Item 1. Business
The Registrant, Amrecorp Realty Fund II, (the "Partnership"), is a limited partnership organized under the Texas Uniform Limited Partnership Act pursuant to a Certificate of Limited Partnership dated April 16, 1984 and amended on July 5, 1984. As of December 31, 2001, the Partnership consisted of an individual general partner, Mr. Robert J. Werra (the "General Partner") and 1,684 limited partners owning 14,544 limited partnership interests at $1,000 per interest. The distribution of limited partnership interests commenced pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration #2-90654) as amended.
The Partnership was organized to acquire a diversified portfolio of income-producing real properties, primarily apartments, as well as office buildings, industrial buildings, and other similar properties. The Partnership intends to continue until December 31, 2014 unless terminated by an earlier sale of its Properties.
The General Partner manages the affairs of the Partnership and acts as the Managing Agent with respect to the Partnership's properties. The General Partner may also engage other on-site property managers and other agents, to the extent the General Partner considers appropriate. The General Partner makes all decisions regarding investments in and disposition of properties and has ultimate authority regarding all property management decisions.
The Partnership competes in the residential and commercial rental markets. The General Partner prepared market analyses for the property areas and determined these areas contain other like properties which may be considered competitive on the basis of location, amenities and rental rates.
No material expenditure has been made or is anticipated for either Partnership-sponsored or consumer research and development activities relating to the development or improvement of facilities or services provided by the Partnership. There neither has been, nor are any anticipated, material expenditures required to comply with any Federal, State or local environmental provisions which would materially affect the earnings or competitive position of the Partnership.
The Partnership is engaged solely in the business of real estate investments. Its business is believed by management to fall entirely within a single industry segment. Management does not anticipate that there will be any material seasonal effects upon the operation of the Partnership.
Competition and Other Factors
The majority of the Properties' leases are of six to twelve month terms. Accordingly, operating income is highly susceptible to varying market conditions. Occupancy and local market rents are driven by general market conditions which include job creation, new construction of single and multi-family projects, and demolition and other reduction in net supply of apartment units.
On the property owned at December 31, 2001, the Partnership has been able to maintain a generally high occupancy level and increasing rents primarily due to the positive relationship between apartment unit supply and demand in the market. However, the property is subject to substantial competition from similar and often newer properties in the vicinity in which they are located. In addition, operating expenses and capitalized expenditures have increased as units are updated and made more competitive in the market place.
In 1996, the Partnership sold its commercial shopping center located in Lancaster, Texas, receiving net proceeds of $949,649 and recognizing a loss of $10,177. In addition, in January 1997 the Partnership sold its apartment complex located in Charlotte, North Carolina, for net proceeds of $4,149,635 and recognizing a gain of $1,287,391.
Item 2.
Item 2. Properties
At December 31, 2001 the Partnership owned one property, Chimney Square Apartments. Prior to their disposal during January 1997 and August 1996 the Partnership also owned two other properties, as indicated below:
Name and Location General Description of the Property Chimney Square A fee simple interest in seventeen Apartments two-story residential buildings located in Abilene, Texas purchased in 1984, containing approximately 126,554 net rentable square feet on approximately 7.18 acres of land. The community consists of 128 apartment units and twenty-four townhouse units.
Shorewood Apartments A fee simple interest in a 96 unit (sold January 1997) apartment community located in Mecklenburg County, North Carolina, purchased in 1985 and containing approximately 124,194 net rentable square feet on 10.058 acres of land. In January 1997, the Partnership sold this apartment community.
Occupancy Rates
Percent
1997 1998 1999 2000 2001 Chimney Square 90.6% 93.8% 97.0% 96.9% 97.9%
The property is encumbered by a non-recourse mortgage payable. For information regarding the encumbrances to which the property is subject and the status of the related mortgage loan, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" contained in Item 7 hereof and Note B to the Financial Statements and Schedule Index contained in Item 8.
Item 3.
