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, 2006, the Partnership consisted of an individual general partner, Mr. Robert J. Werra (the "General Partner") and 1,470 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, 2006, 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. In addition, operating expenses and capitalized expenditures have increased as units are updated and made more competitive in the market place.
In March 2007, Robert Werra, the general partner, filed with the Securities and Exchange Commission preliminary consent solicitation material in which Mr. Werra is seeking the consent of the limited partners for him to purchase the sole asset of Amrecorp Realty Fund II, the Chimney Square Apartments, at a purchase price of its appraised value of $5,250,000. This transaction is subject to approval of limited partners holding 66-2/3 % of the limited partnership units, excluding any units held by Robert Werra or his affiliates. If the sale to Mr. Werra is approved and completed, the general partner estimates that, after payment of partnership indebtedness, the limited partners would receive a distribution from the partnership of approximately $95 to $100 per limited partnership unit, and the partnership would be terminated. At the time of the filing of this Form 10-K, the partnership is working with the Securities and Exchange Commission to finalize the consent solicitation material in preparation for mailing the material to the limited partners.
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, 2006 the Partnership owned one property, Chimney Square Apartments.
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.
Occupancy Rates
Percent
2002 2003 2004 2005 2006 Chimney Square 96.1% 94.5% 99.2% 96.9% 98.1%
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, 2006 there were approximately 1,470 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, Everest Management, LLC has acquired 990.25 units, approximately 9%, of the outstanding Interests of the partnership from 2001 though 2005 (as reported in Item 12(b)). Also, Equity Resources has purchased 920 units or 8.36% of the fund between 2000 and 2002. 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 2006 and 2005 the partnership distributed $25 per limited partnership unit. In 2004 the partnership distributed $100 per limited partnership unit. In 2002 the partnership distributed $15 per limited partnership unit. 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 2002 $15 $0 $15 2003 $17 $0 $0 2004 $10 $0 $100 2005 $13 $0 $25 2006 $12 $0 $25
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: 2006 VERSUS 2005
Revenue from Property Operations increased $23,706 or 2.5% as compared to 2005, due to increased rental rates and occupancy. Other income for 2006 increased $211 primarily due to increased fee income. The following table illustrates the increases:
Increase/ (Decrease)
Rentals $23,495 Fees and other 211 Net Increase $23,706
Property operating expenses for 2006 decreased $8,213 from 2005 or 1.1%. Repairs and maintenance decreased $12,995 or 14.1% due to fewer deferred maintenance projects being performed. Payroll decreased $3,959 or 3.5% due to decreased employees. Utilities decreased $5,495 or 12.4% due to lower electric rates. Real estate taxes decreased $3,221 or 2.6% primarily due to decreased tax rates. General and administrative increased $12,138 or 13.3% due to higher partnership legal bills. The following table illustrates the increases or (decreases):
Increase (Decrease) Depreciation and amortization $4,049 Real estate taxes (3,221) Payroll (3,959) Repairs and maintenance (12,995) General and administrative 12,138 Property management fee affiliate 1,270 Utilities (5,495) Net Decrease $(8,213)
Results of Operations: 2005 VERSUS 2004
Revenue from Property Operations increased $8,959 or 0.96% as compared to 2004, due to increased rental rates. Other income for 2005 decreased $2,906 primarily due to decreased fee income. The following table illustrates the increases:
Increase/ (Decrease)
Rentals $11,865 Fees and other (2,906) Net Increase $8,959
Property operating expenses for 2005 increased $1,067 from 2004 or 0.14%. Repairs and maintenance decreased $55,038 or 37.5% due to fewer deferred maintenance projects being performed. Payroll increased $13,371 or 13.5% due to higher salaries. Utilities increased $1,863 or 4.4% due to higher electric rates as a result of higher natural gas prices. Real estate taxes increased $8,227 or 7.0% primarily due to increased assessed valuations. . General and administrative increased $10,869 or 13.5% due to postage for partnership mailings. Depreciation and amortization increased $21,394 or 10.7% due to 2005 including a full year's amortization of deferred financing costs associated with the refinancing of the mortgage in December 2004 as well as 2005 including a full year's depreciation on significant additions to building improvements in 2004. The following table illustrates the increases or (decreases):
Increase (Decrease)
Repairs and maintenance $(55,038) Property management fee to affiliate 381 Utilities 1,863 Real estate taxes 8,227 Depreciation and amortization 21,394 General administrative 10,869 Payroll 13,371 Net Increase $1,067
Liquidity and Capital Resources
In March 2007, Robert Werra, the general partner, filed with the Securities and Exchange Commission preliminary consent solicitation material in which Mr. Werra is seeking the consent of the limited partners for him to purchase the sole asset of Amrecorp Realty Fund II, the Chimney Square Apartments, at a purchase price of its appraised value of $5,250,000. This transaction is subject to approval of limited partners holding 66-2/3 % of the limited partnership units, excluding any units held by Robert Werra or his affiliates. If the sale to Mr. Werra is approved and completed, the general partner estimates that, after payment of partnership indebtedness, the limited partners would receive a distribution from the partnership of approximately $95 to $100 per limited partnership unit, and the partnership would be terminated. At the time of the filing of this Form 10-K, the partnership is working with the Securities and Exchange Commission to finalize the consent solicitation material in preparation for mailing the material to the limited partners.
