FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1997 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 0-20737
AMERICA FIRST APARTMENT INVESTORS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 47-0797793
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(Registrant's telephone number, including area code)
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 X NO
<PAGE> - i -
Part I. Financial Information
Item 1. Financial Statements
AMERICA FIRST APARTMENT INVESTORS, L.P.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Mar. 31, 1997 Dec. 31, 1996
-------------- --------------
<S> <C> <C>
Assets
Cash and temporary cash investments, at cost which
approximates market value (Note 4) $ 1,859,891 $ 2,021,860
Investment in tax-exempt mortgage bonds, at estimated fair value (Note 5) 31,566,526 31,566,526
Investment in real estate, net of accumulated depreciation (Note 6) 29,962,742 30,199,846
Interest receivable 226,531 186,320
Other assets 677,617 948,849
-------------- --------------
$ 64,293,307 $ 64,923,401
============== ==============
Liabilities and Partners' Capital
Liabilities
Accounts payable (Note 9) $ 994,698 $ 1,454,694
Bonds payable (Note 7) 6,120,000 2,750,000
Line of Credit (Note 8) 134,200 3,584,200
Distribution payable (Note 3) 329,051 329,051
-------------- --------------
7,577,949 8,117,945
-------------- --------------
Partners' Capital
General Partner 6,466 4,038
Beneficial Unit Certificate Holders
($10.88 per BUC in 1997 and $10.90 in 1996) 56,708,892 56,801,418
-------------- --------------
56,715,358 56,805,456
-------------- --------------
$ 64,293,307 $ 64,923,401
============== ==============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> - 1 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the
Quarter Ended Quarter Ended
Mar. 31, 1997 Mar. 31, 1996
--------------- ---------------
<S> <C> <C>
Income
Mortgage bond investment income $ 632,504 $ 594,905
Rental income 1,692,818 1,297,401
Interest income on temporary cash investments 5,988 11,063
--------------- ---------------
2,331,310 1,903,369
--------------- ---------------
Expenses
General and administrative expenses (Note 9) 270,085 229,081
Real estate operating expenses 666,024 717,406
Depreciation 332,889 308,092
Interest expense 165,257 -
--------------- ---------------
1,434,255 1,254,579
--------------- ---------------
Net income $ 897,055 $ 648,790
=============== ===============
Net income allocated to:
General Partner $ 12,299 $ 9,569
BUC Holders 884,756 639,221
--------------- ---------------
$ 897,055 $ 648,790
=============== ===============
Net income per BUC $ .17 $ .12
=============== ===============
Weighted average number of BUCs outstanding 5,212,167 5,245,623
=============== ===============
</TABLE>
AMERICA FIRST APARTMENT INVESTORS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE QUARTER ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Beneficial Unit
Certificate Holders
General
Partner # of BUCs Amount Total
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Partners' Capital (excluding net unrealized
holding losses):
Balance at December 31, 1996 $ 4,038 5,212,167 $ 65,549,892 $ 65,553,930
Net income 12,299 - 884,756 897,055
Cash distributions paid or accrued (Note 3)
Income (9,871) - (644,393) (654,264)
Return of capital - - (332,889) (332,889)
--------------- --------------- --------------- ---------------
6,466 5,212,167 65,457,366 65,463,832
--------------- --------------- --------------- ---------------
Net unrealized holding losses:
Balance at December 31, 1996 and March 31, 1997 - - (8,748,474) (8,748,474)
--------------- --------------- --------------- ---------------
Balance at March 31, 1997 $ 6,466 5,212,167 $ 56,708,892 $ 56,715,358
=============== =============== =============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> - 2 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the
Quarter Ended Quarter Ended
Mar. 31, 1997 Mar. 31, 1996
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 897,055 $ 648,790
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 332,889 308,092
Amortization 39,440 -
Decrease (increase) in interest receivable (40,211) 10,373
Decrease (increase) in other assets 408,831 (59,177)
Increase (decrease) in accounts payable (459,996) 60,457
--------------- ---------------
Net cash provided by operating activities 1,178,008 968,535
--------------- ---------------
Cash flows from investing activities
Real estate capital improvements (78,731) (41,570)
Acquisition of real estate (17,054) -
--------------- ---------------
Net cash used in investing activities (95,785) (41,570)
--------------- ---------------
Cash flows from financing activities
Proceeds from issuance of tax-exempt refunding bonds 3,450,000 -
Net repayments on line of credit (3,450,000) -
