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 June 30, 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 June 30, 2007 and
December 31, 2006 Page 3
Statements of Operations for the Three and Six
Months Ended June 30, 2007 and 2006 Page 4
Statements of Cash Flows for the Six
Months Ended June 30, 2007 and 2006 Page 5
Item 2. Results of Operations and Management's Discussion and
Analysis of
Financial Condition Page 6
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
June 30, December 31,
2007 2006
(Unaudited)
ASSETS
Real estate held-for-sale,
net of depreciation $1,406,302 $1,544,606
Cash including cash investments 155,639 73,658
Due from Affiliate --- 2,063
Deferred Costs and Fees 70,155 77,950
Other assets 29,335 16,789
Total Assets $1,661,431 $1,715,066
LIABILITIES AND PARTNERS'
EQUITY:
LIABILITIES:
Liabilities related to assets
held-for-sale $3,920,348 $4,023,547
Payable to Affiliates 200 ---
Accounts payable and accrued
expenses 29,635 24,635
Total Liabilities 3,950,183 4,048,182
PARTNERS CAPITAL (DEFICIT):
Limited Partners -2,216,587 -2,260,507
General Partners -72,165 -72,609
Total Partners Capital -2,288,752 (2,333,116)
(Deficit)
Total Liabilities and
See notes to Condensed Financial Statements
AMRECORP REALTY FUND II
Condensed Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30
REVENUES 2007 2006 2007 2006
Interest Income 1,155 1,465 1,810 2,209
Total revenues 1,155 1,465 1,810 2,209
EXPENSES
General administrative 4,350 15,803 8,035 18,529
Total expenses 4,350 15,803 8,035 18,529
Net loss from continuing
operations (3,195) (14,338) (6,225) (16,320)
Net income from discontinued
operations 34,551 13,837 50,589 34,617
NET INCOME (LOSS) $31,356 ($501) $44,364 $18,297
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT - BASIC $2.13 $(0.03) $3.02 $1.25
Limited Partnership units
outstanding Basic 14,544 14,544 14,544 14,544
See Notes to Condensed Financial Statements
AMRECORP REALTY FUND II
Condensed Statement of Cash Flows
Unaudited
June Months Ended
June 30,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITY
Net income $44,364 $18,297
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization 103,540 107,795
Net Effect of changes in operating accounts
Escrow deposits 50,909 107,670
Accrued real estate taxes 63,498 63,498
Security deposits (2,062) 3,854
Accounts payable (139,659) (129,412)
Other assets (12,546) (24,164)
Net cash provided by operating activities 108,044 147,538
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Real Estate (8,350) (18,000)
Net cash used by investing activities (8,350) (18,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage notes payable (24,086) (24,027)
Proceeds from amounts due affiliates 4,310 2,105
Repayment of amounts due to affiliates 2,063 0
Increase in accrued interest --- (851)
Net cash used by financing activities (17,713) (22,773)
NET INCREASE (DECREASE) IN CASH AND CASH 81,981 106,765
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF 73,658 191,459
PERIOD
CASH AND CASH EQUIVALENT, END OF PERIOD $155,639 $298,224
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.
Real Estate Held For Sale & Discontinued Operations
In June 2007, the Partnership entered into a purchase and sale
agreement to the sell the Partnership's final property located
in Texas to a third party for $6,250,000. As a result, as
required by Financial Accounting Standard No. 144 , "Accounting
for the Impairment or Disposal of Long-Lived Assets", the
property and related assets and liabilities are classified as
held for sale on the balance sheets, depreciation ceased and
the property's operations are included in discontinued
operations in the statements of operations for each of the
periods presented. The sale is expected to close in the third
quarter of 2007.