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.
The partnership refinanced its mortgage note during December 2004. The proceeds from the refinancing enabled the partnership to issue a distribution in the amount of $100 per limited partnership unit.
As of December 31, 2006, the Partnership had $73,658 in cash and cash equivalents as compared to $191,459 as of December 31, 2005. The net decrease in cash of $117,801 is principally due to distributions paid during 2006.
The remaining property is encumbered by a non-recourse mortgage as of December 31, 2006, with an interest rate of 6.25%. Required principal payments on this mortgage note for the five years ended December 31, 2011, are $45,427; $48,014; $50,759; $55,027 and $58,877 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. 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.
Item 8
Item 8 Financial Statements and Supplemental Information
AMRECORP REALTY FUND II FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
December 31, 2006 and 2005
Page
Report of Independent Registered Public Accounting Firm 2
Financial Statements
Balance Sheets as of December 31, 2006 and 2005 3
Statements of Income for the years ended December 31, 2006, 2005 and 2004 4
Statements of Partners' Equity (Deficit) for the years ended December 31, 2006, 2005 and 2004 5
Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004 6
Notes to Financial Statements 7
Schedule III - Real Estate and Accumulated Depreciation 15
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.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2006 and 2005, and the related statements of income, partners' equity (deficit), and cash flows for the years ended December 31, 2006, 2005 and 2004. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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, 2006 and 2005 financial statements referred to above present fairly, in all material respects, the financial position of Amrecorp Realty Fund II as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years ended December 31, 2006, 2005 and 2004 in conformity with accounting principles generally accepted in the United States of America.
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, 2006 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.
Farmer Fuqua & Huff, P.C.
March 2, 2007 Plano, Texas AMRECORP REALTY FUND II BALANCE SHEETS December 31,
ASSETS 2006 2005
Investments in real estate at cost Land $580,045 $580,045 Buildings, improvements and furniture and fixtures 5,070,130 5,040,345
5,650,175 5,620,390 Accumulated depreciation (4,287,592) (4,078,027)
1,362,583 1,542,363
Cash and cash equivalents 73,658 191,459 Due from affiliates 2,063 --- Deferred financing costs, net of accumulated amortization of $31,180 and $15,590, respectively 77,950 93,540 Escrow deposits 182,023 261,607 Other assets 16,789 13,125
TOTAL ASSETS 1,715,066 2,102,094
LIABILITIES AND PARTNERS' EQUITY
Mortgage payable 3,818,168 3,864,817 Accounts payable and accrued expenses 155,919 142,287 Due to affiliates --- 705 Accrued interest payable 20,548 18,680 Distributions payable 24,335 23,935 Security deposits 29,212 24,141
TOTAL LIABILITIES 4,048,182 4,074,565
PARTNERS' EQUITY (2,333,116) (1,972,471)
TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT) $1,715,066 $2,102,094
AMRECORP REALTY FUND II STATEMENTS OF INCOME For the Years Ended December 31,
2006 2005 2004
PROPERTY REVENUES Rentals $938,936 $915,441 $903,576 Fees and other 26,037 25,826 28,732
Total property revenues 964,973 941,267 932,308
OPERATING EXPENSES Depreciation and amortization 225,155 221,106 199,712 Real estate taxes 123,010 126,231 118,004 Payroll 108,675 112,634 99,263 Repairs and maintenance 78,906 91,901 146,939 General and administrative 103,477 91,339 80,470 Property management fee to affiliate 48,266 46,996 46,615 Utilities 38,862 44,357 42,494 Administrative services fees to affiliate 5,472 5,472 5,472
Total operating expenses 731,823 740,036 738,969
OPERATING INCOME 233,150 201,231 193,339
FINANCIAL INCOME AND (EXPENSE) Interest income 9,112 2,114 247 Interest expense (239,307) (184,006) (194,780) Total other income and (expense) (230,195) (181,892) (194,533)
NET INCOME (LOSS) $ 2,955 $19,339 $(1,194)
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT - BASIC
Net income (loss) per unit-basic $.20 $1.32 $(.08)
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, 2006, 2005, and 2004
General Limited Partner Partners Total
Balance, January 1, 2004 (72,820) (99,796) (172,616)
Distributions --- (1,454,000) (1,454,000)
Net loss (12) (1,182) (1,194)
