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, 2007 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:
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes: No: N
Indicate by check mark whether the registrant is a shell Partnership
(as defined in Rule 12b-2 of the Exchange Act).
Yes: No: N
REGISTRANT IS A LIMITED PARTNERSHIP
TABLE OF CONTENTS
Part I
Item 1. Financial Statements
The following Unaudited financial statements are filed herewith:
Balance Sheet as of March 31, 2007 and
December 31, 2006 Page 3
Statements of Operations for the Three
Months Ended March 31, 2007 and 2006 Page 4
Statements of Cash Flows for the Three and Three
Months Ended March 31, 2007 and 2006 Page 5
Item 2. Results of Operations and Management's Discussion
and Analysis of Financial Condition Page 6
Liquidity and Capital Resources Page 7
Item 3. Quantitative and Qualitative Disclosures about
Market Risk Page 7
Item 4. Controls and Procedures Page 7
Part II
Other Information Page 8
Signatures Page 9
The statements, insofar as they relate to the period
subsequent to December 31, 2006 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND II
Condensed Balance Sheets
March 31, December 31,
2007 2006
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $580,045 $580,045
Buildings and improvements 5,072,580 5,070,130
5,652,625 5,650,175
Less: Accumulated depreciation -4,343,592 -4,287,592
Real estate, net 1,309,033 1,362,583
Cash including cash investments 101,021 73,658
Due from Affiliate 0 2,063
Escrow deposits 110,443 182,023
Deferred Costs and Fees 74,053 77,950
Other assets 5,727 16,789
Total Assets $1,600,277 $1,715,066
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES:
Mortgage payable $3,805,564 $3,818,168
Payable to Affiliates 978 0
Interest payable 20,549 20,548
Real estate taxes payable 31,749 0
Security deposits 26,778 29,212
Accounts payable and accrued
expenses 34,767 180,254
Total Liabilities 3,920,385 4,048,182
PARTNERS CAPITAL (DEFICIT):
Limited Partners -2,247,629 -2,260,507
General Partners -72,479 -72,609
Total Partners Capital (Deficit) -2,320,108 (2,333,116)
Total Liabilities and Partners
Equity $1,600,277 $1,715,066
See notes to Condensed Financial Statements
AMRECORP REALTY FUND II
Condensed Statement of Operations
(Unaudited)
Three Months Ended
March 31,
REVENUES 2007 2006
Rental income $237,953 $226,675
Other property 10,665 5,479
Total revenues 248,618 232,154
EXPENSES
Salaries & wages 22,003 21,944
Maintenance & repairs 5,103 2,212
Utilities 10,230 10,454
Real estate taxes 31,749 31,749
General administrative 10,673 5,620
Contract services 12,895 12,923
Insurance 11,062 8,463
Interest 59,606 54,520
Depreciation and
amortization 56,000 50,000
Property management fees 12,391 11,573
Amortization of deferred
costs and fees 3,898 3,898
Total expenses 235,610 213,356
NET INCOME (LOSS) $13,008 $18,798
NET INCOME LIMITED PARTNERSHIP
UNIT BASIC $0.89 $1.28
Limited Partnership units
outstanding basic 14,544 14,544
See Notes to Condensed Financial Statements
AMRECORP REALTY FUND II
Condensed Statement of Cash Flows
Unaudited
Three Months Ended
March 31,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITY
Net income $13,008 $18,798
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 56,000 50,000
Net Effect of changes in operating accounts
Escrow deposits 71,580 107,799
Deferred Costs 3,897 3,897
Accrued real estate taxes 31,749 31,749
Security deposits (2,434) 2,209
Accounts payable (145,487) (135,403)
Other assets 11,062 8,463
Net cash provided by operating activities 39,375 87,512
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Real Estate (2,450) 0
Net cash used by investing activities (2,450) 0
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage notes payable (12,604) (13,057)
Proceeds from amounts due affiliates 978 1,484
Repayment of amounts due to affiliates 2,063 0
Increase in accrued interest 1 (851)
Net cash used by financing activities (9,562) (12,424)
NET INCREASE (DECREASE) IN CASH AND CASH 27,363 75,088
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 73,658 191,459
CASH AND CASH EQUIVALENT, END OF PERIOD $101,021 $266,547
See Notes to Condensed Financial Statements
Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared by Amrecorp Realty Fund II (the "Partnership") 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
Partnership 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 Partnership's
2006 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, 2007.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
Results of Operations
At March 31, 2007 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 97.9%
during the first quarter of 2007 as compared to 99.2% for the first
quarter of 2006.
FIRST THREE MONTHS 2007 COMPARED TO FIRST THREE MONTHS 2006
Revenue from property operations increased $16,464 or 7.09%, for the
first three months of 2007, as compared to the 2006 first three
months. Rental income increased $11,278 or 4.98% due to increased
rental rates. Other income increased $5,186 or 94.65% primarily due
to increased fees. The following table illustrates the components:
Increase Per Cent
(Decrease) Change
Rental income $11,278 4.98%
Other property 5,186 94.65%
$16,464 7.09%
Property operating expenses increased $22,254 or 10.43%, for the first
three months of 2007, as compared to the same period in 2006. This
was primarily due from increased maintenance. and repairs.
Maintenance increased $2,891 or 130.7% due to carpets purchased.
General & administrative increased $5,053 or 89.91% due to increased
legal. Insurance increased $2,599 or 30.71% due to higher insurance
rates. The following table illustrates the components by category:
Increase Per Cent
(Decrease) Change
Salaries & wages $59 0.27%
Maintenance & repairs 2,891 130.70%
Utilities (224) (2.14)%
General administrative 5,053 89.91%
Contract services (28) (0.22)%
Insurance 2,599 30.71%
Interest 5,086 9.33%
Depreciation and
amortization 6,000 12.00%
Property management fees 818 7.07%
Net Increase (Decrease) $22,254 10.43%
LIQUIDITY AND CAPITAL RESOURCES
The General Partner has listed the final property for sale with a
national brokerage firm. Provided we receive an acceptable offer we
anticipate selling the property by the end of 2007.
As of March 31, 2007, the Partnership had $101,021 in cash and cash
equivalents as compared to $73,658 as of December 31 2006. The net
increase in cash of $27,363 is principally due to cash flow from
operations.
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 adjustable rate mortgage as
of March 31, 2007, with an interest rate based on monthly LIBOR rate
plus 1.53% which is 6.25% (the maximum rate) as of March 31, 2007.
Required principal payments on this mortgage note for the three years
ended December 31, 2009, are $45,427, 48,014, and $50,759
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 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
from GEMSA Loan Services was obtained. The current note is payable in
monthly installments of principal and interest to be calculated on the
monthly LIBOR rate plus 1.53%, with a maximum rate of 6.25% 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.
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
None
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 3, 2007
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
Partnership;
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 Partnership 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 Partnership and its 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 Partnership'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 Partnership's
internal control over financial reporting that occurred
during the Partnership's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, the Partnership'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
Partnership'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
Partnership'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
Partnership's internal control over financial reporting.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
May 3, 2007
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 Partnership") on Form 10-Q for the period ending March 31,
2007 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 Partnership.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
May 3, 2007