Item 3. Legal Proceedings
The Partnership is not engaged in any material legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Unit Holders
There were no matters submitted to a vote of unit holders during the fourth quarter of the fiscal year.
By virtue of its organization as a limited partnership, the Partnership has outstanding no securities possessing traditional voting rights. However, as provided and qualified in the Limited Partnership Agreement, limited partners have voting rights for, among other things, the removal of the General Partner and dissolution of the Partnership.
PART II
Item 5.
Item 5. Market for Registrant's Units and Related Unit-holders Matters
The Partnerships outstanding securities are in the form of Limited Partnership Interests ("Interests"). As of December 31, 2001 there were approximately 1,684 limited partners owning 14,544 limited partnership interests at $1,000 per interest. A public market for trading Interests has not developed and none is expected to develop. In addition, transfer of an Interest is restricted pursuant to Article X, Section 2, of the Limited Partnership Agreement.
Although a public market for trading Interests has not developed, 74-Mackenzie Patterson Fund ("Mackenzie") acquired 732, approximately 5%, of the outstanding Interests of the partnership in 1998 (as reported in Item 12(b)). - Mackenzie Patterson Special Fund 4 L.L.C. ("Mackenzie") acquired 441, approximately 3%, of the outstanding Interests of the partnership in 1999 (as reported in Item 12(b)). The registrant knows of no other activity involving the sale or acquisition of Interest.
The General Partner continues to review the Partnership's ability to make distributions on a quarter-by-quarter basis. In 2001 the partnership distributed $20 per limited partnership unit. In 2000 the partnership distributed $25 per limited partnership unit. In 1998 the Partnership distributed $35 per $1000 unit due to the refinancing of Chimney Square Apartments. In 1997 the Partnership distributed $100 per $1000 unit due to the sale of Shorewood Apartments. In 1996 the Partnership distributed $50 per $1000 unit due to the sale of Lancaster Place.
An analysis of tax income or loss allocated and cash distributed to Investors per $1,000 unit is as follows:
YEARS TAXABLE INCOME OR TAXABLE LOSS CASH GAIN DISTRIBUTED 1984 - 1993 $0 $910 $30 1994 0 $27 0 1995 0 $28 0 1996 $62 0 $50 1997 $143 0 $100 1998 0 $1 $35 1999 0 $0 0 2000 $2 $0 $25 2001 $10 $0 $20
Item 6.
Item 6. Selected Financial Data
The following table sets forth selected financial data regarding the Partnership's results of operations and financial position as of the dates indicated. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7
Item 7 Management's Discussion and Analysis of Financial Conditions and Results of Operations
This discussion should be read in conjunction with Item 6 - "Selected Financial Data" and Item 8 - "Financial Statements and Supplemental Information."
Results of Operations: 2001 VERSUS 2000
Revenue from Property Operations increased $23,158 or 2.66% as compared to 2000, due to increased occupancy and rental rates. Additionally, interest income decreased $4,754 resulting from lower cash balances and interest rates. Other income for 2001 increased $6,452 primarily due to increased fees and vending income. The following table illustrates the increases:
Increase/ (Decrease)
Rental income 21,460 Interest (4,754) Other 6,452 Net Increase 23,158
Property operating expenses for 2001 increased $28,567 from 2000 or 3.61%. Utilities increased $6,450 or 23.25% due to higher rates. Repairs and Maintenance increased $8,593 or 13.27% due to normal maintenance operations. Real estate taxes rose $11,303 or 10.79% primarily due to increased assessed valuations. General & administrative increased $7,526 or 13.61% primarily due to increased partnership administrative costs. The following table illustrates the increases or (decreases):