Real estate held-for-sale includes the following:
June 30, December 31,
2007 2006
Property at net book value $ 1,275,188 $ 1,362,583
Escrow deposits 131,114 182,023
Real estate held-for-sale,
net of depreciation $ 1,406,302 $ 1,544,606
Liabilities relating to assets held-for-sale include:
June 30, December 31,
2007 2006
Mortgage payable $ 3,794,082 $ 3,818,168
Real estate taxes payable 63,498 ---
Security deposits 27,150 29,212
Accounts Payable 35,618 176,167
Liabilities related to assets
held-for-sale $ 3,920,348 $ 4,023,547
The operations of the property for the three and six months
ending June 30, 2007 and 2006 are included in discontinued
operations in the statements of operations. The following
tables summarize the revenue and expense information for the
discontinued operations:
Six months ended
June 30
2007 2006
Rents and other property revenues $ 502,715 $ 479,258
Operating expenses 452,126 444,641
Operating income $ 50,589 $ 34,617
Other income (expense) --- ---
Net income from discontinued
operations $ 50,589 $ 34,617
Three months ended
June 30
2007 2006
Rents and other property revenues $ 254,752 $ 247,848
Operating expenses 220,201 234,011
Operating income $ 34,551 $ 13,837
Other income (expense) --- ---
Net income from discontinued
operations $ 34,551 $ 13,837
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
Results of Operations
At June 30, 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
99.2% during the second quarter of 2007 as compared to 95.8% for the
second quarter of 2006.
SECOND QUARTER 2007 COMPARED TO SECOND QUARTER 2006
Revenue from continuing operations decreased $310 or 21.16%, for the
second quarter of 2007, as compared to the 2006 second quarter.
Interest income accounted for the decrease. The following table
illustrates the components:
Increase Per Cent
(Decrease) Change
Interest Income $(310) 21.16%
Net Decrease $(310) 21.16%
Continuing operating expenses decreased $11,453 or 72.4%, for the
second quarter of 2007, as compared to the same period in 2006.
General & administrative decreased $11,453 or 72.4%. The following
table illustrates the components by category:
Increase Per Cent
(Decrease) Change
General administrative $(11,453) 72.4%
Net (Decrease) $(11,453) 72.4%
FIRST SIX MONTHS 2007 COMPARED TO FIRST SIX MONTHS 2006
Revenue from continuing operations decreased $399 or 18.06%, for the
first six months of 2007, as compared to the 2006 first six months.
Interest income accounted for the decrease. The following table
illustrates the components:
Increase Per Cent
(Decrease) Change
Interest Income $(399) 18.06%
Net Decrease $(399) 18.06%
Continuing operating expenses decreased $10,494 or 56.63%, for the
first six months of 2007, as compared to the same period in 2006.
General & administrative decreased $10,494 or 56.63%. The following
table illustrates the components by category:
Increase Per Cent
(Decrease) Change
General administrative $(10,494) 56,63%
Net (Decrease) $(10,494) 56.63%
LIQUIDITY AND CAPITAL RESOURCES
The General Partner has signed a contract to sell Chimney Square
Apartments over the next few months. We anticipate a distribution
of approximately $140 per limited partnership unit shortly after the
sale closes.
As of June 30, 2007, the Partnership had $155,639 in cash and cash
equivalents as compared to $73,658 as of December 31 2006. The net
increase in cash of $81,981 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
with an interest rate based on monthly LIBOR rate plus 1.53% which
is 6.25% (the maximum rate) as of June 30, 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.
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 its 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 June 30,
2007 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
(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: August 9, 2007
Exhibit 31.1
CERTIFICATION
I, Robert J. Werra, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
American Republic Realty Fund;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this 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 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
registrant and have:
(a) Designed such disclosure
controls and procedures, or caused such disclosure
controls and procedures to be designed under our
supervision, to ensure that material information relating
to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared;
(b) Designed such internal
control over financial reporting, or caused such internal
control over financial reporting to be designed under our
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 registrant's disclosure controls and
procedures and presented in this report our 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
(d) Disclosed in this report
any change in the registrant's internal control over
financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(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
registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not
material, that involves management or other employees who
have a significant role in the registrant's internal
control over financial reporting.
Date: August 9, 2007 /s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive
Officer and Chief Financial
Officer
Exhibit 32.1
CERTIFICATION
Pursuant to 18 United States Code 1350
I, Robert J. Werra, General Partner of Amrecorp Realty Fund II,
hereby certify that the Quarterly Report on Form 10-Q for the
quarter ended June 30, 2007 of Amrecorp Realty Fund II (the
"Company") filed with the Securities and Exchange Commission on the
date hereof fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that the
information contained in such report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: August 9, 2007 /s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive
Officer and Chief Financial
Financial Officer