SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2004 Commission file number 2-90654
AMRECORP REALTY FUND II
(Exact name of registrant as specified in its charter)
TEXAS 75-1956009
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification Number)
2800 N. Dallas Pkwy Suite 100
Plano, Texas 75093-5994
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 836-8000.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes: Y No:
REGISTRANT IS A LIMITED PARTNERSHIP
TABLE OF CONTENTS
Item 1. Financial Statements
The following Unaudited financial statements are filed herewith:
Consolidated Balance Sheet as of March 31, 2004 and
December 31, 2003 Page 3
Consolidated Statements of Operations for the Three
months Ended March 31, 2004 and 2003 Page 4
Consolidated Statements of Cash Flows for the Three
months Ended March 31, 2004 and 2003 Page 5
Item 2. Results of Operations and Management's Discussion and
Analysis of Financial Condition Page 6
Liquidity and Capital Resources Page 7
Other Information Page 9
Signatures Page 10
The statements, insofar as they relate to the period subsequent to
December 31, 2003 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND II
Condensed Consolidated Balance Sheets
March 31, December 31,
2004 2003
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $580,045 $580,045
Buildings and improvements 4,794,733 4,794,733
5,374,778 5,374,778
Less: Accumulated depreciation (3,729,782) (3,680,782)
Real estate, net 1,644,996 1,693,996
Investments in Real Estate Held for Sale
Cash including cash investments 284,535 240,219
Escrow deposits 129,855 202,842
Deferred Costs and Fees 6,272 7,983
Other assets 3,954 13,320
Total assets $2,069,612 $2,158,360
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES:
Mortgage and notes payable $2,118,537 $2,137,546
Payable to Affiliates 4,108 320
Interest payable 0 16,611
Real estate taxes payable 28,815 0
Security deposits 22,649 23,213
Accounts payable and accrued expenses 77,890 153,286
Total liabilities 2,251,999 2,330,976
PARTNERS CAPITAL (DEFICIT):
Limited Partners (109,469) (99,796)
General Partners (72,918) (72,820)
Total Partners Capital (Deficit) (182,387) (172,616)
Total Liability and Partners Equity $2,069,612 $2,158,360
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND II
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended
March 31,
REVENUES 2004 2003
Rental income $212,854 $213,885
Other property 5,306 5,713
Total revenues 218,160 219,598
EXPENSES
Salaries & wages 21,920 20,182
Maintenance & repairs 22,039 5,090
Utilities 9,855 8,452
Real estate taxes 29,250 29,250
General administrative 5,800 5,728
Contract services 12,281 11,762
Insurance 15,556 9,900
Interest 49,611 50,885
Depreciation and amortization 49,000 48,000
Property management fees 10,908 11,066
Amortization of deferred
costs and fees 1,711 1,711
Total expenses 227,931 202,026
NET INCOME (LOSS) ($9,771) $17,572
NET INCOME PER SHARE $(0.67) $1.21
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND II
Condensed Consolidated Statement of Cash Flows
Unaudited
Three Months Ended
March 31,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($9,771) $17,572
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 49,000 48,000
Net Effect of changes in operating accounts
Escrow deposits 72,987 39,347
Deferred Costs 1,711 (2,207)
Accrued real estate taxes 28,815 29,185
Security deposits (564) 1,309
Accounts payable (75,396) (93,558)
Other assets 9,366 13,816
Net cash used by operating activities 76,148 53,464
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used by investing activities 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage notes payable (19,009) (17,382)
Proceeds from amounts due affiliates 3,788 1,008
Increase in accrued interest (16,611) (17,028)
Net cash provided by financing activities (31,832) (33,402)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 44,316 20,062
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 240,219 7,833
CASH AND CASH EQUIVALENT, END OF PERIOD $284,535 $27,895
See Notes to Condensed Consolidated Financial Statements
Basis of Presentation:
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the
Partnership believes that the disclosures are adequate to make
the information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the
Partnership's latest annual report on Form 10-K.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
Results of Operations
At March 31, 2004 the Partnership owned one property, Chimney
Square Apartments located in Abilene Texas with approximately
126,554 net rentable square feet.