Increase (Decrease)
Repairs and Maintenance 8,593 13.27% Real estate taxes 11,303 10.79% General & Admin 7,526 13.61% Utilities 6,450 23.25% Payroll -317 -0.40% Interest -4,097 -1.91% Depreciation and amortization -2,232 -1.13% Property management fees 1,341 3.14%
Net Increase 28,567 3.61%
Results of Operations: 2000 VERSUS 1999
Revenue from Property Operations increased $35,873 or 4.31% as compared to 1999, due to increased occupancy and rental rates. Additionally, interest income increased $3.355 resulting from higher cash balances. Other income for 2000 increased $1,555 primarily due to increased fees to residents. The following table illustrates the increases:
Increase/ (Decrease)
Rental income $30,963 Interest 3,355 Other 1,555 Net Increase $35,873
Property operating expenses for 2000 increased $97 from 1999 or 0.01. Real estate taxes rose $14,378 or 15.9% primarily due to increased assessed valuations. General & administrative decreased $9,933 or 15.23% primarily due to decreased partnership administrative costs. The following table illustrates the increases or (decreases):
Increase (Decrease)
Repairs and Maintenance (6,380) Real estate taxes 14,378 General & Admin (9,933) Utilities (155) Payroll 5,636 Interest (3,602) Depreciation and amortization (1,646) Property management fees 1,605
Net Increase $97
Liquidity and Capital Resources
While it is the General Partners primary intention to operate and manage the remaining real estate investment, the General Partner also continually evaluates this investment in light of current economic conditions and trends to determine if this asset should be considered for disposal.
In 1996 the Partnership sold its investment in the shopping center located in Lancaster, Texas , recognizing a loss of $10,177. Shorewood Apartments, an apartment complex located in Charlotte, North Carolina was sold in January 1997. Net gain from the sale was $1,287,391.
As of December 31, 2001, the Partnership had $142,797 in cash and cash equivalents as compared to $210,193 as of December 31, 2000. The net decrease in cash of $67,396 is principally due to distributions paid in December 2001.
The remaining property is encumbered by a non-recourse mortgage as of December 31, 2001, with an interest rate of 9.325%. Required principal payments on this mortgage note for the four years ended December 31, 2005, are, $49,029 $53,082 $59,039 and $2,079,227 respectively.
For the foreseeable future, the Partnership anticipates that mortgage principal payments (excluding balloon mortgage payments), improvements and capital expenditures will be funded by net cash from operations. The primary source of capital to fund the balloon mortgage payment will be proceeds from the sale, financing or refinancing of the properties.
Item 7a
Item 7a - Quantitative and Qualitative Disclosure about Market Risk
Market Risk
The Partnership is exposed to interest rate changes primarily as a result of its real estate mortgages. The Partnerships interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower it's overall borrowing costs. To achieve its objectives, the partnership borrows primarily at fixed rates. The partnership does not enter into derivative or interest rate transactions for any purpose.
The Partnerships' activities do not contain material risk due to changes in general market conditions. The partnership invests only in fully insured bank certificates of deposits, and mutual funds investing in United States treasury obligations.
