DK Presidio Investors, LLC(3) 8.45%
Stonehill Partners, LP(4) 5.50%
</TABLE>
The holdings of the directors and executive officers of Presidio are as follows:
<TABLE>
<CAPTION>
<S> <C>
Directors and Officers:
Adam Anhang(5) 0%
Marc Gordon(5) 0%
David Hamamoto(5) 71.93%
Charles Humber(5) 0%
David King(5) 0%
Gregory Peck(5) 0%
Kevin Reardon(5) 0%
Allan Rothschild(5) 0%
Richard J. Sabella(5) 0%
Lawrence Schachter(5) 0%
W. Edward Scheetz(5) 71.93%
Directors and Officers as a group: 71.93%
</TABLE>
(1) Presidio Holding Company, LLC is a New York limited liability
company whose address is 527 Madison Avenue, 16th Floor, New
York, New York 10022. PHC has two members, Polaris Operating
LLC ("Polaris") which holds a 1% interest, and Northstar
Operating, LLC ("Northstar") which holds a 99% interest.
Polaris is a Delaware limited liability company whose address
is 527 Madison Avenue, 16th Floor, New York, New York 10022.
Polaris has two members, Sextant Operating Corp. ("Sextant"),
<PAGE>
which holds a 1% interest, and Northstar, which holds a 99%
interest. Sextant is a Delaware corporation whose address is
527 Madison Avenue, 16th Floor, New York, New York 10022 and
whose sole shareholder is Northstar. Northstar is a Delaware
limited liability company whose address is 527 Madison Avenue,
16th Floor, New York, New York 10022. Northstar has two
members, Northstar Capital Partners ("NCP"), which holds a 99%
interest, and Northstar Capital Holdings I, LLC ("NCHI"),
which holds a 1% interest. Both NCP and NCHI are Delaware
limited liability companies, whose business address is 527
Madison Avenue, 16th Floor, New York, New York 10022. NCP has
two members, NCHI, which holds a 74.75% interest, and
Northstar Capital Holdings II LLC ("NCHII"), which holds a
25.25% interest. The business address for NCHII, a Delaware
limited liability company is 527 Madison Avenue, 16th Floor,
New York, New York 10022. NCHII has three members, NCHI, which
holds a 99% interest, Edward Scheetz, who holds a 0.5%
interest and David Hamamoto, who holds a 0.5% interest. Mr.
Scheetz, a U.S. citizen whose business address is 527 Madison
Avenue, 16th Floor, New York, New York 10022, is a founding
member of NCP. Mr. Hamamoto, a U.S. citizen whose business
address is 527 Madison Avenue, 16th Floor, New York, New York
10022, is a founding member of NCP. NCHI has two members, Mr.
Scheetz and Mr. Hamamoto, each of whom holds a 50% interest.
Pursuant to that certain Amended and Restated Pledge and
Security Agreement (the "Pledge Agreement") dated March 5,
1998 made by PHC in favor of Credit Suisse First Boston
Mortgage Capital LLC ("CSFB"), PHC pledged all of its
membership interest in PCIC to CSFB as security for loans
issued under the Loan Agreement dated as of February 20, 1998
by and among PHC and CSFB and the First Amendment thereon
dated March 5, 1998 (together, the "Loan Agreement"). The
Pledge Agreement and Loan Agreement contain standard default
and event of default provisions which may at a subsequent date
result in a change of control of PCIC and, therefore, the
Registrant.
(2) Each of Angelo, Gordon & Company, LP, as sole manager of AG
Presidio Investors, LLC, and John M. Angelo and Michael L.
Gordon, as general partners of the general partner of Angelo,
Gordon & Company, LP may be deemed to beneficially own for
purposes of rule 13 d-3 of the Exchange Act, the securities
beneficially owned by AG Presidio Investors, LLC. Each of John
M. Angelo and Michael L. Gordon disclaim such beneficial
ownership. The business address for such persons is c/o
Angelo, Gordon & Company, LP, 345 Park Avenue, 26th Floor, New
York, New York 10167.
(3) M.H. Davidson & Company, Inc., as sole manager of DK Presidio
Investors, LLC may be deemed to beneficially own for purposes
of Rule 13d-3 of the Exchange Act, the securities beneficially
owned by DK Presidio Investors, LLC. The business address for
such person is c/o M.H. Davidson & Company, 885 Third Avenue,
New York, New York 10022.