The occupancy of Chimney Square averaged 91.7 during the first
quarter of 2004 as compared to 95.0% for the first quarter of
2003.
FIRST QUARTER 2004 COMPARED TO FIRST QUARTER 2003
Revenue from property operations decreased $1,438 or 0.65%, for
the first quarter of 2004, as compared to the 2003 first quarter.
Rental income decreased $1,031 or 048% from vacancy. Other
income decreased $407 or 7.12% primarily due to decreased fees.
The following table illustrates the components:
Increase Percent
(Decrease) Change
Rental income ($1,031) 0.48%
Other property (407) 7.12%
($1,438) 0.65%
Property operating expenses increased $25,905 or 12.82%, for the
first quarter of 2004, as compared to the same period in 2003.
This was primarily due from increased maintenance & repairs.
Maintenance and repairs increased $16,949 or 332.99% due to
higher turnover cost and exterior building maintenance on the
property. Insurance increased $5,656 or 57.13% due to higher
property insurance rates. Utilities increased $1,403 or 16.60%
due to increased electric rates. Payroll increased $1,738 or
8.61% due to increased salaries. The following table illustrates
the components by category:
Increase Percent
(Decrease) Change
Salaries & wages $1,738 8.61%
Maintenance & repairs 16,949 332.99%
Utilities 1,403 16.60%
Real estate taxes 0 0.00%
General administrative 72 1.26%
Contract services 519 4.41%
Insurance 5,656 57.13%
Interest (1,274) 2.50%
Depreciation and amortization 1,000 2.08%
Property management fees (158) 1.43%
Net Increase (Decrease) $25,905 12.82%
FIRST QUARTER 2003 COMPARED TO FIRST QUARTER 2002
Revenue from property operations decreased $4,323 or 1.93%, for
the first quarter of 2003, as compared to the 2002 first quarter.
Rental income decreased $5,693 or 2.59% from higher vacancy
rates. Other income increased $1,370 or 31.55% primarily due to
increased fees. The following table illustrates the components:
Increase Percent
(Decrease) Change
Rental income ($5,693) 2.59%
Other property 1,370 31.55%
($4,323) 1.93%
Property operating expenses increased $1,366 or 0.68%, for the
first quarter of 2003, as compared to the same period in 2002.
This was primarily due from increased insurance. Insurance costs
increased $3,336 or 50.82% as a result of policy renewal.
General & administrative costs decreased $883 or 13.36% primarily
due to decreased legal expenditures. Contract services increased
$1,707 or 16.98% due to higher pest control and cable television
costs. The following table illustrates the components by
category:
Increase Percent Material
(Decrease) Change Changes
Salaries & wages ($1,268) 5.91% 0
Maintenance & repairs 54 1.07% 0
Utilities (688) 7.53% 0
Real estate taxes 501 1.74% 0
General administrative (883) 13.36% (883)
Contract services 1,707 16.98% 1,707
Insurance 3,336 50.82% 3,336
Interest (1,160) 2.23% 0
Depreciation and amortization 0 0.00% 0
Property management fees (233) 2.06% 0
Net Increase (Decrease) $1,366 0.68% 4,160
LIQUIDITY AND CAPITAL RESOURCES
While it is the General Partners primary intention to operate and
manage the existing real estate investments, the General Partner
also continually evaluates this investment in light of current
economic conditions and trends to determine if these assets
should be considered for disposal. Accordingly, 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 proceeds from the sale
were 1.3 million dollars resulting in cash distribution of
$100.00 per unit.
As of March 31, 2004, the Partnership had $284,535 in cash and
cash equivalents as compared to $240,219 as of December 31 2003.
