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, 2005 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, 2005 and
December 31, 2004 Page 3
Consolidated Statements of Operations for the Three
Months Ended March 31, 2005 and 2004 Page 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2005 and 2004 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, 2004 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND II
Condensed Consolidated Balance Sheets
March 31, December 31,
2005 2004
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $580,045 $580,045
Buildings and improvements 5,027,932 4,920,932
5,607,977 5,500,977
Less: Accumulated depreciation (3,922,511) (3,872,511)
Real estate, net 1,685,466 1,628,466
Investments in Real Estate Held for Sale
Cash including cash investments 188,823 235,305
Escrow deposits 425,743 376,002
Deferred Costs and Fees 105,447 103,138
Other assets 5,195 14,395
Total assets $2,410,674 $2,357,306
LIABILITIES AND PARTNERS'
EQUITY:
LIABILITIES:
Mortgage and notes payable $3,902,842 $3,920,000
Payable to Affiliates 782 192
Real estate taxes payable 28,500 0
Security deposits 23,186 22,085
Accounts payable and accrued expenses 72,424 42,839
Total liabilities 4,027,734 3,985,116
PARTNERS CAPITAL (DEFICIT):
Limited Partners (1,544,335) (1,554,978)
General Partners (72,725) (72,832)
Total Partners Capital (Deficit) (1,617,060) (1,627,810)
Total $2,410,674 $2,357,306
Liability and Partners Equity
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND II
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended
March 31,
REVENUES 2005 2004
Rental income $225,129 $212,854
Other property 4,864 5,306
Total revenues 229,993 218,160
EXPENSES
Salaries & wages 24,136 21,920
Maintenance & repairs 21,580 22,039
Utilities 10,876 9,855
Real estate taxes 28,500 29,250
General administrative 6,285 5,800
Contract services 14,827 12,281
Insurance 9,200 15,556
Interest 38,656 49,611
Depreciation and amortization 50,000 49,000
Property management fees 11,500 10,908
Amortization of deferred 3,683 1,711
costs and fees
Total expenses 219,243 227,931
NET INCOME (LOSS) $10,750 ($9,771)
NET INCOME PER SHARE $0.73 $(0.67)
Number of shares outstanding 14,544 14,544
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND II
Condensed Consolidated Statement of Cash Flows
Unaudited
Three Months Ended
March 31,
2005 2004
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) $10,750 ($9,771)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 50,000 49,000
Net Effect of changes in operating accounts
Escrow deposits (49,741) 72,987
Deferred Costs (2,309) 1,711
Accrued real estate taxes 28,500 28,815
Security deposits 1,101 (564)
Accounts payable 29,585 (75,396)
Other assets 9,200 9,366
Net cash used by operating activities 77,086 76,148
CASH FLOWS FROM INVESTING ACTIVITIES
Real Estate Improvements (107,000) 0
Net cash used by investing activities (107,000) 0
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage notes payable (17,158) (19,009)
Proceeds from amounts due affiliates 590 3,788
Increase in accrued interest 0 (16,611)
Net cash provided by financing activities (16,568) (31,832)
NET INCREASE (DECREASE) IN CASH AND CASH (46,482) 44,316
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 235,305 240,219
CASH AND CASH EQUIVALENT, END OF PERIOD $188,823 $284,535
See Notes to Condensed Consolidated Financial Statements
Basis of Presentation:
The accompanying unaudited condensed consolidated financial
statements have been prepared by Amrecorp Realty Fund II (the
"Company") pursuant to the rules and regulations of the
Securities and Exchange Commission. The financial statements
reflect all adjustments that are, in the opinion of management,
necessary to fairly present such information. All such
adjustments are of a normal recurring nature. Although the
Company believes that the disclosures are adequate to make the
information presented not misleading, certain information and
footnote disclosures, including a description of significant
accounting policies normally included in financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America, have been condensed or
omitted pursuant to such rules and regulations.
These financial statements should be read in conjunction
with the financial statements and notes thereto included in the
Company's 2004 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. The results of operations
for interim periods are not necessarily indicative of the results
for any subsequent quarter or the entire fiscal year ending
December 31, 2005.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
Results of Operations
At March 31, 2005 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 98.4% during the first quarter of 2005 as
compared to 99.2% for the first quarter of 2004.
FIRST QUARTER 2005 COMPARED TO FIRST QUARTER 2004
Revenue from property operations increased $11,833 or 5.42%, for
the first quarter of 2005, as compared to the 2004 first quarter.
Rental income increased $12,275 or 5.77% due to increased rental
rates. Other income increased $442 or 8.33% primarily due to
decreased fees. The following table illustrates the components:
Increase Percent
(Decrease) Change
Rental income $12,275 5.77%
Other property (442) 8.33%
$11,833 5.42%
Property operating expenses increased $96,340 or 42.27%, for the
first quarter of 2005, as compared to the same period in 2004.
This was primarily due from decreased insurance. Insurance
decreased $6,356 or 40.86% due to negotiation of the flood
insurance provisions. Utilities increased $1,021 or 10.36% due
to higher electric rates. Contract services increased $2,546 or
20.73% increased pest control costs. Interest decreased $10,955
or 22.08% due the refinancing in December 2004 as discussed in
the liquidity and capital resources section. The following
table illustrates the components by category:
Increase Percent
(Decrease) Change
Salaries & wages $2,216 10.11%
Maintenance & repairs (459) 2.08%
Utilities 1,021 10.36%
Real estate taxes (750) 2.56%
General administrative 485 8.36%
Contract services 2,546 20.73%
Insurance (6,356) 40.86%
Interest (10,955) 22.08%
Depreciation and amortization 1,000 2.04%
Property management fees 592 5.43%
Net Increase (Decrease) ($10,660) 4.68%
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.
As of March 31, 2005, the Partnership had $188,823 in cash and
cash equivalents as compared to $235,305 as of December 31 2004.
The net decrease in cash of $46,482 is principally due to cash
used for investing and financing.
On December 31, 2004 the partnership distributed $100.00 per
limited partnership unit to units of record December 31, 2004.
This distribution was made from proceeds of refinancing Chimney
Square Apartments.
The property is encumbered by non-recourse mortgage as of March
31, 2005, with an interest rate of 4.254%. Required principal
payments on this mortgage note for the three years ended December
31, 2007, are $421,377, 487,996, and $519,385 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 December 14, 2004 the Partnership refinanced the loan on
Chimney Square Apartments. The original loan matured and a new
$3,920,000 loan bearing interest at 4.254% per year was secured
from Newport Mortgage Company L.P. The current note is payable in
monthly installments of principal and interest to be calculated
on the monthly LIBOR rate plus 1.53%, through January 2012.The
loan matures on January 2012. In connection with this loan, the
lender required, and the Partnership provided, a single asset
partnership known as Chimney Square Apartments, owned 99% by the
Fund.
Management intends to continue operating the Partnership in its
present form while investigating options to improve operations of
the Partnership.
Item 3 - Quantitative and Qualitative Disclosure about 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.
Item 4 - Controls and Procedures
Based on their most recent evaluation, which was completed
within 90 days of the filing of this Form 10-Q, our Acting
Principal Executive Officer and Chief Financial Officer, believe
our disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) are effective. There were not any
significant changes in internal controls or in other factors that
could significantly affect these controls subsequent to the date
of their evaluation, and there has not been any corrective action
with regard to significant deficiencies and material weaknesses.
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 5, 2005
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 5, 2005
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, 2005
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
May 5, 2005