<PAGE>
(4) Includes shares of PCIC beneficially owned by Stonehill
Offshore Partners Limited and Stonehill Institutional
Partners, LP. John A. Motulsky is a managing general partner
of Stonehill Partners, LP, a managing member of the investment
advisor to Stonehill Offshore Partners Limited and is a
general partner of Stonehill Institutional Partners, LP. John
A. Motulsky disclaims beneficial ownership of the shares held
by these entities. The business address for such person is c/o
Stonehill Investment Corporation, 110 East 59th Street, New
York, New York 10022.
(5) The business address for such person is 527 Madison Avenue,
16th Floor, New York, New York 10022.
<PAGE>
Item 13. Certain Relationships and Related Transactions.
The General Partners, during Registrant's year ended December 31, 1997, earned
or received compensation or payments for services from or with respect to
Registrant (or Integrated or Presidio) as follows:
<TABLE>
<CAPTION>
Capacity in Which Served or Services
Name of Recipient Performed Compensation
----------------- --------- ------------
<S> <C> <C>
RAM Funding, Inc. Managing General Partner (1)
Presidio AGP Corp. Associate General Partner (1)
</TABLE>
<PAGE>
(1) The General Partners were not entitled to any payment for services from
or with respect to Registrant, Integrated or Presidio. However, the
General Partners, pursuant to the Partnership Agreement, are entitled
to receive 2.5% of Registrant's income, loss, capital and distributions
(2.45% to the Managing General Partner and .05% to the Associate
General Partner) including without limitation Registrant's cash flow
from operations and disposition proceeds. No distributions are expected
to be made from operations inasmuch as all interest and principal due
on the Mortgage Loans is deferred until maturity, unless there are
prepayments of Mortgage Loans. For the year ended December 31, 1997,
the General Partners were allocated an aggregate of $152,610 of taxable
income ($149,558 to the Managing General Partner and $3,052 to the
Associate General Partner).
In addition, certain officers and directors of the General Partners receive
compensation from the General Partners and/or their affiliates (but not from
Registrant) for services performed for various affiliated entities, which may
include services performed for Registrant.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(a)(1) Financial Statements
See Item 8, "Financial Statements and Supplementary Data."
(a)(2) Financial Statement Schedules
None.
All schedules have been omitted because they are inapplicable, not
required, or the information is included in the Financial Statements or
Notes thereto.
(a)(3) Exhibits
3. Certificate of Limited Partnership filed August 14, 1986 (incorporated
by reference to Exhibit 3B as filed as part of Pre-Effective Amendment
No. 1 filed on May 14, 1987 ("Pre-Effective Amendment") to the
Registration Statement) and Amendments to Certificate of Limited
Partnership filed on March 12, 1987, May 7, 1987 (incorporated by
reference as filed as part of Pre-Effective Amendment to the
Registration Statement) and February 5, 1988 (incorporated by reference
to Post-Effective Amendment No. 2 to the Registration Statement).
4.
(A) Amended and Restated Agreement of Limited Partnership (incorporated
by reference to Exhibit 3A as filed as part of Post-Effective Amendment
No. 2 filed on March 23, 1988 ("Post-Effective Amendment No. 2") to the
Registration Statement).
(B) Amendment No. 1 to Amended and Restated Partnership Agreement dated
as of June 1, 1988, incorporated by reference to Exhibit 4(B) of the
1988 10-K.
(C) Amendment No. 2 to Amended and Restated Partnership Agreement
(incorporated by reference to Supplement No. 1 dated August 12, 1988 to
the Prospectus as filed pursuant to Rules 424(b)(3) and 424(c).
10.
(A) Agreement with Associate General Partner dated as of May 17, 1988
among Integrated, RAM Funding, Inc. and Z Square G Partners II,
incorporated by reference to Exhibit 10(B) of the 1988 10-K.
(B) Mortgage Services Agreement dated as of April 12, 1988 between
Registrant and RAM Funding, Inc., incorporated by reference to Exhibit
10(C) of the 1988 10-K.
(C) Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement among High Cash Partners, L.P., Truster; First Commercial
Title, Inc., Trustee and Resources Accrued Mortgage Investors 2 L.P.,
Beneficiary, dated February 10, 1989 (incorporated by reference to
Exhibit 10(a) of Registrant's Current Report on Form 8-K dated February
13, 1989 (hereinafter referred to as the February 13, 1989 Form 8-K)).