Distributions paid (987,153) (993,489)
Bond issuance costs paid (177,039) -
Principal paid on bonds payable (80,000) -
--------------- ---------------
Net cash used in financing activities (1,244,192) (993,489)
--------------- ---------------
Net decrease in cash and temporary cash investments (161,969) (66,524)
Cash and temporary cash investments at beginning of period 2,021,860 1,912,560
--------------- ---------------
Cash and temporary cash investments at end of period $ 1,859,891 $ 1,846,036
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 158,784 $ -
=============== ===============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> - 3 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. Organization
America First Apartment Investors, L.P. (the Partnership) was formed on March
7, 1996, under the Delaware Revised Uniform Limited Partnership Act for the
purpose of acquiring, holding, operating, selling or otherwise dealing with
multi-family residential properties and other types of commercial real estate
and interests therein. The Partnership commenced operations on August 20,
1996, when it was merged with America First Tax Exempt Mortgage Fund 2 Limited
Partnership (the Prior Partnership). Under the terms of the Merger agreement,
the Partnership was the surviving partnership and effectively took over the
operations of the Prior Partnership. Unit holders of the Prior Partnership
received one Beneficial Unit Certificate (BUC) of the Partnership for each BUC
they held in the Prior Partnership as of the record date. The Prior
Partnership was terminated under the provisions of the Prior Partnership's
Partnership Agreement. The Partnership will terminate on December 31, 2016,
unless terminated earlier under the provisions of its Partnership Agreement.
The General Partner of the Partnership is America First Capital Associates
Limited Partnership Four (AFCA 4).
2. Summary of Significant Accounting Policies
A) Financial Statement Presentation
The accompanying 1997 consolidated financial statements include the
accounts of the Partnership. Financial statements for 1996 include the
accounts of the Prior Partnership.
The consolidated financial statements include the accounts of the
Partnership and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.
The consolidated financial statements of the Partnership are prepared
without audit on the accrual basis of accounting in accordance with
generally accepted accounting principles. The consolidated financial
statements should be read in conjunction with the consolidated and
combined financial statements and notes thereto included in the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1996. In the opinion of management, all normal and recurring adjustments
necessary to present fairly the financial position at March 31, 1997, and
results of operations for all periods presented have been made.
The preparation of financial statements in conformity with 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 the reporting period. Actual results could differ from those
estimates.
B) Investment in Tax-Exempt Mortgage Bonds
Investment securities are classified as held-to-maturity,
available-for-sale, or trading. Investments classified as
available-for-sale are reported at fair value with any unrealized gains or
losses excluded from earnings and reflected as a separate component of
partners' capital. Subsequent increases and decreases in the net
unrealized gain/loss on the available-for-sale securities are reflected as
adjustments to the carrying value of the portfolio and adjustments to the
component of partners' capital. The Partnership does not have investment
securities classified as held-to-maturity or trading. The carrying value
of tax-exempt mortgage bonds is periodically reviewed and adjusted when
there are significant changes in the estimated net realizable value of the
underlying collateral.
<PAGE> - 4 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
Accrual of mortgage bond investment income is excluded from income when,
in the opinion of management, collection of related interest is doubtful.
This interest is recognized as income when it is received.
C) Investment in Real Estate
The Partnership's investment in real estate consists of property acquired
through foreclosure or deed in lieu of foreclosure and other real estate
acquired. Each real estate property acquired is recorded at the lower of
cost or estimated net realizable value. The carrying value of each real
estate property acquired is periodically reviewed and adjusted when there
are significant declines in the estimated net realizable value.
Depreciation of real estate is based on the estimated useful life of the
property (27-1/2 years on multifamily residential apartments or 31-1/2
years on The Exchange at Palm Bay) using the straight-line method.