Balance, December 31, 2004 $(72,832) $(1,554,978) $(1,627,810)
Distributions --- (364,000) (364,000)
Net income 193 19,146 19,339
Balance, December 31, 2005 $(72,639) $(1,899,832) $(1,972,471)
Distributions --- (363,600) (363,600)
Net income 30 2,925 2,955
Balance, December 31, 2006 $(72,609) $(2,260,507) $(2,333,116)
AMRECORP REALTY FUND II STATEMENTS OF CASH FLOWS For the Years Ended December 31,
2006 2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES Net income $2,955 $19,339 $(1,194) Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 225,155 221,106 199,712 Changes in assets and liabilities: Due from affiliates (2,063) --- --- Escrow deposits 35,888 (116,556) (2,277) Other assets (3,664) 1,270 (1,075) Accrued interest payable 1,868 18,680 (16,611) Due to affiliates (705) 513 (128) Accounts payable and accrued expenses 13,633 124,632 23,865 Security deposits 5,071 2,056 (1,128)
Net cash provided by operating activities 278,138 271,040 201,164
CASH FLOWS FROM INVESTING ACTIVITIES Investments in real estate (29,785) (119,412) (126,199) Deposits to reserve for replacements (34,777) (37,387) (32,220) Disbursements from reserve for replacements 78,472 268,338 22,038
Net cash provided by (used for) investing activities 13,910 111,539 (136,381)
CASH FLOWS FROM FINANCING ACTIVITIES Payments on mortgages and notes payable (46,649) (55,183) (59,039) Proceeds from borrowings --- --- 1,540,762 Distributions (363,600) (364,000)(1,454,000) Deferred financing costs --- (5,992) (97,420) Distributions payable 400 (1,250) ---
Net cash used for financing activities (409,849) (426,425) (69,697)
Net decrease in cash and cash equivalents (117,801) (43,846) (4,914)
Cash and cash equivalents at beginning of period 191,459 235,305 240,219
Cash and cash equivalents at end of period $73,658 $191,459 $235,305
Supplemental disclosure of cash flow information: Cash paid during the year for interest $237,439 $165,326 $211,390
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005
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, 2006. Under the terms of the offering, no additional units will be offered.
ALLOCATION OF NET INCOME (LOSS) AND CASH
Net operating income and loss are allocated 1% to general partners and 99% to limited partners. Net operating cash flow, as defined in the partnership agreement, shall be distributed to the limited and general partners first to the limited partners in an amount equal to a variable distribution preference on capital contributions for the current year and then to the extent the preference has not been satisfied for all preceding years, and, thereafter, 10% to the general partner and 90% 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.
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 U.S. generally accepted accounting principles.
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Recent Accounting Pronouncements
In May 2005, the FASB issued Statement No. 154, "Accounting Changes and Error Corrections" ("Statement No. 154"). Statement No. 154, which replaces APB Opinion No. 20, "Accounting Changes" and FASB Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements", changes the requirements for the accounting for and reporting of a change in accounting principle. The statement requires retrospective application of changes in accounting principle to prior periods' financial statements unless it is impracticable to determine the period-specific effects or the cumulative effect of the change. Statement No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of Statement No. 154 is not expected to have a material impact on the financial position, results of operations or cash flows of the Partnership.
In June 2005, the FASB ratified the consensus in EITF Issue No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" ("Issue 04-5"), which provides guidance in determining whether a general partner controls a limited partnership. Issue 04-5 states that the general partner in a limited partnership is presumed to control that limited partnership. The presumption may be overcome if the limited partners have either (1) the substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause or (2) substantive participating rights, which provide the limited partners with the ability to effectively participate in significant decisions that would be expected to be made in the ordinary course of the limited partnership's business and thereby preclude the general partner from exercising unilateral control over the partnership. Issue 04-5 is not expected to have a material effect on the financial position, results of operations or cash flows of the Partnership.