(D) Registered Note among High Cash Partners L.P. and Resources Accrued
Mortgage Investors 2 L.P., dated February 10, 1989 (incorporated by
reference to Exhibit 10(b) of the February 13, 1989 Form 8-K).
<PAGE>
(E) Assignment of Leases and Rents among High Cash Partners L.P. and
Resources Accrued Mortgage Investors 2 L.P., dated February 10, 1989
(incorporated by reference to Exhibit 10(c) of the February 13,
1989 Form 8-K).
(F) Power of Sale Mortgage, Assignment of Rents and Security Agreement
(also constituting a financing statement) from Harborista Associates
Limited Partnership Mortgagor, to Resources Accrued Mortgage Investors
2 L.P. Mortgagee, dated January 31, 1989 (incorporated by reference to
Exhibit 10(d) of the February 13, 1989 Form 8-K).
(G) Note among Harborista Associates Limited Partnership and Resources
Accrued Mortgage Investors 2 L.P. dated January 31, 1989 (incorporated
by reference to Exhibit 10(e) of the February 13, 1989 Form 8-K).
(H) Assignment of Leases and Rents from Harborista Associates Limited
Partnership Assigns to Resources Accrued Mortgage Investors 2 L.P.,
Assignee, dated January 31, 1989 (incorporated by reference to Exhibit
10(f) of the February 13, 1989 Form 8-K).
(I) Mortgage, Assignment of Rents and Security Agreement dated as of
April 1, 1990 between Twin Oak Plaza Associates, L.P. and Resources
Accrued Mortgage Investors 2 L.P. (incorporated by reference to Exhibit
10(A) of the April 3, 1990 Form 8K).
(J) Note as of April 3, 1990 between Twin Oak Plaza Associates, L.P.
and Resources Accrued Mortgage Investors 2 L.P. (incorporated by
reference to Exhibit 10(B) of the April 3, 1990 Form 8K).
(K) Loan Commitment dated as of April 11, 1990 between Twin Oak Plaza
Associates, L.P. and Resources Accrued Mortgage Investitures 2 L.P.
(incorporated by reference to Exhibit 10(D) of the April 3, 1990 Form
8K).
(L) Amendment to Agreement dated as of June 20, 1990 among Registrant,
the Managing General Partner and Rosenberg and Rosenberg, Ltd.
(incorporated by reference to Exhibit 10(O) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990.)
(M) Amended and Restated Intercreditor Agreement between The
Northwestern Mutual Life Insuance Company and Registrant, dated as of
November 1, 1994.
(N) Amendment of Mortgage, Note and Other Loan Documents between
Harborista Associates Limited Partnership and Registrant, dated as of
November 1, 1994.
(b) Reports on Form 8-K None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 27th day of March, 1998.
RESOURCES ACCRUED MORTGAGE
INVESTORS 2 L.P.
By: RAM FUNDING, INC.,
Managing General Partner
Date
By: /s/Richard Sabella March 27, 1998
------------------
Richard Sabella
Director, President
(Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
their capacities as directors and/or officers (with respect to the Managing
General Partner) and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Kevin Reardon Director, Vice President, March 27, 1998
- ----------------
Kevin Reardon Treasurer and Secretary
/s/Larry Schachter Senior Vice President, March 27, 1998
- ------------------
Larry Schachter (Principal Financial Officer
and Principal Accounting Officer)
/s/Richard Sabella Director, President, March 27, 1998
- ------------------ (Chief Executive Officer)
Richard Sabella
/s/David King Director, Executive Vice President, March 27, 1998
- ------------- and Assistant Treasurer
David King
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
3. Certificate of Limited Partnership filed August 14, 1986 (incorporated
by reference to Exhibit 3B as filed as part of Pre-Effective Amendment
No. 1 filed on May 14, 1987 ("Pre-Effective Amendment") to the
Registration Statement) and Amendments to Certificate of Limited
Partnership filed on March 12, 1987, May 7, 1987 (incorporated by
reference as filed as part of Pre-Effective Amendment to the
Registration Statement) and February 5, 1988 (incorporated by reference
to Post-Effective Amendment No. 2 to the Registration Statement).
4.
(A) Amended and Restated Agreement of Limited Partnership (incorporated by
reference to Exhibit 3A as filed as part of Post-Effective Amendment
No. 2 filed on March 23, 1988 ("Post-Effective Amendment No. 2") to the
Registration Statement).
(B) Amendment No. 1 to Amended and Restated Partnership Agreement dated as
of June 1, 1988, incorporated by reference to Exhibit 4(B) of the 1988
10-K.