Depreciation of real estate improvements on The Exchange at Palm Bay is
based on the term of the related tenant lease using the straight-line
method.
D) Income Taxes
No provision has been made for income taxes since Beneficial Unit
Certificate (BUC) Holders are required to report their share of the
Partnership's taxable income for federal and state income tax purposes.
E) Temporary Cash Investments
Temporary cash investments are invested in federally tax-exempt securities
purchased with an original maturity of three months or less.
F) Net Income per BUC
Net income per BUC has been calculated based on the weighted average
number of BUCs outstanding during each period presented.
3. Partnership Income, Expenses and Cash Distributions
The Partnership Agreement contains provisions for the distribution of Net
Operating Income, Net Sale Proceeds and Liquidation Proceeds and for the
allocation of income and expenses for tax purposes among AFCA 4 and BUC
Holders.
Cash distributions included in the financial statements represent the actual
cash distributions made during each period and the cash distributions accrued
at the end of each period.
4. Partnership Reserve Account
The Partnership maintains a reserve account which totaled $1,184,504 at March
31, 1997. The reserve account was established to maintain working capital for
the Partnership and is available to supplement distributions to investors or
for any other contingencies related to the ownership of the mortgage bonds,
real estate acquired and the operation of the Partnership, including the
acquisition of additional properties.
On July 10, 1996, management announced its intent to utilize a portion of the
reserve account to purchase up to a total of 50,000 BUCs of the Partnership in
open market transactions. Through March 31, 1997, 33,456 BUCs had been
acquired at a cost of $294,070 (none during the quarter ended March 31, 1997).
<PAGE> - 5 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
5. Investment in Tax-Exempt Mortgage Bonds
Descriptions of the tax-exempt mortgage bonds owned by the Partnership at
March 31, 1997, are as follows:
<TABLE>
<CAPTION>
Base
Number Maturity Interest Carrying
Property Name Location of Units Date Rate(1) Amount
---------------------------------- -------------------- -------- ------------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Performing:
Jackson Park Place Fresno, CA 296 09/01/11 8.5% $ 8,760,000
-----------------
Nonperforming:(2)
Jefferson Place Olathe, KS 352 12/01/10 8.5% 12,800,000
Avalon Ridge Renton, WA 356 09/01/11 8.5% 18,755,000
-----------------
31,555,000
-----------------
40,315,000
Unrealized holding losses (8,748,474)
-----------------
Balance at March 31, 1997 (at estimated fair value) $ 31,566,526
=================
</TABLE>
(1) In addition to the base interest rate shown, the bonds bear additional
contingent interest as defined in each revenue note which, when combined
with the interest shown, is limited to a cumulative, noncompounded amount
not greater than 13% per annum. The Partnership did not receive any
additional contingent interest in 1997.
(2) Nonperforming bonds are bonds which are not fully current as to interest
payments. The amount of foregone interest on nonperforming bonds for 1997
was $224,190.
<PAGE> - 6 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
6. Investment in Real Estate
The Partnership's investment in real estate is comprised of the following at
March 31, 1997:
<TABLE>
<CAPTION>
Building
Number and Carrying
Property Name Location of Units Land Improvements Amount
--------------------------------- -------------------- -------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Covey at Fox Valley(1) Aurora, IL 216 $ 1,320,000 $ 10,028,338 $ 11,348,338
The Exchange at Palm Bay Palm Bay, FL 72,002(2) 1,296,002 3,387,791 4,683,793
The Park at Fifty Eight(3)(4) Chattanooga, TN 196 231,113 4,122,226 4,353,339
Shelby Heights (4) Bristol, TN 100 175,000 2,952,847 3,127,847
Coral Point(1) Mesa, AZ 336 2,240,000 8,960,000 11,200,000
Park at Countryside(4),(5) Port Orange, FL 120 647,000 2,615,508 3,262,508
-----------------
37,975,825
Less accumulated depreciation (8,013,083)
-----------------
Balance at March 31, 1997 $ 29,962,742
=================
</TABLE>
(1) Property is encumbered as described in Note 8.