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. AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
Investments in Real Estate and Depreciation
All real estate holdings are stated at cost or adjusted carrying value. Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long- Lived Assets" ("SFAS No. 144"), requires that a property be considered impaired if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the property. If impairment exists, an impairment loss is recognized, by a charge against earnings, equal to the amount by which the carrying amount of the property exceeds the fair value less cost to sell the property. If impairment of a property is recognized, the carrying amount of the property is reduced by the amount of the impairment, and a new cost for the property is established. Such new cost is depreciated over the property's remaining useful life. Depreciation is provided by the straight-line method over estimated useful lives, which range from 5 to 27.5 years. There was no charge to earnings during 2006 due to an impairment of real estate.
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.
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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, 2006.
At December 31, 2006 and 2005, included in cash and cash equivalents is $70,529 and $185,475, respectively, which is cash held in a pooled account of the property's management company, as a fiduciary, in a financial institution and could be at risk.
Use of Estimates
The preparation of financial statements in conformity with U.S. 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.
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, 2006, 2005, 2004, 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. AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005
NOTE B - MORTGAGE PAYABLE
The company had mortgages payable of $3,818,168 and $3,864,817 at December 31, 2006 and 2005, respectively. Prior to refinancing in December 2005, the note had an interest rate of 9.325% and was payable in monthly installments of principal and interest of $21,324 through March 2005, at which time a lump sum payment of approximately $2,069,000 was due. 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. This mortgage note is secured by real estate with a net book value of $1,362,583.
At December 31, 2006, estimated required principal payments due under the maximum "capped" stated terms of 6.25%, per the Partnership's mortgage note payable are as follows:
2007 45,427 2008 48,014 2009 50,759 2010 55,027 2011 58,877 Thereafter 3,560,064
$3,818,168
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 were earned by an affiliate of the general partner in 2006, 2005 and 2004:
2006 2005 2004 Property management fee $48,266 $46,996 $46,615 Administrative service fee 5,472 5,472 5,472
Resulting from the above transactions, amounts due from (to) an affiliate of the general partner as of December 31, 2006 and 2005 totaled $2,063 and $(705), respectively.
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005
NOTE D - ACCUMULATED AMORTIZATION
At December 31, 2006, amortization expense for deferred financing costs over the next five years is as follows:
2007 15,590 2008 15,590 2009 15,590 2010 15,590 2011 15,590
$77,950
NOTE E - COMMITMENTS
The Partnership will pay a real estate commission to the general partner or his affiliates in an amount not exceeding the lesser 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.
NOTE F - 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 U.S. generally accepted accounting principals ("GAAP"), the excess of revenues over expenses for 2006 would have been as follows:
Net loss per accompanying financial statements $2,955
Add - book basis depreciation using straight-line method 209,565
Deduct - amount capitalized for book and expensed for tax (12,800)
Deduct - income tax basis depreciation expense using ACRS method (27,518)
Excess of revenues over expenses, accrual income tax basis $172,202
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005
NOTE G - 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 judgment 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 value of its mortgage payable 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, 2006 and 2005.
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.
NOTE H - SUBSEQUENT EVENT
On March 2, 2007, the Partnership filed a preliminary consent of solicitation statement seeking the consent of limited partnership unit holders for the Partnership to sell the final property of the Partnership to an affiliate of the general partner for a sales price of $5,250,000. The property has a net book value of $1,362,583 and an outstanding mortgage payable of $3,818,168 at December 31, 2006. The sale is contingent on obtaining the consent of sixty-six and two-thirds percent of the outstanding limited partnership unit holders excluding those limited partnership units owned by the general partner or its affiliate. The closing of the sale would take place on or before the earliest occurrence of (1) ten days following the purchaser obtaining written approval from the lender to assume the existing loan or (2) 90 days after the approval of 66-2/3s of the limited partnership unit holders. Should the limited partnership unit holders approve the sale of the final property of the Partnership and the sale be completed, it is management's intention to dissolve the Partnership.
AMRECORP REALTY FUND II NOTES TO FINANCIAL STATEMENTS December 31, 2006 and 2005
NOTE I - QUARTERLY DATA (UNAUDITED)
The table below reflects the Partnership's selected quarterly information for the years ended December 31, 2006 and 2005.