Risk Associated with Forward-Looking Statements Included in this Form 10-K
This Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created thereby. These statements include the plans and objectives of management for future operations, including plans and objectives relating to capital expenditures and rehabilitation costs on the Properties. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward- looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
AMRECORP REALTY FUND II FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORTS
December 31, 2001 and 2000
Page
Independent Auditors' Reports 1
Financial Statements
Balance Sheets as of December 31, 2001 and 2000 3
Statements of Income for the years ended December 31, 2001, 2000 and 1999 4
Statements of Partners' Equity (Deficit) for the years ended December 31, 2001, 2000 and 1999 5
Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 6
Notes to Financial Statements 7
Schedule III - Real Estate and Accumulated Depreciation 13
All other schedules have been omitted because they are not applicable, not required or the information has been supplied in the financial statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partners of Amrecorp Realty Fund II
We have audited the accompanying balance sheets of Amrecorp Realty Fund II, a Texas limited partnership (the "Partnership") as of December 31, 2001 and 2000, and the related statements of income, partners' equity (deficit), and cash flows for the years ended December 31, 2001, 2000 and 1999. 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 U.S. 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 presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the December 31, 2001 and 2000 financial statements referred to above present fairly, in all material respects, the financial position of Amrecorp Realty Fund II as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years ended December 31, 2001, 2000 and 1999 in conformity with U.S. generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule III for the year ended December 31, 2001 is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
January 14, 2002 Plano, Texas AMRECORP REALTY FUND II BALANCE SHEETS December 31, 2001 and 2000
ASSETS 2001 2000
Investments in real estate at cost Land $580,045 $580,045 Buildings, improvements and furniture and fixtures 4,678,271 4,653,056
5,258,316 5,233,101 Accumulated depreciation (3,302,996) (3,114,199)
1,955,320 2,118,902
Cash and cash equivalents 142,797 210,193 Deferred financing costs, net of accumulated amortization of $59,064 and $52,222, respectively 21,667 28,509 Escrow deposits 208,514 220,453 Other assets 10,444 7,961
TOTAL ASSETS 2,338,742 2,586,018
LIABILITIES AND PARTNERS' EQUITY
Mortgage payable 2,240,377 2,285,057 Accounts payable and accrued expenses 134,849 120,550 Due to affiliates 1,242 --- Accrued interest payable 17,410 17,757 Distributions payable 23,425 23,425 Security deposits 19,501 18,301
TOTAL LIABILITIES 2,436,804 2,465,090
PARTNERS' EQUITY (98,062) 120,928
TOTAL LIABILITIES AND PARTNERS' EQUITY $2,338,742 $2,586,018
AMRECORP REALTY FUND II STATEMENTS OF INCOME For the Years Ended December 31, 2001, 2000, and 1999
2001 2000 1999
INCOME Rentals $856,100 $834,640 $803,677 Interest 12,177 16,931 13,576 Other 23,974 17,522 15,967
Total income 892,251 869,093 833,220
OPERATING EXPENSES Interest 210,857 214,954 218,556 Depreciation and amortization 195,639 197,871 199,517 Real estate taxes 116,057 104,754 90,376 Payroll 77,974 78,291 72,655 Repairs and maintenance 73,353 64,760 71,140 General and administrative 62,813 55,287 65,220 Property management fee to affiliate 44,007 42,666 41,061 Utilities 34,189 27,739 27,894 Administrative services fees to affiliate 5,472 5,472 5,472
Total operating expenses 820,361 791,794 791,891
NET INCOME $71,890 $77,299 $41,329
NET INCOME PER LIMITED PARTNERSHIP UNIT - BASIC
Net income per unit - basic $ 4.45 $ 4.78 $ 2.81
LIMITED PARTNERSHIP UNITS OUTSTANDING - BASIC 14,544 14,544 14,544
AMRECORP REALTY FUND II STATEMENTS OF PARTNERS' EQUITY (DEFICIT) For the Years Ended December 31, 2001, 2000 and 1999
General Limited Partner Partners Total
Balance, January 1, 1999 $(89,588) $455,488 $365,900
Net income 413 40,916 41,329
Balance, December 31, 1999 (89,175) 496,404 407,229
Distributions --- (363,600) (363,600)
Net income 7,730 69,569 77,299
Balance, December 31, 2000 (81,445) 202,373 120,928
Distributions --- (290,880) (290,880)
Net income 7,189 64,701 71,890
Balance, December 31, 2001 $(74,256) $(23,806) $(98,062)
AMRECORP REALTY FUND II STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES Net income $71,890 $77,299 $41,329 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 195,639 197,871 199,517 Changes in assets and liabilities: Escrow deposits 14,180 (14,795) (5,432) Other assets (2,482) (1,280) (129) Accrued interest payable (347) (404) (223) Due to affiliates 1,560 (977) (307) Accounts payable and accrued expenses 13,981 15,052 11,032 Security deposits 1,200 (600) 1,701
Net cash provided by operating activities 295,621 272,166 247,488