(2) Represents square feet.
(3) Property consists of Phase II (96 units acquired through foreclosure) and
Phase I (100 units purchased on May 16, 1996).
(4) Property is encumbered as described in Note 7.
(5) Property was acquired on December 30 1996.
7. Bonds Payable
Bonds payable were originated by the Partnership through the issuance of
tax-exempt refunding bonds. Bonds payable at March 31, 1997, consisted of the
following:
<TABLE>
<CAPTION>
Effective Final
Interest Maturity Annual Carrying
Collateral Rate Date Payment Schedule Payments Amount
- ----------------------- --------- -------- ----------------------------------- --------------------- -------------
<S> <C> <C> <C> <C> <C>
The Park at Fifty Eight 6.65% 3/1/2021 semiannual payments of range from $224,000 $ 2,670,000
principal and/or interest to $228,000
are due each March 1 and September 1
Shelby Heights and 6.10% 3/1/2022 semiannual payments of range from $266,000 $ 3,450,000
Park at Countryside principal and/or interest to $276,000
are due each March 1 and September 1 -------------
Balance at March 31, 1997 $ 6,120,000
=============
</TABLE>
<PAGE> - 7 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
8. Line of Credit
The Partnership has a $15 million revolving loan credit agreement (the Line of
Credit) with The First National Bank of Boston (the Bank). The Line of Credit
provides interim financing for the acquisition of multifamily residential
properties. It expires on December 19, 1997; however, the maturity date may
be extended one year if certain conditions are met. The Line of Credit bears
interest, which is payable monthly, at 1/2% above the Bank's base rate (8.75%
as of March 31, 1997). In addition, the Partnership pays a facility fee of
1/4 of 1% on the unused portion of the line which is payable quarterly in
arrears. The Line of Credit is collateralized by Covey at Fox Valley and
Coral Point; however, the Partnership may substitute other real estate owned
as collateral, subject to the approval of the Bank. The Partnership had
borrowings of $134,200 against the Line of Credit and had $14,865,800 of
available unused credit as of March 31, 1997. The Line of Credit contains
covenants which include, among others, restrictions on the amount of
indebtedness the Partnership may incur and minimum debt service coverage
requirements.
9. Transactions with Related Parties
Substantially all of the Partnership's general and administrative expenses are
paid by AFCA 4 or an affiliate and reimbursed by the Partnership. The amount
of such expenses reimbursed to AFCA 4 during 1997 was $350,527. AFCA 4 or an
affiliate also paid $72,420 in costs capitalized by the Partnership during
1997 which were reimbursed by the Partnership. The capitalized costs were
incurred in connection with the offering of multifamily housing revenue
refunding bonds described in Note 7. The reimbursed expenses are presented on
a cash basis and do not reflect accruals made at quarter end.
Pursuant to the terms of the Limited Partnership Agreement, AFCA 4 is entitled
to an administrative fee from the Partnership based on the original amount of
the mortgage bonds which were foreclosed on and the purchase price of any
additional properties acquired by the Partnership. The amount of such fees
paid to AFCA 4 during 1997 was $56,550. AFCA 4 did not receive administrative
fees from property owners during 1997.
Pursuant to the terms of the Limited Partnership Agreement, AFCA 4 is entitled
to receive a property acquisition fee from the Partnership in connection with
the identification, evaluation and acquisition of additional properties and
the financing thereof. No such fees were paid to AFCA 4 during 1997.
The general partner of the property partnership which owns Jefferson Place is
principally owned by an employee of an affiliate of AFCA 4. Such employee has
a nominal interest in the affiliate. AFCA 4 and an affiliated mortgage fund
also own small interests in the general partner. The general partner has a
nominal interest in the property partnership's profits, losses and cash flow
which is subordinate to the interest of the Partnership and the mortgage
bond. The general partner did not receive cash distributions from the
partnership in 1997.
An affiliate of AFCA 4 was retained to provide property management services
for Covey at Fox Valley, The Park at Fifty Eight, Shelby Heights, Coral Point,
Jefferson Place, Avalon Ridge and Park at Countryside (beginning in January
1997). The fees for services provided represent the lower of (i) costs
incurred in providing management of the property, or (ii) customary fees for
such services determined on a competitive basis and amounted to $125,799 in
1997.