Year ended December 31, 2006 First Second Third Fourth Quarter Quarter Quarter Quarter
Rents and other property revenue $231,409 $ 247,848 $ 240,828 $ 244,888 Operating expenses 158,836 189,477 180,661 202,849 Operating income 72,573 58,371 60,167 42,039 Other income (expense) (53,775) (58,872) (58,394) (59,154) Net income (loss) $18,798 $(501) $1,773 $(17,115) Net income (loss) allocable to limited partnership unit $18,610 $(496) $1,755 $(16,944) Net income (loss) per limited unit - basic and diluted $1.28 $(.03) $.12 $(1.17)
Year ended December 31, 2005 First Second Third Fourth Quarter Quarter Quarter Quarter
Rents and other property revenue $229,992 $244,636 $234,798 $231,841 Operating expenses 180,587 181,346 181,963 196,140 Operating income 49,405 63,290 52,835 35,701 Other income (expense) (38,655) (42,432) (47,738) (53,067) Net income (loss) $10,750 $20,858 $5,097 $(17,366) Net income (loss) allocable to limited partnership unit $10,643 $20,649 $5,046 $(17,192) Net income (loss) per limited unit - basic and diluted $0.73 $1.42 $0.35 $(1.18)
AMRECORP REALTY FUND II Schedule III - Real Estate and Accumulated Depreciation December 31, 2006
Initial Cost to Partnership
Description Encumbrances Land Building Total Cost and Subsequent to Improvements Acquisitions
A 128-unit two-story apartment community of wooden frame construction acquired combination brick veneer and wood siding exterior located in Abilene, Texas (b) $580,045 $4,341,569 $728,561
Gross Amounts at Which Carried at Close of Year
Description Land Buildings Total Accumulated and (c)(d) Deprteciation Improvements (c)
A 128-unit two-story apartment community of wooden frame construction acquired combination brick veneer and wood siding exterior located in Abilene, Texas $580,045 $5,070,130 $5,650,175 $4,287,592
Description Date of Date Life on Which Construction Acquired Depreciation Is Computed A 128-unit two-story apartment community of wooden frame construction acquired combination brick veneer and wood siding exterior located in Abilene, Complete at Texas 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, 2006
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, 2006, 2005 and 2004 is as follows:
Investments in Accumulated Real Estate Depreciation
Balance, January 1, 2004 $5,374,779 $3,680,782
Acquisitions 126,199 --- Depreciation expense --- 191,729
Balance, December 31, 2004 $5,500,978 $3,872,511
Acquisitions 119,412 --- Depreciation expense --- 205,516
Balance, December 31, 2005 $5,620,390 $4,078,027
Acquisitions 29,785 --- Depreciation expense --- 209,565
Balance, December 31, 2006 $5,650,175 $4,287,592
(d) Aggregate cost for federal income tax purposes is $5,654,967.
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.
Item 9a.
Item 9a. Controls and Procedures
Based on their most recent evaluation, which was completed within 90 days of the filing of this Form 10-K, our Principal Financial Officer and Principal Executive 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 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, 67, the General Partner, 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 Renumeration 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, 2006, 2005, and 2004, property management fees earned totaled $48,266, $46,996, and $46,615, 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, 2006, 2005, and 2004, 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.
Amount and Nature Title Name of of Beneficial Percent of Class Beneficial Owner Ownership of Interest
Limited Everest Management, LLC 990.25 6.8% Partnership Interests Equity Resources 920 6.3%
(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, 2007.
Title Name of Amount and Nature Percent of Class Beneficial Owner of Beneficial Owners of Interest
Limited Robert J. Werra 86 units 0.59% Partnership 2800 N Dallas Pkwy #100 Interests Plano, Texas 75093
(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 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). Item 14.
Item 14. Principal Accounting Fees and Services
The following table sets forth the aggregate fees for professional services rendered to the Partnership for the years 2006 and 2005 by the Partnership's principal accounting firm, Farmer, Fuqua, & Huff, P.C.
Type of Fees 2006 2005
Audit Fees $12,250 $11,500 Audit related fees --- --- Tax fees --- --- All other fees --- ---
PART IV
Item 15.
Item 15. 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, 2006.