CASH FLOWS FROM INVESTING ACTIVITIES Investments in real estate (25,215) (35,078) (26,991) Deposits to reserve for replacements (32,298) (33,388) (33,806) Disbursements from reserve for replacements 30,056 33,581 13,145
Net cash used for investing activities (27,457) (34,885) (47,652)
CASH FLOWS FROM FINANCING ACTIVITIES Payments on mortgages and notes payable (44,680) (40,717) (37,105) Distributions (290,880) (363,600) --- Distributions payable --- (1,250) (1,745)
Net cash used for financing activities (335,560) (405,567) (38,850)
Net increase (decrease) in cash and cash equivalents (67,396) (168,286) 160,986
Cash and cash equivalents at beginning of period 210,193 378,479 217,493
Cash and cash equivalents at end of period $142,797 $210,193 $378,479
Supplemental disclosure of cash flow information: Cash paid during the year for interest $211,204 $215,167 $218,779
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Amrecorp Realty Fund II (the "Partnership"), a Texas limited partnership, was formed on April 16, 1984, under the laws of the state of Texas, for the purpose of acquiring, maintaining, developing, operating, and selling buildings and improvements. The Partnership owns and operates rental apartments in Abilene, Texas. The Partnership will be terminated by December 31, 2014, although this date can be extended if certain events occur. The general partner is Mr. Robert J. Werra.
An aggregate of 25,000 units at $1,000 per unit are authorized, of which 14,544 were outstanding for each of the three years ended December 31, 2001. Under the terms of the offering, no additional units will be offered.
Allocation of Net Income (Loss) and Cash
Net income and net operating cash flow, as defined in the limited partnership agreement, are allocated first to the limited partners in an amount equal to a distribution preference (as defined) on capital contributions from the first day of the month following their capital contribution and thereafter generally 10% to the general partner and 90% to the limited partners. Net loss is allocated 1% to the general partner and 99% to the limited partners.
Net income from the sale of property is allocated first, to the extent there are cumulative net losses, 1% to the general partner and 99% to the limited partners; second, to the limited partners in an amount equal to their distribution preference as determined on the date of the partners' entry into the Partnership; and, thereafter, 15% to the general partner and 85% to the limited partners.
Cash proceeds from the sale of property or refinancing are allocated first to the limited partners to the extent of their capital contributions and distribution preference as determined on the date of the partners' entry into the Partnership; and, thereafter, 15% to the general partner and 85% to the limited partners.
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Basis of Accounting
The Partnership maintains its books on the basis of accounting used for federal income tax reporting purposes. Memorandum entries have been made to present the accompanying financial statements in accordance with generally accepted accounting principles.
Investments in Real Estate and Depreciation
Buildings, improvements, and furniture and fixtures are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets ranging from 5 to 25 years.
Income Taxes
No provision for income taxes has been made since the partners report their respective share of the results of operations on their individual income tax return.
Revenue Recognition
The Partnership has leased substantially all of its rental apartments under cancelable leases for periods generally less than one year. Rental revenue is recognized on a monthly basis as earned.
Deferred Financing Costs
Costs incurred to obtain mortgage financing are being amortized over the life of the mortgage using the straight- line method.
Syndication Costs
Costs or fees incurred to raise capital for the Partnership are netted against the respective partners' equity accounts.
Cash and Cash Equivalents
The Partnership considers all highly liquid instruments with a maturity of three months or less to be cash equivalents.
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Long-Lived Assets
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting For the Impairment of Long-Lived Assets and For Long-Lived Assets to be Disposed Of", the Partnership records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. Based on current estimates, management does not believe impairment of operating properties is present.
Computation of Earnings Per Unit
The Partnership has adopted Statement of Financial Accounting Standards ("SFAS") No.128, "Earnings per Share". Basic earnings per unit is computed by dividing net income (loss) attributable to the limited partners' interests by the weighted average number of units outstanding. Earnings per unit assuming dilution would be computed by dividing net income (loss) attributable to the limited partners' interests by the weighted average number of units and equivalent units outstanding. The Partnership has no equivalent units outstanding for any period presented.