10. Subsequent Events
On April 10, 1997, the Partnership acquired The Retreat Apartments, a 226-unit
multifamily housing property located in Atlanta, Georgia. The property was
acquired at a cost of $9,094,433 and was financed primarily from proceeds from
the Partnership's Line of Credit. The Partnership anticipates obtaining
permanent financing for the property through the offering of certain of its
tax-exempt bonds.
<PAGE> - 8 -
AMERICA FIRST APARTMENT INVESTORS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
In accordance with the terms of the Loan Agreement underlying the $8,760,000
in tax-exempt mortgage bonds collateralized by Jackson Park Place (Jackson),
the Partnership exercised its option to require the owner of Jackson to prepay
the tax-exempt mortgage bonds. The owner of Jackson, however, was unable to
obtain financing to prepay the tax-exempt mortgage bonds. As a result, the
Partnership entered into a Settlement Agreement with the owner of Jackson
pursuant to which Jackson was conveyed to the Partnership on May 7, 1997,
through a deed in lieu of foreclosure. In accordance with the terms of the
Loan Agreement, the following disbursements were made: (i) $2,100,000 to
America First Participating/Preferred Equity Mortgage Fund (PREP) representing
payment of the outstanding balance of its Participating Loan on Jackson;
(ii) $69,480 to PREP representing contingent interest on its Participating
Loan; (iii) $460,000 to AFCA 4 representing due and unpaid administrative fees;
and (iv) $360,000 to the owner of Jackson. These disbursements were funded
with borrowings on the Partnership's Line of Credit. As a result of the
acquisition, the Partnership recognized contingent interest income of $290,520
on the tax-exempt mortgage bonds.
<PAGE> - 9 -
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
America First Tax Exempt Mortgage Fund 2 (the Prior Partnership) originally
acquired nine tax-exempt mortgage bonds, the proceeds of which were used to
provide construction and/or permanent financing for eight multifamily housing
properties and one commercial property. During 1988, one tax-exempt mortgage
bond was prepaid in full. On May 16, 1996, the Partnership acquired Phase I
of the Park at Fifty Eight Apartments and on December 30, 1996, the
Partnership acquired Park at Countryside. At March 31, 1997, the Partnership
continued to hold three of these tax-exempt mortgage bonds with a carrying
value, at estimated fair value, of $31,566,526 and six real estate properties
acquired with a depreciated cost of $29,962,742.
On August 20, 1996, the Prior Partnership merged with America First Apartment
Investors, L.P. (the Partnership). Under the terms of the merger agreement,
the Partnership was the surviving partnership and effectively took over the
operations of the Prior Partnership. Unit holders of the Prior Partnership
received one Beneficial Unit Certificate (BUC) of the New Partnership for each
BUC they held in the Prior Partnership as of the record date. The Prior
Partnership was terminated under the provisions of the Prior Partnership's
Partnership Agreement.
The following table shows the various occupancy levels of the properties
financed or owned by the Partnership at March 31, 1997:
<TABLE>
<CAPTION>
Number Percentage
Number of Units of Units
Property Name Location of Units Occupied Occupied
- ------------------------------- ----------------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Jackson Park Place Fresno, CA 296 260 88%
Jefferson Place Olathe, KS 352 342 97%
Avalon Ridge Renton, WA 356 288 81%
Covey at Fox Valley(1) Aurora, IL 216 206 95%
The Park at Fifty Eight(3) Chattanooga, TN 196 193 98%
Shelby Heights(1) Bristol, TN 100 89 89%
Coral Point(1) Mesa, AZ 336 320 95%
Park at Countryside(4) Port Orange, FL 120 113 94%
---------- ---------- -----------
1,972 1,811 92%
========== ========== ===========
The Exchange at Palm Bay(1) Palm Bay, FL 72,002(2) 40,718(2) 57%
========== ========== ===========
</TABLE>
(1) Property acquired through foreclosure or deed in lieu of foreclosure.