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 14. Code of Ethics for Senior Financial Officers 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 31. Certification 32. Officers Section 1350 Certifications
(d) Financial Statement Schedules excluded from the annual report 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 30, 2007
EXHIBIT 14
Code of Ethics for Senior Financial Officers
The principal executive officer, president, principal financial officer, chief financial officer, principal accounting officer and controller (all, the partnership's "Senior Financial Officers") hold an important and elevated role in corporate governance, vested with both the responsibility and authority to protect, balance, and preserve the interests of all of the enterprise stakeholders, including shareholders, customers, employees, suppliers, and citizens of the communities in which business is conducted. Senior Financial Officers fulfill this responsibility by prescribing and enforcing the policies and procedures employed in the operation of the enterprise's financial organization and by acting in good faith and in the partnership's best interests in accordance with the Partnership's Code of Business Conduct and Ethics.
1 Honest and Ethical Conduct
Senior Financial Officers will exhibit and promote honest and ethical conduct through the establishment and operation of policies and procedures that:
. Encourage and reward professional integrity in all aspects of the financial organization, by eliminating inhibitions and barriers to responsible behavior, such as coercion, fear of reprisal, or alienation from the financial organization or the enterprise itself.
. Promote the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.
. Provide a mechanism for members of the finance organization to inform senior Management of deviations in the practice from policies and procedures governing honest and ethical behavior.
. Respect the confidentiality of information acquired in the course of work, except when authorized or otherwise legally obligated to disclose such information, and restrict the use of confidential information acquired in the course of work for personal advantage.
. Demonstrate their personal support for such policies and procedures through periodic communication reinforcing these ethical standards throughout the finance organization.
2 Financial Records and Periodic Reports
Senior Financial Officers will establish and manage the enterprise transaction and reporting systems and procedures to provide that: . Business transactions are properly authorized and accurately and timely recorded on the partnership's books and records in accordance with Generally Accepted Accounting Principles ("GAAP") and established partnership financial policy.
. No false or artificial statements or entries for any purpose are made in the partnership's books and records, financial statements and related communications.
. The retention or proper disposal of partnership records shall be in accordance with established records retention policies and applicable legal and regulatory requirements.
. Periodic financial communications and reports will include full, fair, accurate, timely and understandable disclosure.
3 Compliance with Applicable Laws, Rules and Regulations.
Senior Financial Officers will establish and maintain mechanisms to:
. Educate members of the finance organization about any federal, state or local statute, regulation or administrative procedure that affects the operation of the finance organization and the enterprise generally.
. Monitor the compliance of the finance organization with any applicable federal, state or local statute, regulation or administrative rule.
. Identify, report and correct in a swift and certain manner, any detected deviations from applicable federal, state or local statute or regulation.
4 Reporting of Non-Compliance
Senior Financial Officers will promptly bring to the attention of the Audit Committee:
. Material information that affects the disclosures made by the partnership in its public filings.
. Information concerning significant deficiencies in the design or operation of internal controls that could adversely affect the partnership's ability to record, process, summarize and report financial data.
Senior Financial Officers will promptly bring to the attention of the General Counsel and to the Audit Committee:
. Fraud, whether or not material, that involves management or other employees who have a significant role in the partnership's financial reporting, disclosures or internal controls.
. Information concerning a violation of this Code or the partnership's Code of Business and Ethics Conduct, including any actual or apparent conflicts of interest between personal and professional relationships, involving management or other employees who have a significant role in the partnership's financal reporting, disclosures or internal controls.
. Evidence of a material violation by the partnership or its employees or agents of applicable laws, rules or regulations.
5 Disciplinary Action
In the event of violation by Senior Financial Officers of this Code or the partnerhip's Code of Business Conduct and Ethics, the Audit Committee of the Board of Directors shall recommend appropriate disciplinary and remedial actions.
Exhibit 31
CERTIFICATION
I, Robert J. Werra, certify that:
1 . I have reviewed this annual report on Form 10-K of Amrecorp Realty Fund II;
2 . Based on my knowledge, this annual 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 annual report;
3 . Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
4 . The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13-15(e) and 15d- 15e) and have 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 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 annual 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 principals; and
(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the 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 that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(e) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and 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 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 controls.
Dated: March 30, 2007.
/s/ Robert W. Werra General Partner Exhibit 32
Officers' Section 1350 Certifications
The undersigned officer of Amrecorp Realty Fund II, a Texas limited Partnership (the "Partnership"), hereby certifies that (i) the Partnership's Annual Report on Form 10-K for the year ended December 31, 2005 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and (ii) the information contained in the Partnerhip's Annual Report on Form 10- K for the year ended December 31, 2005 fairly presents, in all material respects, the financial condition and results of operations of the Partnership's, at and for the periods indicated.
Dated: March 30, 2007.
/s/ Robert J. Werra General Partner