The net increase in cash of $44,316 is principally due to cash
flow from operations.
On September 30, 2002 the partnership distributed $15.00 per
limited partnership unit to units of record September 30, 2002.
This distribution was made from excess cash on hand from cash
flow from operations.
The property is encumbered by non-recourse mortgage as of March
31, 2004, with an interest rate of 9.325%. Required principal
payments on this mortgage note for the two years ended December
31, 2005, are $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 future Partnership acquisitions and balloon mortgage
payments will be proceeds from the sale, financing or refinancing
of the properties.
On February 7, 1995 the Partnership refinanced the loan on
Chimney Square Apartments. The original loan matured and a new
$2,475,000 loan bearing interest at 9.325% per year was secured
from Newport Mortgage Company L.P. The loan matures on March 1,
2005. In connection with this loan, the lender required, and the
Partnership provided, a new single asset partnership known as
Chimney Square Apartments, owned 99% by the Fund.
In February 1991, Amrecorp Realty Inc., resigned as the Managing
General Partner of the Partnership. As was communicated to all
limited partners, this step was taken in order to minimize any
effect that Amrecorp's financial difficulties might have on the
partnership. Management of the Partnership's assets is performed
by Univesco, Inc., a Texas corporation, Robert J. Werra, CEO.
Management intends to continue operating the Partnership in its
present form while investigating options to improve operations of
the Partnership.
Part II
Other Information
Item 1. Legal Proceedings
See Part I Item 2. Management's Discussion
and Analysis of Financial Conditions and
Results of Operations.
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matter to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
None
(A) The following documents are filed herewith
or incorporated herein by reference as indicated
as Exhibits:
Exhibit Designation Document Description
Limited Partnership Agreement
incorporated by reference to
Registration Statement No. 2-90654
effective July 6, 1984.
Limited Partnership Agreement
incorporated by reference to
Registration Statement No. 2-90654
effective July 6, 1984.
11 Not Applicable
15 Not Applicable
18 Not Applicable
19 Not Applicable
20 Not Applicable
23 Not Applicable
31.1 Certification Pursuant to
Rules 13a-14 and 15d-14 Under
the Securities Exchange Act of
1934, as Adopted Pursuant to
Section 302 of the Sarbanes-
Oxley Act of 2002, filed
herewith.
32.1 Certification Pursuant to 18
U.S.C. Section 1350, as
Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act
of 2002, filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
AMRECORP REALTY FUND II
a Texas limited partnership
By: /s/ Robert J. Werra
Robert J. Werra,
General Partner
Date: May 6, 2004
Exhibit 31.1
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I Robert J. Werra, Acting Principal Executive Officer and Chief
Financial Amrecorp Realty Fund II ("the Company"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
Company;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
report, fairly present in all material respects the
financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented
in this quarterly report;
4. I am responsible for establishing and maintaining
disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Company and
have:
a. designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material
information relating to the company and its consolidated
subsidiaries is made known to me by others within those
entities, particularly for the periods presented in this
quarterly report;
b. designed such internal control over financial reporting,
or caused such internal control over financial reporting
to be designed under my supervision, to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles.
c. evaluated the effectiveness of the Company's disclosure
controls and procedures and presented in this report my
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - continued
d. disclosed in this report any change in the Company's internal
control over financial reporting that occurred during the
Company's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting; and
5. I have disclosed based on my most recent evaluation of
internal control over financial reporting, to the Company's
auditors and Audit Committee of the Board of Directors (or
persons fulfilling the equivalent function):
a. all significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
Company's ability to record, process, summarize, and report
financial data; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Company's internal control over financial reporting.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
May 6, 2004
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Amrecorp Realty Fund II
("the Company") on Form 10-Q for the period ending March 31, 2004
as filed with the Securities and Exchange Commission on the date
hereof ("the Report"), I, Robert J. Werra, Acting Principal
Executive Officer and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
October 31, 2003