(2) Represents square feet.
(3) Property consists of Phase II (96 units acquired through foreclosure) and
Phase I (100 units purchased on May 16, 1996).
(4) Property acquired on December 30, 1996.
The principal amounts of the tax-exempt mortgage bonds do not amortize over
their terms. The tax-exempt mortgage bonds provide for the payment of base
interest at a fixed rate. In addition, the Partnership may earn contingent
interest based on a participation in the net cash flow and net sale or
refinancing proceeds from the real estate collateralizing the tax-exempt
mortgage bonds. The base interest payments received on the tax-exempt
mortgage bonds and net rental income earned on properties owned represent the
principal sources of the Partnership's income and distributable cash. The
Partnership has not received any contingent interest on its mortgage bonds
during 1997. The Partnership also earns income on temporary cash investments.
The Partnership may draw on reserves to pay operating expenses or to
supplement cash distributions to Beneficial Unit Certificate (BUC) Holders.
<PAGE> - 10 -
The Partnership has a $15 million revolving loan credit agreement (the Line of
Credit) with the First National Bank of Boston (the Bank). The Line of Credit
provides interim financing for the acquisition of multifamily residential
properties. The Line of Credit bears interest at 1/2% above the Bank's base
rate (8.75% as of March 31, 1997). The Line of Credit expires on December 19,
1997; however, the maturity date may be extended one year if certain conditions
are met. The Partnership had borrowings of $134,200 against the Line of Credit
and had $14,865,800 of available unused credit as of March 31, 1997. The Line
of Credit contains covenants which include, among others, restrictions on the
amount of indebtedness the Partnership may incur and minimum debt service
coverage requirements. The Partnership intends to repay borrowings under the
Line of Credit through the refunding of existing tax-exempt bonds that are
associated with certain properties acquired in foreclosure.
On March 13, 1997, the Partnership raised $3,450,000 through the offering of
multifamily housing revenue refunding bonds on Shelby Heights. The bonds were
rated "AA" by Standard and Poor's Corporation, bear interest at an effective
rate of 6.1% and have a 25-year maturity. Proceeds from the offering were
used to pay down borrowings on the Line of Credit.
On April 10, 1997, the Partnership acquired The Retreat Apartments, a 226-unit
multifamily housing property located in Atlanta, Georgia. The property was
acquired at a cost of $9,094,433 and was financed primarily from proceeds from
the Partnership's Line of Credit. The Partnership anticipates obtaining
permanent financing for the property through the offering of certain of its
tax-exempt mortgage bonds.
During the quarter ended March 31, 1997, $242,791 of undistributed principal
payments was placed in reserves. The total amount held in reserves at March
31, 1997, was $1,184,504. Future distributions to BUC Holders will depend
upon the amount of base and contingent interest and net rental income the
Partnership receives, the size of reserves established by the Partnership and
the extent to which withdrawals are made from reserves.
The Partnership believes that cash provided by operating activities and, if
necessary, withdrawals from the Partnership's reserves will be adequate to
meet its short-term and long-term liquidity requirements, including the
payments of distributions to BUC Holders. Under the terms of its Partnership
Agreement, the Partnership has the authority to enter into short-term and
long-term debt financing arrangements. The Partnership is not authorized to
issue additional BUCs to meet short-term and long-term liquidity requirements.
Distributions
Cash distributions paid or accrued per BUC were as follows:
<TABLE>
<CAPTION>
For the For the
Quarter Ended Quarter Ended
Mar. 31, 1997 Mar. 31, 1996
--------------- ---------------
<S> <C> <C>
Regular monthly distributions
Income $ .1236 $ .1288
Return of capital .0639 .0587
--------------- ---------------
$ .1875 $ .1875
=============== ===============
Distributions
Paid out of current and prior undistributed cash flow $ .1875 $ .1875
=============== ===============
</TABLE>
Asset Quality
It is the policy of the Partnership to make a periodic review of the real
estate collateralizing the Partnership's mortgage bonds and real estate
acquired and adjust, when necessary, the carrying value of the mortgage bonds
and each real estate property acquired. Mortgage bonds are classified as
available-for-sale and are therefore recorded at the estimated fair value of
the underlying collateral. Each real estate property acquired is recorded at
the lower of cost or estimated net realizable value. The carrying value of
the mortgage bonds is adjusted when there are significant changes in the
estimated net realizable value of the underlying collateral for the bonds.