Concentration of Credit Risk
Financial instruments, which potentially subject the Partnership to concentrations of credit risk, consist primarily of cash. The Partnership places its cash with various financial institutions. The Partnership's exposure to loss should any of these financial institutions fail would be limited to any amount in excess of the amount insured by the Federal Deposit Insurance Corporation or Securities Investor Protection Corporation, where applicable. Management does not believe significant credit risk exists at December 31, 2001.
Use of 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 that reporting period. Actual results could differ from those estimates.
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Environmental Remediation Costs
The Partnership accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. Project management is not aware of any environmental remediation obligations that would materially affect the operations, financial position or cash flows of the Project.
Comprehensive Income
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, (SFAS 130), requires that total comprehensive income be reported in the financial statements. For the years ended December 31, 2001, 2000, 1999, the Partnership's comprehensive income was equal to its net income and the Partnership does not have income meeting the definition of other comprehensive income.
Segment Information
The Partnership is in one business segment, the real estate investments business, and follows the requirements of FAS 131, "Disclosures about Segments of an Enterprise and Related Information."
NOTE B - MORTGAGE PAYABLE
Mortgage payable of $2,240,377 and $2,285,057 at December 31, 2001 and 2000, respectively, bears interest at a rate of 9.325% and is payable in monthly installments of principal and interest of $21,324 through March 2005, at which time a lump sum payment of approximately $2,068,000 is due. This mortgage note is secured by real estate with a net book value of $1,955,320.
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2001 and 2000
NOTE B - MORTGAGE PAYABLE - CONTINUED
At December 31, 2001, required principal payments due under the stated terms of the Partnership's mortgage note payable are as follows
2002 49,029 2003 53,082 2004 59,039 2005 2,079,227 2006 ---
$2,240,377
NOTE C - RELATED PARTY TRANSACTIONS
The Partnership agreement specifies that certain fees be paid to the general partner or his designee. An affiliate of the general partner receives a property management fee that is 5% of the Partnership's gross receipts. Additionally, the Partnership reimburses the affiliate for administrative expenditures. The following fees and reimbursements earned by an affiliate of the general partner in 2001, 2000 and 1999:
2001 2000 1999 Property management fee $44,007 $42,666 $41,061 Administrative service fee 5,472 5,472 5,472
Resulting from the above transactions, amounts due an affiliate of the general partner as of December 31, 2001, 2000 and 1999 totaled $1,242, $-0-, and $977, respectively.
NOTE D - COMMITMENTS
The Partnership will pay a real estate commission to the general partner or his affiliates in an amount not exceeding the lessor of 50% of the amounts customarily charged by others rendering similar services or 3% of the gross sales price of a property sold by the Partnership.
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2001 and 2000
NOTE E - RECONCILIATION OF BOOK TO TAX LOSS (UNAUDITED)
If the accompanying financial statements had been prepared in accordance with the accrual income tax basis of accounting rather than generally accepted accounting principals ("GAAP"), the excess of revenues over expenses for 2001 would have been as follows:
Net income per accompanying financial statements $71,890
Add - book basis depreciation using straight-line method 188,797
Deduct - income tax basis depreciation expense using ACRS method 110,011
Excess of revenues over expenses, accrual income tax basis $150,676
NOTE F - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been determined using available market information or other appropriate valuation methodologies that require considerable judgement in interpreting market data and developing estimates. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Partnership could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The fair value of financial instruments that are short-term or reprice frequently and have a history of negligible credit losses is considered to approximate their carrying value. These include cash and cash equivalents, accounts payable and other liabilities.
Management has reviewed the carrying values of its mortgages payable and notes payable to related parties in connection with interest rates currently available to the Partnership for borrowings with similar characteristics and maturities and has determined that their estimated fair value would approximate their carrying value as of December 31, 2001 and 2000.