(C) Amendment No. 2 to Amended and Restated Partnership Agreement
(incorporated by reference to Supplement No. 1 dated August 12, 1988 to
the Prospectus as filed pursuant to Rules
424(b)(3) and 424(c).
10.
(A) Agreement with Associate General Partner dated as of May 17, 1988 among
Integrated, RAM Funding, Inc. and Z Square G Partners II, incorporated
by reference to Exhibit 10(B) of the 1988 10-K.
(B) Mortgage Services Agreement dated as of April 12, 1988 between
Registrant and RAM Funding, Inc., incorporated by reference to Exhibit
10(C) of the 1988 10-K.
(C) Deed of Trust, Assignment of Rents, Fixture Filing and Security
Agreement among High Cash Partners, L.P., Truster; First Commercial
Title, Inc., Trustee and Resources Accrued Mortgage Investors 2 L.P.,
Beneficiary, dated February 10, 1989 (incorporated by reference to
Exhibit 10(a) of Registrant's Current Report on Form 8-K dated February
13, 1989 (hereinafter referred to as the February 13, 1989 Form 8-K)).
(D) Registered Note among High Cash Partners L.P. and Resources Accrued
Mortgage Investors 2 L.P., dated February 10, 1989 (incorporated by
reference to Exhibit 10(b) of the February 13, 1989 Form 8-K).
(E) Assignment of Leases and Rents among High Cash Partners L.P. and
Resources Accrued Mortgage Investors 2 L.P., dated February 10, 1989
(incorporated by reference to Exhibit 10(c) of the February 13, 1989
Form 8-K).
<PAGE>
(F) Power of Sale Mortgage, Assignment of Rents and Security Agreement
(also constituting a financing statement) from Harborista Associates
Limited Partnership Mortgagor, to Resources Accrued Mortgage Investors
2 L.P. Mortgagee, dated January 31, 1989 (incorporated by reference to
Exhibit 10(d) of the February 13, 1989 Form 8-K).
(G) Note among Harborista Associates Limited Partnership and Resources
Accrued Mortgage Investors 2 L.P. dated January 31, 1989 (incorporated
by reference to Exhibit 10(e) of the February 13, 1989 Form 8-K).
(H) Assignment of Leases and Rents from Harborista Associates Limited
Partnership Assigns to Resources Accrued Mortgage Investors 2 L.P.,
Assignee, dated January 31, 1989 (incorporated by reference to Exhibit
10(f) of the February 13, 1989 Form 8-K).
(I) Mortgage, Assignment of Rents and Security Agreement dated as of April
1, 1990 between Twin Oak Plaza Associates, L.P. and Resources Accrued
Mortgage Investors 2 L.P. (incorporated by reference to Exhibit 10(A)
of the April 3, 1990 Form 8K).
(J) Note as of April 3, 1990 between Twin Oak Plaza Associates, L.P. and
Resources Accrued Mortgage Investors 2 L.P. (incorporated by reference
to Exhibit 10(B) of the April 3, 1990 Form 8K).
(K) Loan Commitment dated as of April 11, 1990 between Twin Oak Plaza
Associates, L.P. and Resources Accrued Mortgage Investitures 2 L.P.
(incorporated by reference to Exhibit 10(D) of the April 3, 1990 Form
8K).
(L) Amendment to Agreement dated as of June 20, 1990 among Registrant, the
Managing General Partner and Rosenberg and Rosenberg, Ltd.
(incorporated by reference to Exhibit 10(O) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1990.)
(M) Amended and Restated Intercreditor Agreement between The Northwestern
Mutual Life Insuance Company and Registrant, dated as of November 1,
1994.
(N) Amendment of Mortgage, Note and Other Loan Documents between Harborista
Associates Limited Partnership and Registrant, dated as of November 1,
1994.
* Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the December 31, 1997 Form 10K of Resources Accrued Mortgage
Investors 2 L.P. and is qualified in its entirety by reference for such
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,908,425
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,921,007
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,537,040
<CURRENT-LIABILITIES> 94,140
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,442,900
<TOTAL-LIABILITY-AND-EQUITY> 19,537,040
<SALES> 0
<TOTAL-REVENUES> 165,064
<CGS> 0
<TOTAL-COSTS> 92,382
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 72,682
<INCOME-TAX> 0
<INCOME-CONTINUING> 72,682
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,682
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