The carrying value of each real estate property acquired is adjusted when
there are significant declines in the estimated net realizable value.
<PAGE> - 11 -
Internal property valuations and reviews performed during the quarter ended
March 31, 1997, indicated that the mortgage bonds and real estate recorded on
the balance sheet at March 31, 1997, required no adjustments to their current
carrying amounts.
In accordance with the terms of the Loan Agreement underlying the $8,760,000
in tax-exempt mortgage bonds collateralized by Jackson Park Place (Jackson),
the Partnership exercised its option to require the owner of Jackson to prepay
the tax-exempt mortgage bonds. The owner of Jackson, however, was unable to
obtain financing to prepay the tax-exempt mortgage bonds. As a result, the
Partnership entered into a Settlement Agreement with the owner of Jackson
pursuant to which Jackson was conveyed to the Partnership on May 7, 1997,
through a deed in lieu of foreclosure. In accordance with the terms of the
Loan Agreement, the following disbursements were made: (i) $2,100,000 to
America First Participating/Preferred Equity Mortgage Fund (PREP) representing
payment of the outstanding balance of its Participating Loan on Jackson;
(ii) $69,480 to PREP representing contingent interest on its Participating
Loan; (iii) $460,000 to AFCA 4 representing due and unpaid administrative fees;
and (iv) $360,000 to the owner of Jackson. These disbursements were funded
with borrowings on the Partnership's Line of Credit. As a result of the
acquisition, the Partnership recognized contingent interest income of $290,520
on the tax-exempt mortgage bonds.
The overall status of the Partnership's other mortgage bonds and real estate
owned has generally remained constant since December 31, 1996.
Results of Operations
The table below compares the results of operations for each period shown.
Results of operations for 1996 include the accounts of the Prior Partnership.
<TABLE>
<CAPTION>
For the For the Increase
Quarter Ended Quarter Ended (Decrease)
Mar. 31, 1997 Mar. 31, 1996 From 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Mortgage bond investment income $ 632,504 $ 594,905 $ 37,599
Rental income 1,692,818 1,297,401 395,417
Interest income on temporary cash investments 5,988 11,063 (5,075)
--------------- --------------- ---------------
2,331,310 1,903,369 427,941
--------------- --------------- ---------------
General and administrative expenses 270,085 229,081 41,004
Real estate operating expenses 666,024 717,406 (51,382)
Depreciation 332,889 308,092 24,797
Interest expense 165,257 - 165,257
--------------- --------------- ---------------
1,434,255 1,254,579 179,676
--------------- --------------- ---------------
Net income $ 897,055 $ 648,790 $ 248,265
=============== =============== ===============
</TABLE>
Mortgage bond investment income increased for the quarter ended March 31,
1997, compared to the same period in 1996 as a result of an increase in the
cash flow received from Avalon Ridge of approximately $25,000, and an increase
in cash flow received from Jefferson Place of approximately $13,000.
Rental income increased for the quarter ended March 31, 1997, compared to the
same period in 1996. This increase is attributable to: (i) a $182,000
increase from Park at Countryside resulting from the acquisition of
this property in December 1996; (ii) a $123,000 increase from The Park at
Fifty Eight resulting primarily from the acquisition of Phase I of this
property in May 1996; (iii) a $64,000 increase due to a slight increase in
average occupancy and rental rate increases at certain properties acquired by
the Partnership in foreclosure; and (iv) a $26,000 increase from The Exchange
at Palm Bay due to an increase in average leased space during 1997.