The fair value information presented herein is based on pertinent information available to management. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented herein.
AMRECORP REALTY FUND II Schedule III - Real Estate and Accumulated Depreciation December 31, 2001
Initial Cost to Partnership
Description Encumbrances Land Building Total Cost And Subsequent to A 128-unit two-story Improvements Acquisition apartment community of wooden frame construction and a combination brick veneer and wood siding exterior located in Abilene, Texas (b) $4,341,569 $336,702 $336,702
Gross Amounts at Which Carried at Close of Year
Buildings And Accumulated Land Improvements Total Depreciation (c)(d)
$580,045 $4,678,271 $5,258,316 $3,302,996
Life on Which Date of Date Depreciation Construction Acquired Is Computed
Complete at Date Acquired 11/1/84 (a)
See notes to Schedule III.
AMRECORP REALTY FUND II Schedule III - Real Estate and Accumulated Depreciation (Continued) December 31, 2001
NOTES TO SCHEDULE III:
(a) See Note A to financial statements outlining depreciation methods and lives.
(b) See description of mortgages and notes payable in Note B to the financial statements.
(c) The reconciliation of investments in real estate and accumulated depreciation for the years ended December 31, 2001, 2000 and 1999 is as follows:
Investments in Accumulated Real Estate Depreciation
Balance, January 1, 1999 $5,171,032 $2,730,495
Acquisitions 26,991 --- Depreciation expense --- 192,675
Balance, December 31, 1999 $5,198,023 $2,923,170
Acquisitions 35,078 --- Depreciation expense --- 191,029
Balance, December 31, 2000 $5,233,101 3,114,199
Acquisitions 25,215 Depreciation expense --- 188,797
Balance, December 31, 2001 $5,258,316 $3,302,996
(d) Aggregate cost for federal income tax purposes is $5,275,909.
Item 9.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
On November 6, 1998, an 8-K was filed to disclose the change in auditors. No financial statements were issued in conjunction with this filing. The Registrant has not been involved in any disagreements on accounting and financial disclosure.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Partnership
The Partnership itself has no officers or directors. Robert J. Werra is the General Partner of the Partnership.
Robert J. Werra, 63, the General Partner, Mr. Werra joined Loewi & Co., Incorporated ("Loewi") in 1967 as a Registered Representative. In 1971, he formed the Loewi real estate department, and was responsible for its first sales of privately placed real estate programs. Loewi Realty was incorporated in 1974, as a wholly owned subsidiary of Loewi & Co., with Mr. Werra as President. In 1980, Mr. Werra along with three others formed Amrecorp Inc. to purchase the stock of Loewi Real Estate Inc., and Loewi Realty. In 1991 Univesco, Inc. became the management agent for the Partnership. Limited Partners have no right to participate in management of the Partnership.
Item 11.
Item 11. Management Remuneration and Transactions
As stated above, the Partnership has no officers or directors. Pursuant to the terms of the Limited Partnership Agreement, the General Partner receives 1% of Partnership income and loss up to 15% of the net proceeds received from sale or refinancing of Partnership properties (after return of Limited Partner capital contributions and payments of a 6% Current Distribution Preference thereon).
Univesco, Inc., an affiliate of the General Partner, is entitled to receive a management fee with respect to the properties actually managed of 5% of actual gross receipts from a property or an amount competitive in price or terms for comparable services available from a non-affiliated persons. The Partnership is also permitted to engage in various transactions involving affiliates of the General Partner as described under the caption "Compensation and Fees" at pages 6-8, "Management" at page 17 "Allocation of Net Income and Losses and Cash Distributions" at pages 34-36 of the Prospectus as supplemented, incorporated in the Form S-11 Registration Statement which was filed with the Securities and Exchange Commission and made effective on May 2, 1983.
For the Fiscal year ended December 31, 2001, 2000, and 1999, property management fees earned totaled $44,007, $42,666, and $41,061, respectively. An additional administration service fee was paid to the general partner of $5,472, $5,472, and $5,472, for the years ended December 31, 2001, 2000, and 1999, respectively. Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) No one owns of record, except as noted in Item (b) below, and the General Partner knows of no one who owns beneficially, more than five percent of the Interests in the Partnership, the only class of securities outstanding.
(b) By virtue of its organization as a limited partnership, the Partnership has no officers or directors. Persons performing functions similar to those of officers and directors of the Partnership, beneficially own, the following units of the Partnership as of March 1, 2002. Amount and Nature Title Name of of Beneficial Percent of Class Beneficial Owner Ownership of Interest
Limited Robert J. Werra 86 units 0.59% Partnership 6210 Campbell Rd. #140 Interests Dallas, Texas 75248
Limited 74-Mackenzie Patterson Fund 732 units 5.033% Partnership 1640 School St #100 Interests Morgana, CA 94556
Limited Mackenzie Patterson Special Partnership Fund 4 L.L.C. 441 units 3.032% Interests 1640 School St #100 Morgana, CA 94556
(c) There is no arrangement, known to the Partnership, which may, at a subsequent date, result in a change in control of the Partnership.
Item 13.
Item 13. Certain Relationships and Related Transactions
As stated Item 11, the Partnership has no officers or directors. Pursuant to the terms of the Limited Partnership Agreement, the General Partner receives 1% of Partnership income and loss up to 15% of the net proceeds received from sale or refinancing of Partnership properties (after return of Limited Partner capital contributions and payments of a 6% Current Distribution Preference thereon).
Univesco, Inc., an affiliate of the General Partner, is entitled to receive a management fee with respect to the properties actually managed by the corporate general partner. For nonresidential properties (including all leasing and releasing fees and fees for leasing related services) the management fee is lessor of 6% of gross receipts from the Partnership from such properties or an amount which is competitive in price and terms with other non- affiliated persons rendering comparable services which would reasonably be made available to the Partnership. For residential properties ( including all leasing and releasing fees and fees for leasing related services), the lessor of 5% of gross receipts of the Partnership from such properties or an amount which is competitive in price or terms with other non-affiliated persons rendering comparable services which could reasonably be made available to the Partnership. The Partnership is also permitted to engage in various transactions involving affiliates of the General Partner as described under the caption "Compensation and Fees" at pages 6-8, "Management" at page 17 "Allocation of Net Income and Losses and Cash Distributions" at pages 34-36 of the Prospectus as supplemented, incorporated in the Form S-11 Registration Statement which was filed with the Securities and Exchange Commission and made effective on July 6,1984 and incorporated herein by reference.
See Note C to the Financial Statements for detailed information concerning fees paid to Univesco, Inc. (an affiliate of the General Partner).
PART IV
Item 14.
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(A) 1. See accompanying Financial Statements Index
2. Additional financial information required to be furnished:
Schedule III- Real Estate and Accumulate Depreciation.
3. Exhibits None.
(B) Reports on Forms 8-K for the quarter ended December 31, 2001.
November 6, 1998, an 8-K was filed to disclose the change in auditors. No financial statements were issued in conjunction with this filing.
(C) Exhibits
3. Certificate of Limited Partnership, incorporated by reference to Registration Statement No. 2-90654 effective July 6, 1984. 4. Limited Partnership Agreement, incorporated by reference to Registration Statement No. 2-90654 effective July 6, 1984. 9. Not Applicable 10. Not Applicable 11. Not Applicable 12. Not Applicable 13. Not Applicable 18. Not Applicable 19. Not Applicable 22. Not Applicable 23. Not Applicable 24. Not Applicable 25. Power of Attorney, incorporated by reference to Registration Statement No. 2-90654 effective July 5, 1984. 28. None
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMRECORP REALTY FUND II ROBERT J. WERRA, GENERAL PARTNER
/s/ Robert J. Werra
March 20, 2002