<PAGE> - 12 -
Excluding property tax refunds of approximately $180,000 received by Covey at
Fox Valley during the quarter ended March 31, 1997, real estate operating
expenses increased approximately $129,000 for the quarter ended March 31,
1997, compared to the same period in 1996. This increase is attributable to:
(i) a $110,000 increase from Park at Countryside resulting from the acquisition
of this property in December 1996; (ii) a $61,000 increase from The Park at
Fifty Eight resulting primarily from the acquisition of Phase I of this
property in May 1996; (iii) a $40,000 increase due primarily to a slight
increase in property improvements and repairs and maintenance expenses at
certain properties; partially offset by (iv) an $82,000 decrease from The
Exchange at Palm Bay resulting from non-recurring leasing commissions of
approximately $85,000 incurred in 1996.
Depreciation expense increased for the quarter ended March 31, 1997, compared
to the same period in 1996 due to: (i) a $24,000 increase from Park at
Countryside resulting from the acquisition of this property in December 1996;
(ii) an $18,000 increase from The Park at Fifty Eight resulting from the
acquisition of Phase I of this property in May 1996; partially offset by (iii)
a $17,000 decrease in depreciation expense due to certain property becoming
fully depreciated.
Interest expense of $165,257 was incurred for the quarter ended March 31,
1997, consisting of interest of $113,053 incurred on the Line of Credit and
$52,204 incurred on bonds payable.
The decrease in interest income on temporary cash investments for the quarter
and ended March 31, 1997, compared to the same period in 1996 is primarily due
to a decrease in the average interest rate earned on the Partnership reserves
during 1997.
General and administrative expenses increased for the quarter ended March 31,
1997, compared to the same period in 1996 due primarily to an increase in
salaries and related expenses.
<PAGE> - 13 -
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4(a) Form of Certificate of Beneficial Unit Certificate
incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-4 (Commission File No. 333-2920) filed
by the Registrant on March 29, 1996).
4(b) Agreement of Limited Partnership of the Registrant
(incorporated by reference to Exhibit 4(b) to Form 8-K
(Commission File No. 0-20737) filed by the Registrant on
August 23, 1996).
10(a) $18,755,000 Washington State Housing Finance Commission
Multifamily Housing Mortgage Revenue Note (Sunpointe
Apartments Projects) Series 1987 (incorporated herein by
reference to Form 10-K dated December 31, 1987 filed
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 by America First Tax Exempt Mortgage Fund 2
Limited Partnership (Commission File No. 0-15329)).
10(b) Lender Loan Agreement and Indenture of Trust among
Washington State Housing Finance Commission, the
Registrant and FirsTier Bank, National Association, dated
September 1, 1987 (incorporated herein by reference to Form
10-K dated December 31, 1987 filed pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 by America
First Tax Exempt Mortgage Fund 2 Limited Partnership
(Commission File No. 0-15329)).
10(c) Construction Loan Agreement between the Registrant and
Sunpointe Associates Limited Partnership, dated September
1, 1987 (incorporated herein by reference to Form 10-K
dated December 31, 1987 filed pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 by America
First Tax Exempt Mortgage Fund 2 Limited Partnership
(Commission File No. 0-15329)).
(b) Form 8-K
The registrant did not file a report on Form 8-K during the
quarter for which this report is filed.
<PAGE> - 14 -
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.
Dated: May 13, 1997 AMERICA FIRST APARTMENT INVESTORS, L.P.
By America First Capital
Associates Limited
Partnership Four, General
Partner of the Registrant
By America First Companies L.L.C.,
General Partner of America First Capital
Associates Limited Partnership Four
By /s/ Michael Thesing
Michael Thesing
Vice President and
Principal Financial
Officer
<PAGE> - 15 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,859,891
<SECURITIES> 31,566,526
<RECEIVABLES> 226,531
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,086,422
<PP&E> 37,975,825
<DEPRECIATION> 8,013,083
<TOTAL-ASSETS> 64,293,307
<CURRENT-LIABILITIES> 1,323,749
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 56,715,358
<TOTAL-LIABILITY-AND-EQUITY> 64,293,307
<SALES> 0
<TOTAL-REVENUES> 2,331,310
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,434,255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 897,055
<INCOME-TAX> 0
<INCOME-CONTINUING> 897,055
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 897,055
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
